Dynamics of moving from small, fast growth to large corporate

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The Wall Street Journal posted an article recently on Kashi, a Kellogg company, that triggered thoughts on many levels.

Let’s look at a quick timeline and some statistics.

Kashi was founded in 1984 in California to pursue healthy minded consumers. These consumers could arguably be described as smart, environmentally concerned, health conscious, and independent thinkers. In 2000, Kashi was sold to Kellogg for 33 million. By 2008, Kashi sales had soared 24 times their 2000 revenues in a market that was experiencing 10 to 15% overall growth as a category. (42% CAGR per year to a $600M rate in 2008.)

From 2008 until 2012, revenues remained relatively steady, experiencing a slight decline. However, from 2013 to 2014, revenues drastically decreased to $400M at an CAGR of -19%.

What caused this disaster?

Kellogg was hands off of Kashi until 2007, when Kellogg management took over the day to day operations of Kashi from the Michigan home office. This was the beginning of a disconnect of the Kashi brand and it’s target customers. Kellogg management and the Kellogg sales team had forever been used to a methodical and gradual roll out of products to stores across it’s global reach. Kashi had been used to picking up on customer’s desires for new products, and had developed an enviable process of deploying several products to satiate customers desires in a short period of time.

The pressures of expanding from a regional, fast-moving entity (and the associated culture) to a global supply chain can be very taxing. The processes are very different and the needs of a global supply chain are very different. Kellogg might have done better trying to bring the processes of Kashi into other Kellogg product areas instead of trying to push Kashi into the old, “tried and true” ways.

Here’s how far Kellogg took the brand from it’s fans.

“In April 2012, John Wood, owner of a natural-and-organic grocery in Portsmouth, R.I., removed some Kashi products after learning they contained GMO ingredients. Photos of a note he posted announcing the move went viral online, and consumers complained Kashi had misled them by describing its products as “natural.”

In response, Kashi in April 2012 announced it would remove GMOs by the end of 2014 from all its existing GoLean cereals and Kashi chewy granola bars.” (direct quote from the WSJ article)

Globalizing a brand requires planning on many levels as the volume increases dramatically. There are supplier forces (and some may use GMO techniques); manufacturing (it takes time to set up and create 600M worth of product); channel fulfillment (shipping to fulfillment centers and on to distribution customers); and sales cycles (should there be a Kashi AND a Kellogg sales person? Or can that be combined?).

Mergers are wonderful when they work, but they can be very painful to the people involved on both sides when the processes are not merged with the over-arching theme of protecting the brand/customer connection. In Kashi’s case, it lost touch with it’s customer base after it’s processes were changed to Kellogg processes. It remains to be seen if Kellogg can save Kashi by giving it back the autonomy and freedom to pursue the customer the way the customer would like to be pursued.

Are you concerned with the mechanics of post merger integration of people and product lines? Call me to set up a time to discuss.

© Mark Travis – All Rights Reserved

www.travis-company.com

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