In 2000, Kellogg Co. made a brilliant move. Carlos Gutierrez, Kellogg’s CEO, bought a small natural cereal startup called Kashi.
Ahead of his time, Gutierrez anticipated America’s embrace of pure and organic food. Within five years, consumers craved healthy alternatives to sugary cereals.
Kashi’s revenues soared 25-fold by 2008. By the late 2000s, however, the company’s strategic miscues ruined Kashi’s sales momentum. Gutierrez had left Kashi alone from 2000 to 2004, his last year at Kellogg. But after 2004, new leaders started to encroach on Kashi’s space and micromanage it.
Kellogg started imposing its own processes related to product planning, procurement and manufacturing. It also combined sales teams and stifled Kashi’s zest for innovation, driving many longtime Kashi employees to quit.
Due to Kellogg’s increasing involvement in resetting Kashi’s strategic direction, Kashi lost its entrepreneurial spirit and brand identity. As consumers gained awareness of the push for non-GMO (genetically modified organism) foods and gluten-free options, Kashi fell behind. Kellogg’s reputation took a hit when reports revealed that it had donated to a campaign opposing the labeling of GMO foods. Kashi fans were outraged.
By 2014, revenues from Kashi’s cereals fell 21 percent. Licking its wounds, Kellogg is trying to revive the brand.
“A large organization can sometimes help too much,” says John Bryant, Kellogg’s current CEO.
— Adapted from The Network Imperative, Barry Libert, Megan Beck and Jerry Wind, Harvard Business Review Press.