ANALYSIS: All change at Kellogg's top table - Kellogg has been quick to answer the departure of its marketing chief with a new appointment. Tania Mason asks how the changes at the top will impact cereals

The battle for breakfast is back on the marketing agenda, with something of a shake-up occurring in the UK cereals market.

Hard on the heels of Weetabix's repositioning campaign, Kellogg, the UK's Goliath of cereal producers, has this week imported one of its top US marketers to lead a renewed assault on the British and Irish markets.

Michael Allen has replaced Guy Longworth, the incumbent marketing director whose sudden departure shocked the industry a week earlier. True to its secretive form, Kellogg won't say much about its new man. Allen took his previous post, vice-president of US marketing for ready-to-eat cereals (that is, cereals that don't need cooking), in January 2001. According to a statement he was "instrumental in re-growing value share in the US cereal market in the past year".

He joined Kellogg in 1997 from McCann-Erickson after a 12-year career in advertising, heading accounts including Nestle and Coca-Cola. After an initial assignment in Canada he moved to Kellogg's global headquarters in 1998 as director of innovation.

Allen's boss, UK and Ireland managing director Paul Norman, who was drafted in from the US in February, is a 15-year Kellogg veteran. Before crossing the Atlantic, Norman was US marketing vice-president. His appointment ended Kellogg's struggle to find the right candidate for the job since David Mackay moved to the US in summer 2000.

But while Norman's ascension was a relief for Kellogg in some respects, it is also widely acknowledged as the root cause of Longworth's departure.

The swiftness with which Allen was able to fill the vacancy - less than two weeks after Longworth's exit - suggests a certain element of forward planning.

Sudden exit

Longworth had been at Kellogg for more than five years and filled a 20-month vacancy when he was promoted to marketing director in 1999. His sudden exit sparked speculation that he had been ousted, although Kellogg denied this, saying he "left the company by mutual, amicable agreement to pursue other opportunities".

But sources say Longworth had been unsettled since Norman appeared on the scene.

One insider said Longworth had been "top dog at the company for much of the past few years, and managed to maintain his high profile within the firm even when former Fox's Biscuits managing director Michael Carey joined for a nine-month stint as managing director last year.

But Norman's arrival is understood to have heralded a shift in power.

Norman is renowned as a "very hands-on managing director who likes to roll up his sleeves and really get stuck into everything", according to one source. And his extensive marketing expertise is believed to have added to Longworth's discomfort.

So what are the challenges ahead for Allen and Norman? Kellogg is unrivalled in terms of market share and adspend in the UK. According to Mintel, it has 38% of the market, compared with second-placed Weetabix's 14%, and claims ten of the top 15 brands. But its volume sales declined by 5.8% between 1997 and 2001. Nestle's Cereal Partners added 12.8% and Quaker 10.5% during the same period.

The cereal landscape here is broadly similar to that in the US - both are mature, flat markets, and manufacturers are fighting against pressured lifestyles that render people too busy to eat breakfast.

Taylor Nelson Sofres' latest report estimates that the UK breakfast market is losing around £1.4bn of potential revenue through people skipping breakfast at home. There is more need for quick, convenient breakfasts. This is evident by the growth in cereal bar consumption - up 12% between 2000 and 2001.

Up until 1998, all the producers relied on strong advertising campaigns rather than price to differentiate their products. But in 1998 Kellogg changed that, leading a price-cutting offensive in response to the increasing prevalence of supermarket own-label ranges.

By contrast, Norman's strategy in the US was to eschew price warring in favour of brand-building strategies that aimed to "put the fun back into cereals". One of his legacies is 'Eet and Ern', a reward programme that harks back to the days when you got toys in your cereal boxes. But with Eet and Ern, consumers enter their cereal box code online to collect points, which can then be redeemed for toys. It has been a great success in the US, but Kellogg has so far declined to comment on whether the scheme will follow Norman to the UK.

Expect innovation

Kellogg has also caught up with the licensing trend pioneered by Cereal Partners and Weetabix in the late 90s, and last year launched a Pokemon-themed cereal. More of these can be expected from Kellogg; Allen was responsible for the equivalent US Pokemon product when he was US director of innovation.

J Walter Thompson's managing partner on Kellogg, Enda McCarthy, says it is a "very interesting time to be in the market, with lots of clever people at the top of it".

But the big task will be for cereal companies to find new ways to convince people to stop skipping breakfast, or devise snack ranges to compensate.

Mintel's senior consumer analyst James McCoy predicts further growth will be difficult, but adds that the maturity and robust nature of the market means any decline won't be too severe. He says: "The introduction of novel children's lines, further character branding deals and indulgent ranges aimed at adults will be critical to the market in future."

UK CEREALS MARKET
                      1997       1999       2001    % change
                    tonnes     tonnes     tonnes   1997-2001
Kellogg            154,000    145,000    145,000        -5.8
Weetabix            54,000     54,000     55,000        +1.9
Cereal Partners     39,000     43,000     44,000       +12.8
Quaker              19,000     21,000     21,000       +10.5
Others              19,000     15,000     15,000       -21.1
Own-label          101,000    100,000    100,000        -1.0
Total              386,000    378,000    380,000        -1.6

Source: Mintel

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