Kellogg posts $293m net loss - Special K and Kashi drag down business

By Kacey Culliney contact

- Last updated on GMT

Related tags: Net income, Kellogg company, Business, Revenue

Kellogg has a 'critical task of returning the company to sustainable top line growth', its CEO says
Kellogg has a 'critical task of returning the company to sustainable top line growth', its CEO says
Kellogg’s 136% profit plunge for the fourth quarter (Q4) is disappointing and can mainly be attributed to continued poor performances in Special K and Kashi, its CEO says.

Net income for the fourth quarter plummeted $1.1bn to losses of $293m, down from net profits of $819m for the previous year – a drop of 136%. Full year net income was $633m, down 65% from the previous year.

John Bryant, chairman and CEO of Kellogg Company, said the plunge in sales could mainly be attributed to poor cereal and snack sales in developed markets, particularly the US.

Net sales of US snacks, for example, dipped 3.1% for Q4 and 2.4% for the full year. Net sales for US Morning Foods (predominantly cereals) declined 7.7% for Q4 and 5.7% for the full year.

These declines, the CEO said, were driven by poor performance of Special K and Kashi, particularly due to a consumer shift away from weight management brands in search of positive nutrition and 'goodness' foods.

Consumers are shifting away from 'weight management' brands, says Kellogg CEO
Consumers are shifting away from 'weight management' brands, says Kellogg CEO

For the Special K brand, he said issues centered on the fact it used to call for the ‘two-week challenge’ which basically called on consumers to eat less calories; to deprive themselves, when really consumers want to have weight wellness.

Kellogg would continue to renovate the Special K brand to better align with these needs, he said, a plan Kellogg announced back in Q3 - a global rebrand for Special K​.

“What gives me confidence that we can move the food to be more on trend? One would be our experience in Australia where we launched the Special K Nourish cereal in 2014. That now has the Special K business back to growth in Australia,” ​he told analysts in the company's Q4 earnings call.

Similarly, Kellogg had worked to evolve Kashi’s GoLean brand moving it GMO-free and would soon make its Heart to Heart brand certified USDA organic. The company had also invested in breakfast campaigns across the US to connect with consumers and receive better feedback.

“We expect that these actions will have a positive impact on the performance of Special K and Kashi brands and on the cereal business as a whole,”​ he said. 

Kellogg is focused on continuing to evolve the Kashi brand - GoLean is one example, its CEO says
Kellogg is focused on continuing to evolve the Kashi brand - GoLean is one example, its CEO says

2015 will be a 'rebuilding year'

Moving forward, Bryant said there was promise for snacks, as well as cereals, although the latter would see slower growth.

“We would expect, in developed markets, for our snacks business to grow faster than our cereal business. I think in developing and emerging markets they can both grow at very similar sorts of rates,” ​he said.

“We are at an important point as we enter 2015. After a disappointing 2014, we are building a platform for growth over the coming year.”​ 

Bryant said Kellogg recognized the “critical task of returning the company to sustainable top line growth”.

“So, 2015 is a rebuilding year for us – it’s an opportunity to invest in great food and ideas and to build a solid platform for long-term growth,” ​he said.

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