Cereal: the Manufacturing Industry

the surge of interest in granola and natural cereals in the 1970s and 80s fueled this growth. By 1993, the

This report examines the UK market for Breakfast Cereals. The market has grown substantially in the last 5 years with a high demand for quick meals in the morning due to busy lifestyles. This has had an advantage to the sales of the market.

The cereal market is a booming industry. It has been around for over one hundred years and continues to attract millions of customers’ everyday. The market structure of the cereal industry is an Oligopoly. This is because there are four large firms, Kellogg, General Mills, Post, and Quaker Oats, which dominate the industry.

1) An Oligopolistic market structure is a structure where very few large businesses sell a particular standard Good or differentiated Good, and to whose market entry proves difficult. This in turn, gives little control over product pricing because of mutual interdependence (with the exception of collusion among businesses) creating a non-price competition meaning they are the ‘price setters’. A good rule to help classify an

Factors that can limit the threat of new entrants are known as barriers to entry. In this case barriers to entry are low because: there is no government intervention to prevent businesses from entering the industry, resources are abundant, and customers’ switching costs are low as well as fixed costs to start this type of business.

The value chain, Appendix B, in the RTE cereal industry consists of branded manufactures and private labels that receive their raw materials from suppliers and then distribute their product to food stores, drug stores, and mass merchandisers where the end consumer can eventually purchase the cereal product. Private labels rely on wholesalers and third-party distributors to get their product on the store shelves where the end consumer can purchase these items.

There are four types of market structures: Monopolistic Competition, Monopoly, Oligopoly, and Perfect Competition. Monopolistic Competition is also known as competitive market. In this market structure, there are a large number of firms that produce similar but somewhat differentiated products for the same target customers. The market share is also divided among large number of firms making it difficult for one firm to become the market leader. On the other hand, Monopoly is a type of market structure in which only one firm controls the whole industry. There are strict barriers to entry for new firms due to governmental restrictions or the monopolistic power of the firm itself. In Oligopoly, the whole industry is dominated by a few large scale firms that set prices, introduce innovative products, and use heavy campaigns to attract buyers. All other small scale firms follow the changing market patterns set by these oligopolistic firms. Lastly, perfect competition is a market structure in which there are a larger number of firms that produce similar as well as differentiated products for

• Our pricing strategy is below most of our competition, giving OMG Active Cereal a competitive edge with consumers looking for value for their money.

Competition: * A big emphasis on reducing consumer price with discount offers.We have another 20 competitor cereal company cross Canada as well. Such as: Weetabix of Canada, Kraft

Barriers to Entry: The entry barriers in the market are relatively low, making it easy to access. However, as the market is saturated it could be unlikely for new companies to decide to start new enterprises in this field.

General Mills competes in a dynamic environment. Some of their competitors are Kellogg’s in the cereal segment. Cereal was a product that used to be the number one election for breakfast in American. As time and new knowledge evolved, consciousness about products with less sugar or gluten free arose making the cereal industry tumble. Products like protein bars, Greek yogurts, and even fast food are the new options to start the date, gaining market share over the cereal industry.

Sales of private label cereal grew 50% from 1991-1994 in the Ready-to-Eat breakfast cereal industry. Some of the factors that contributed to the entry of private label cereal manufacturers and their subsequent growth include - lower costs related to manufacturing, packaging, marketing, R&D compared to the Big 3 cereal companies, product quality approaching that of branded products, higher margins for grocers, lower priced products. Some observers blamed higher prices and elaborate expenditure on coupon printing, distribution, redemption and reimbursement of grocer's handling fee for market share gains made by private label cereal products. The policy of "price up and spend back" seemed to hurt the Big 3 firms.

Figure 2 shows the exports of cereals (tons) for Canada, the EU, Northern Africa, Southern Africa, USA and then for the whole world, between year 1990 and 2010. This graph intends to reveal the huge amounts traded on international markets. From the world’s graph can be observed the 50% increase in the exports of cereals over the last 20 years, although the individual exported quantities for the selected regions and countries differ extremely. For instance, the US has exported approximately 20 times the exports of Northern Africa. As a conclusion, the data shows that the greatest share of total exported cereals has been traded by the major economies like the EU, the US and Canada. These large economies have thought for a long period of time

In this case some big companies dominate the whole industry and as a result the small companies

Again, with high entry barriers they are not bombarded with other firms coming and going from their market. (Samuelson and Marks, 2010).