Quantfury Gazette


The battle of the cereals

Miguel F Contributor
box of cereals corn flakes kellogg nyse k

Sometimes the best ideas are born by mistake, and they are also carried out by people who were underestimated and must fight against those who stand in their way to success. This is the case of William Kellogg, a young worker born in 1860 to whom the cereal company Kellogg’s (NYSE: K) owes its name, whose products accompanied me since I was a child at breakfast and conquered me with their colourful characters that seemed to watch me from the supermarket shelves. But I never imagined the interesting and eventful story that repeatedly put the continuity of the company in doubt.

The story begins with William, who failed to complete his schooling due to short-sightedness. While his older brother, John, was a successful student who would get a scholarship to study medicine and would later become the director of a sanatorium renowned for guiding his patients toward vegetarianism and physical exercise. When William was unable to find a job, he turned to his brother, who offered him a position at the sanatorium that included working in the kitchen. 

John was obsessed with creating healthy food for his patients, and experimentation with cereals led him to develop a granola that had great repercussions, and former patients of the clinic kept asking for it through home delivery, a task that William began to develop. The high demand led to standardizing the manufacturing process and even adding temporary staff such as Charles Post, a patient at the clinic who, unable to pay for medical care, began helping in the kitchen.

William quickly saw the potential of the business, but his brother (who held the patent for the product) refused to market it to the general public, as it had been developed for patients at his clinic. In addition, John had contempt for his brother, which caused him to disregard his suggestions. William’s idea would be taken up by kitchen assistant Charles Post, who founded Post Consumer Brands (NYSE: POST) using the processes learned at the sanatorium.

William, far from being discouraged, began to look for investors with the idea of creating his own company, and an oversight in the kitchen would cause the granola to solidify. When he tried to separate this block, he would generate corn flakes that would later be known as Corn Flakes. Sometime later, a catastrophe struck the sanatorium. A fierce fire caused great losses, and John began to raise funds for reconstruction, yielding to his brother’s request to buy the patent of the food to found Kellogg’s (NYSE: K).

From here, William would begin his road to success, but with several setbacks. On the one hand, his own brother, finally seeing the million-dollar business, decided to manufacture the product on his own and offer it on the market with a counterfeit package identical to that of Kellogg’s (NYSE: K). This culminates in a lawsuit in court in which William wins, and John ends up bankrupt.

Post Consumer Brands (NYSE: POST), on the other hand, seeks to mimic the Corn Flakes creation process. Charles Post was a very analytical person and discovered that the manufacturing relied exclusively on rollers that were used to process tobacco, and William used them to create the cornflakes. Charles contacts the only company that manufactures these rollers and buys their entire production while imposing a clause whereby the company cannot sell new rollers to anyone other than himself. This ensured exclusivity while putting the brakes on the increase in Kellogg’s (NYSE: K) production capacity.

There was yet another tragedy to come. The Kellogg’s (NYSE: K) factory caught fire, rendering the rollers unusable. William arranges a loan to get the factory back on its feet, but in trying to buy new rollers, he discovers Charles Post’s exclusive contract. His ingenuity led him to discover that the clause only mentioned the purchase of new rollers but did not mention the repair of used rollers. So he decides to request the repair, and the manufacturing company agrees.

Kellogg’s (NYSE: K) was ready to position itself as the leading brand. To do so, it would invest millions in marketing and signage. While Charles offered his product as a medicinal cure, William offered it for what it really is: breakfast cereal. Marketing would lead him to understand that it is children who tell their parents which cereal to buy. Based on this, they would create animated characters to decorate the boxes, such as the unique tiger Tony, who undoubtedly inherited some of William’s traits, such as competitiveness and tenacity, that led him to create an empire.


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