[Recession Case Study] Kellogg's Rice Krispies Campaign during the Great Depression (1930s)

[Recession Case Study] Kellogg’s Cereal Campaign during the Great Depression (1930s)

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All businesses have concerns when an economic downturn hits. Typically, sales (or revenues) dry up, and businesses begin to pull back on marketing (investment or people). However, the businesses who don’t reduce marketing and take advantage of competitors pulling back will see long-lasting gains.

Here’s Kellogg’s story.

Unemployed people wait outside the state Labor Bureau in New York City in 1933. Image source: NPR

Background

From 1929-1939, the Great Depression, which first hit the United States and then spread across the world, drove business and personal profit losses and unemployment (unemployment in the U.S. rose to height of 25%, vs. 10% during the Great Recession of 2008-2009). Many businesses struggled to stay afloat, which dramatically impacted people and their socio-economic stability. The cereal industry faced challenges as consumer spending tightened while big companies like Kellogg (founded in 1906) and Post (founded 1895) continued to vie for market share. Prior to this period, Post was the dominant player in cereals.

Objective

Kellogg had become a major player in the cereal industry (after its founding in early 1900s), thanks in part to its iconic cereal brand, Corn Flakes; however, it wasn’t the dominant player. When the Great Depression hit, Kellogg found itself in a difficult position. Consumers were tightening their belts and looking for ways to save money, which meant that sales of luxury items like cereal were plummeting. Kellogg (alongside its competitors) had to determine how to drive sales in a devastatingly grim economy.

Image source: The Manufacturer

Strategy

In such a climate, “Post did the predictable thing: it reined in expenses and cut back on advertising. But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the thirties.)” [source: The New Yorker].

Meanwhile, Post was struggling to keep up. The company had been hit hard by the Depression, and its marketing budget had been significantly reduced. As a result, Post was unable to mount an effective counter-campaign against Kellogg’s marketing blitz. Sales of Post cereals declined, while Kellogg’s sales continued to climb.

1929 Kellogg’s Rice Krispies Print Ad. Image source: Etsy.

Results

By the end of the Great Depression, Kellogg had firmly established itself as the dominant player in the cereal industry. The company’s decision to over-invest in advertising had paid off, helping to ensure its survival during a difficult time. “By 1933, even as the economy cratered, Kellogg’s profits had risen almost thirty per cent” [source: The New Yorker]. And, while Post eventually recovered from its slump, it was never able to catch up to Kellogg in terms of market share.

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