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Kellogg reports profit drop, flags up challenging EU market

By Jane Byrne , 05-May-2011

Related topics: Suppliers

Kellogg’s said it expects Europe, and the UK in particular, to be its most challenging operating environment this year, as it reports first-quarter net income drop of 12 per cent citing higher ingredient costs and increased marketing and new product spend.

The leading cereal manufacturer noted earnings of $366m for the quarter, compared with $418m a year earlier but reported a revenue climb of 5 per cent to $3.49 billion on better global sales.

The company notes a highly competitive retail landscape in the UK combined with a “tough economy”. It said its cereal category in that market was flat in the quarter, in line with most UK food categories, while cereal consumption was down 2 per cent.

However Kellogg’s points to growth trends in other European markets.

“During the quarter, we began to see positive trends on the continent. Within our French business, consumption increased 6 per cent, yielding a share gain of 0.6 points.

"The Tresor and Miel Pops Cereal brands helped drive this growth,” said John Bryant, Kellogg company president and CEO during a conference call on the financial results.

The CEO reveals that the US cereal business posted a 2 per cent increase and that this was driven by "stronger innovation and higher promoted prices."

Kellogg said it plans to launch more than $800m worth of new products during the year.

2010 was a difficult period for the world’s biggest cereal maker, with a massive recall of breakfast cereal due to tainted packaging being a major factor behind a profit drop last year.