Kellogg cereal sales, consumption improve thanks to innovation, repositioning

“We are pleased with the performance of our US Cereal business,” which saw the top six brands grain half a percentage point of market share and sales of some “adult” cereals increases, John Bryant, CEO, told analysts during a same day call. Specifically, he noted, Raisin Bran posted double-digit growth in the quarter, sales of Special K increased and consumption of Kashi cereal in North America improved sequentially with consumption in the last four weeks down only 4% compared to 7% in the 12 week period and 13% in the year-to-date period. While these improvements may not be staggering increases in sales or profits, their significance is underscored when compared to the overall category’s struggle in the past few years as consumers turn away from carb- and sugar-heavy cereals in favor of more protein-packed products, like yogurt. Within this context, Bryant said, “If we could stabilize the US cereal business in a stable category, I’d define that as a success.” He also suggested that while cereal sales are improving, he is not counting on growth from the business to help Kellogg hit its goal of low single-digit sales next year. Innovation helps fuel growth Several factors are contributing the US cereal segment’s slow resuscitation, including innovation, repositioning of adult brands, improved advertising and a general increase in breakfast consumption at home, Bryant said. In terms of innovation, he pointed to Raisin Bran’s cranberry innovation as a growth driver and seasonal sales of Pumpkin Spice Mini-Wheats, which he said were “a big hit.” The firm plans to continue building the category sales with innovation in 2016, including the upcoming launch of Special K Nourish, “which is a cereal with positive nutrition and ingredients the consumers can see in the food,” such as a multigrain quinoa flake, fruits and nuts, Bryant said. “This ready-to-eat cereal has been very popular in other parts of the world, and retail acceptance in the US has been encouraging,” he said, adding: “We’ve got a lot of activity planned for the launch, and we’re excited about the potential.” The firm also will double the “total weight of innovation” for the Kashi business, including cereals, in 2016. “We’re focused on progressive nutrition and have some great introductions planned,” he said. Bryant noted the Kashi innovation is not restricted just to food, but also will include packaging, as the firm tries “to hit the right package-price-product offering by channel, by market.” Improved positioning bolsters sales Cereal sales also are climbing on the strength of improved positioning and advertising, Bryant said. For example, the company’s efforts to move Special K away from dieting, which was effective in the 2000s, and more towards wellness, are helping the brand gain traction, he said. Kellogg also is reinvigorating Special K Red Berries by “reinforcing the berries” by adding more of the ingredient, Bryant said. As a result, sales of Red Berries climbed 7.3% in the third quarter. Encouraged by its successes in the US cereal segment, Kellogg will apply these lessons learned to struggling cereal sales in other regions, Bryant said. Despite this potential underdog victory, Kellogg’s overall sales continue to suffer – with profits falling 8.5% to $205 million in the quarter. Revenue also fell 8.5% to $3.33 billion, the firm reported.

Kellogg cereal sales, consumption improve thanks to innovation, repositioning

Kellogg’s beleaguered cereal sales in the US appear to be stabilizing – at least for now – but that isn’t enough to buoy the firm’s overall profits, which fell again during the firm’s third quarter announced Nov. 3.

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