Investment in cereal makes sense for Kellogg because it cannot sideline such an important segment but snacks should really be the priority, an analyst says.
As Kellogg posted a profit drop of 11% for its first quarter (Q1) of 2013 last week, company CEO John A. Bryant said it would inject efforts into the adult cereal category to drive growth.
In a call with analysts, Bryant admitted that the adult segment within cereals was “lagging” and that new product launches under the Special K, Kashi and Raisin Bran brands should boost business.
However, packaged foods analyst at Euromonitor Matthew Hudak suggested that snacks would be a better priority for the firm.
“So much of what they make is from cereals, so they cannot afford to be less competitive. But I would say in the long run, snacks will see higher growth while interest in cereals will likely decline. With that in mind, I would focus on snacks, specifically snack bars,” Hudak told BakeryandSnacks.com.
Biting into opportunities
Kellogg should be working hard on developing convenient and highly nutritious snack bars, the analyst said.
“Consumers increasingly want to have a quick but tasty way to eat on the go or whenever they have small snack cravings. Snack bars work very well here,” he said.
Hudak said it would be crucial to marry taste, convenience and health together in any new product development.
Kellogg does have plans to innovate in snacks, its CEO said, although plans are to launch two new cracker varieties - Cheez-It Zings and Town House Pita - and new cookies.
Boosting the adult cereal segment
Despite innovation investments across snacks, one of the main priorities for Kellogg is to address the lag in adult cereal consumption, Bryant told analysts.
Kellogg will launch new cereal products that specifically target adults –Raisin Bran with Omega-3, Multi-Grain Special K, Kashi GOLEAN Vanilla and Kashi Cheer Heart to Heart.
The company also has plans to expand its ‘drinkable’ breakfast options and launch hot cereals in the middle of the year. “These are both exciting steps for us and should also help drive adult consumption in the broader category,” Bryant said.