A Tale of Two Grains

In July of 1927, a brand new breakfast food hit store shelves. Chances are, you have a box in your home right now. The food was called Rice Krispies, and the snack, crackle, pop of the iconic cereal has been an American staple for nearly 100 years. But, if it weren’t for a bold strategy by its manufacturer, Kellogg’s, Rice Krispies might have been just another footnote in history.

Its rise to popularity offers a business lesson for today.

Two years after the launch of Rice Krispies, the American stock market took a historic tumble. As has happened recently, the economy became a giant question mark in less than 24 hours. People lost jobs. Businesses closed doors. Amidst this catastrophe, marketing budgets were slashed. At the time, Kellogg’s and its rival, Post, were a one-two duo at the top of the American cereal market. The companies shared a ferocious rivalry and an eerie origin story traced to a single, Michigan sanitarium. They both locked in a struggle to dominate a fledgling industry that was just beginning to gain traction on oatmeal. But when the market nosedived, the two brands took different paths through the depression.

In 1929, Post was riding high on the popularity of Grape Nuts and they made the predictable move. It’s the move that most businesses might logically emulate—they slashed the marketed budget and invested less money in research. They circled the wagons.

Kellogg’s, on the other hand, saw an opportunity to strike. Kellogg’s not only retained their marketing budget, but they increased it. They spent more money on research and by the time the depression ended in 1939, Kellogg’s stood atop the totem pole as America’s most well-recognized cereal brand. They remain there to this day.

The current net worth of Kellogg’s is more than $22 billion, while Post is valued at $5.3 billion.

Investing while the market is down: that pattern has repeated itself throughout the past century. McDonalds did it in the early 90’s, Hyundai did it in the late 00’s, and another household name is sure to do it in the 2020’s.

Right now, you may feel helpless. You may feel as if there’s nothing you can do to help your business. Understandably, many tackle stores and even manufacturers are going to endure loses this year. Some will close their doors. But others might weather the storm. At the beginning of this week, the odds seemed stacked against us all. In the wake of the CARES Act, some companies that held little hope for prosperity can at least imagine a route forward. And if you have the means, if you can find a way to continue advertising during this historic downturn, you just might come out ahead in the long run.

Don’t believe me? There’s probably a box of cereal in your cupboard that says otherwise.