Speaking at the Barclays Back to School consumer conference in Boston yesterday, Kellogg chief executive John Bryant said 2010 “was a very difficult year for the Kellogg company. Clearly we lost our momentum in 2010 but we’re in much better shape in 2011.
“We have recently taken some pricing in the US and we do expect 2012 to be inflationary again but expect to have a strong innovation platform so are well positioned to weather that.”
While the UK and Australian markets remained “difficult”, things were starting to look up in the US, he said.
“The good news is that the categories we are in are also returning to growth. We are seeing improving trends here in the cereals category in the US and we are seeing some good growth in cookies and crackers. We’re gaining share in cereals, crackers and toaster pastries.”
‘Outstanding program of innovation’
He added: “We had a lack of innovation in 2009-2010, but we have an outstanding program of innovation in 2011 and a stronger program coming in in 2012.
“This year we will launch products that will have about $800m of additional sales for the company and we’re seeing some great success from sales of products like Special K cracker chips, Crunchy Nut, a rollover benefit from Fiber One as well as thick and fluffy waffles and we have a stronger program for 2012.”
“Hopefully by the time we get to 2012 we will be back on our long term goal of having 15% of our sales from products launched in the last three years.”
Supply chain improvements
The firm, which recalled several breakfast cereals in 2010 due to off-flavors from packaging liners, and was caught up in the peanut salmonella recall of the year before, has since tightened checks across its supply chain, said Bryant.
“The company had the two largest recalls in our history in the last three years… [But] we’ve looked at our supply chain from silo to spoon. We’ve increased auditing and testing of suppliers… introduced environmental zoning in plants.. [and created a] clear delineation between raw materials, processing and packaging so that we control the flow of people and materials through those plants.”
Trade spending
The focus going forward would be on brand building through advertising and other initiatives rather than trade spending, he said, noting that a recent price rise on Special K had not dented volumes because the brand was well supported.
“We took Special K red berries from a $2.50 price point in a number of outlets to $2.99 and when we did that we actually saw our sales grow 12% and our underlying volume was actually stable if not up slightly.”
What future for Post Foods?
Asked what he thought might happen to cereal maker Post Foods after it was spun off by owner Ralcorp, he said: “I don’t know where Ralcorp will end up or what ConAgra [which has made three unsuccessful offers for Ralcorp] is going to do.
“It is a difficult environment to see how one of the major manufacturers could end up owning a big chunk of that business. But it would be pure speculation to comment beyond that.”