What's eating up Kellanova's India Business?

Cereal maker Kellanova, formerly The Kellogg Co, is struggling with low sales growth and profit in India, a market that prefers traditional or savoury breakfast compared to its ready to eat cornflakes and muesli alternatives.

For 2023-24, the American food company reported one of its slowest sales growth in a decade at 4% to Rs 1,610 crore, with a net profit decline of 19% to Rs 97 crore, as per its filing with the Registrar of Companies. A year ago, it had sales of Rs 1,554 crore with net profit of Rs 119 crore. Last week, chocolate maker Mars Inc agreed to buy Kellanova for nearly $36 billion.

“Cornflakes is on a decline as a category and for Kellogg, the segment accounts for the bulk of the sales. While the company has been driving sales of other products such as oats and muesli, competition is intense in these segments,” said an industry executive, who did not wish to be named.


In a statement, Kellanova India said despite a challenging 2023 for the food industry, marked by inflation and consumer spending constraints, its company saw resilient performance on a strong base of 2022.

"Notably, our snacking business achieved double-digit growth, while cereals grew in single digits. Within our cereal portfolio, muesli and Pringles stood out with double-digit growths. We also gained share in cornflakes despite intense competition," said the spokesperson, adding that the entry of new competitors underscores the category's potential. "As a category leader, we see our role to build the relevance of the category and thus increase household penetration. We are doing this by strengthening our core brands and with relevant innovations, as opposed to discounting, which we have seen does not grow the market."

In India, Kellogg started its first manufacturing plant in 1994. Its second unit opened in 2016, followed by a research and development centre to develop breakfast products for India and other emerging markets in the Asia-Pacific. Four years ago, the company that globally relies on western style breakfast options, launched Indian options including upma in select markets to widen its consumer base, a strategy which has not worked yet.

In India’s snacking market, especially the breakfast options segment worth Rs 3,000 crore, consumers still prefer traditional or savoury ready-to-eat cornflakes and muesli alternatives. Over the past few years, companies including MTR, ID Fresh, PepsiCo and Marico, have driven the market as consumers switch to healthier options such as oats and whole-grain meals.

“We are seeing strong sales, especially in the healthy snacking space, and have launched whey-based and no sugar variants to capitalise on the trend. Also, oats in a larger market compared to cornflakes,"said Aditya Bagri, director at Bagrrys, which sells muesli, oats and cornflakes. "The emergence of quick commerce has helped us gain market share disproportionately as it is more skewed towards premium offerings.”

In India, the packaged food market is dominated by biscuits and salty snacks which together are worth nearly Rs 60,000 crore. Other food segments, especially breakfast cereals, including cornflakes, have not had much headway.

Snack spending also remains unchanged, despite economic tightening, as three-fourths of Indian consumers report that they are more conscious of snacking prices but have not made significant changes, according to an international survey by Mondelez International and The Harris Poll which covered consumers across 12 countries. Nearly 79% of Indian consumers would rather have a smaller portion of an indulgent snack than a bigger portion of a low fat or sugar alternative version, the report said.

When making a choice, Indians have traditionally preferred health to taste, although the trend is gradually changing. With products such as cornflakes hit by the convenience and lifestyle trends, there is also a growing competition within western breakfast.

Tata Soulfull, which has a host of millet-based snacking and breakfast options, saw a 40% year-on-year increase in sales last fiscal while Nestle and Parle have entered the breakfast products segment too. Two years ago, Marico acquired True Elements, a clean label, digital-first brand breakfast and snacks segment that includes western breakfast such as oats, quinoa, muesli, granola, flakes and Indian breakfast including poha, upma and dosa.