Kellogg's Snacks Drive Growth -- WSJ
October 30 2019 - 3:02AM
Dow Jones News
By Annie Gasparro and Micah Maidenberg
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 30, 2019).
Kellogg Co. is leaning on snacks like Pringles and Cheez-Its for
growth, as its U.S. cereal sales continue to decline.
The maker of Frosted Flakes, Special K and Rice Krispies said
Tuesday that its cereal sales in North America fell 4.8% in the
third quarter on a comparable basis, while snacks sales in the
region rose 5.2%.
Kellogg's shares rose 3%, as the company's adjusted profit of
$1.05 a share, excluding currency effects, exceeded forecasts from
analysts.
Long a breakfast staple, cereal has struggled in recent years as
consumers have opted for more protein-heavy meals at the start of
the day and fast-food chains have moved to expand their breakfast
businesses.
"What we haven't done as an industry is respond quickly enough
to some of the trends," Chief Executive Steve Cahillane said on a
conference call.
More marketing investments and production capacity for cereals
over the next couple months will help, he said. Kellogg is also
replacing some underselling and low-margin brands with new ones,
like Pop-Tarts cereal.
Kellogg's salty snacks, including Pringles, indulgent ones like
Rice Krispies Treats, and "wholesome" brands, like Nutri-Grain, are
driving growth. Also contributing are new products such as Pringles
Wavy, Nutri-Grain bites and smaller or single-serving packages
meant for people to eat on the go.
New Cheez-It Snap'd crisps, for instance, have been such a
success that Kellogg is at peak capacity, selling every box it
makes, executives said.
Kellogg's frozen-food brands, including Eggo and MorningStar
Farms, are also gaining traction. Americans' increasing interest in
meat alternatives coupled with new product launches from
MorningStar Farms helped the company gain market share and shelf
space in the latest quarter.
Battle Creek, Mich.-based Kellogg reported third-quarter sales
of $3.37 billion for the quarter, slightly more than expectations
from analysts polled by FactSet but down from $3.47 billion a year
earlier.
The company said its sale of Keebler cookies and other brands, a
deal that was completed in July, weighed on results compared with
last year's third quarter. But that move has allowed Kellogg to
focus more attention and resources on its core U.S. brands,
executives said.
"The heaviest lifting and the biggest, most disruptive actions
are largely behind us," Mr. Cahillane said.
The company reported a profit of $247 million, or 72 cents a
share, compared with $380 million, or $1.09 a share, last year.
Excluding currency fluctuations, mergers and asset sales, global
sales rose 2.4% in the quarter, Kellogg said.
Kellogg's costs of goods sold grew about 3% in the quarter as it
paid more for ingredients, but it raised its prices to help offset
that. Selling, general and administrative expenses fell 6%, aiding
its profit margin.
Write to Annie Gasparro at annie.gasparro@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
October 30, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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