Catch-22 for Kellogg's?
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Case Details:
Case Code : MKTG212
Case Length : 24 Pages
Period : 2008-2009
Pub Date : 2009
Teaching Note :Not Available
Organization : - Kellogg Company
Industry : - Consumer Packaged Goods
Countries : US
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Background Note
Kellogg Company was established by Will Keith Kellogg (WK Kellogg) in 1906. Earlier WK Kellogg worked with his brother Dr. John Harvey Kellogg (John Harvey) at the Battle Creek Sanitarium and supplied cereal products to patients at the sanitarium...
Deal with Michael Phelps
Over the years, Kellogg had also used athletes as celebrity endorsers of its products. Olympic athletes who have featured on its packages included figure skaters Kristi Yamaguchi (1992), Scott Hamilton and Rosalynn Sumner (together, 1984) as well as speed skaters Bonnie Blair (1992 and 1994) and Dan Jansen (1992). In August 2008, Kellogg entered into a deal with Phelps to endorse its Corn Flakes and Frosted Flakes. The deal was announced after Phelps won his historic eighth gold medal on day eight of the 2008 Beijing Olympics. It was considered to be a prized catch for Kellogg as popular athletes usually endorsed its rival General Mills, Inc.'s brand Wheaties...
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Some Initial Problems
When Phelps signed the deal with Kellogg, he was criticized by health experts for promoting a product which they considered unhealthy. There was a backlash from health campaigners who felt that Kellogg's Frosted Flakes were junk food with high fructose content. They contended that Frosted Flakes contained three times the amount of sugar and one-third fiber of Wheaties...
The Bong Controversy
Phelps' Cheerios incident died down soon with Kellogg taking care not to make any fuss about it publicly. However, on January 31, 2009, a photograph of Phelps smoking from a bong surfaced, leading to major embarrassment for the ace swimmer as well as his various sponsors...
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Kellog Dissociates itself from Phelps
After the picture of Phelps with the bong story was published in the newspaper, Kellogg announced that it would not renew its sponsorship contract with Phelps which ended in February 2009. The company had earlier decided not to renew its Olympic sponsorship of the
US swimming team, which expired in December 2008...
The Other View
After Kellogg cancelled its contract with Phelps after the bong controversy, there was a backlash from his fans and well-wishers who threatened to boycott Kellogg's products. Over 14,000 people joined a Facebook group vowing to boycott Kellogg... |
How Other Sponsors Handled the Issue
None of Phelps' other sponsors such as Speedo, Omega, Visa, and sports beverage PureSport's maker Human Performance Labs, canceled their sponsorships with Phelps. Speedo issued a statement confirming that it would still use Phelps as its celebrity spokesperson and would do all that it could to support him and his family...
Have the Rules of Public Relations Changed?
Experts said that this particular incident had gone a long way to show the limitations of celebrity endorsements. Companies had very little control over the celebrity's image, and it could cause them immense damage if the star were to behave irresponsibly...
Exhibits
Exhibit I: Kellogg's Company Timeline
Exhibit II: Kellogg Company Financials
Exhibit III: Profile of Michael Phelps
Exhibit IV: Kellogg's Press Release Announcing its Association with Michael Phelps
Exhibit V: Image of Michael Phelps as it Appeared on Kellogg's Corn Flakes Packs
Exhibit VI: Michael Phelps Endorsements
Exhibit VII: Some Instances When Celebrity Athletes were Dropped from Endorsement Deals
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