However from 1991 to 1994 private labels began to

However from 1991 to 1994, private labels began to enter the market and brought about a
series of changes to the industry. Some of the main changes were that sales margins for
retailers were higher for private labels, there was an expansion of discount retailers (eg
costco) into supermarkets, and the use of coupons significantly reduced brand loyalty.
2) Imagine that your group wants to enter the RTE Cereal industry in 1994. What are
the investment items you should consider? How much should these items cost in
total?
3) What are the pros and cons of General Mill (GM)’s price-promotion reduction
(stopping issuing coupons) in April 1994? How do you expect GM’s competitor’s
respond?
The pros are that the coupons were proving to be a less effective strategy as consumers
were saturated with coupons, and thus promotions were not as effective. Thus by removing
the coupons GM could rebuild brand loyalty, reduce the internal loss by coupons, and retake
market share from private labels. The cons were that GMs would have to successfully focus
on a new strategy (differentiating by means other than price), and would have to adapt to a
new more streamlined, targeted marketing. The major con however was the possibility of
losing customers and profit, and possibly devalue the brand by competing with private
labels. If the other of the big three companies, eg Kelloggs, were to respond similarly it could
result in a price war.