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The last paragraph performs which of the following main functions in the passage?
The third paragraph describes the extension strategy which Kellogg's used to solve the problem of the Nutri-Grain brand's declining sales.
Although the second paragraph describes the problem Nutri-Grain faced, the third paragraph describes the solution to that problem, rather than gives further information on it.
The strategy of reviving the product is mentioned in the last sentence of the first paragraph, but is hardly described. You are correct that A is a possible/plausible answer choice, but providing an example for the strategy of reviving is not really the main function of the third paragraph, which deals with Kellogg's solution to the problem of Nutri-Grain's competition towards the end of its life cycle. Thus, it's not so much that A is wrong, as that C is a more correct description of the function of the last paragraph.
Your choosing this answer choice is an example of why adhering to the initial reading is beneficial for dealing with General questions such as structure questions. If you read too much of the passage, then some answer choices may link to the less important parts of the passage that you have read into, and thus become dangerously appealing. The main idea of a GMAT passage will be in your initial reading - If it didn't appear in the initial reading, it's not the main point (or main function).
The second paragraph provides an example, not evidence, of the life cycle of a specific brand, Nutri-Grain.
Diversification and development are two types of extension strategies that were possible solutions to Nutri-Grain's problems.