BATTLE CREEK — Encouraging signs for new product introductions at Kellogg Co. are among reasons the company’s top executives remain upbeat in a difficult market environment. New details of the company’s innovation pipeline were featured in a Nov. 3 conference call with investment analysts.
As previously reported, comparable, currency-neutral earnings per share on the common stock at Kellogg were 96c in the third quarter ended Oct. 3, down 2.3% from the third quarter of 2014. Sales were up 1%, excluding the effects of currency moves.
For Special K cereal, which has been repositioned as a wellness rather than a diet brand, a new cereal introduction is on trend and generating buzz, said John Bryant, chairman and chief executive officer.
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| John Bryant, chairman and c.e.o. of Kellogg |
“We’ve had a great reception for the innovation we have planned for the first quarter,” he said. “For example, we are launching Special K Nourish, which is a cereal with positive nutrition, and ingredients the consumer can see in the food. There are two S.K.U.s (stock-keeping units) in the U.S. — cranberry coconut almond and apple raspberry almond — and both are made with a multi-grain quinoa flake. The food includes fruits, nuts, and on-trends grains like quinoa. You’ll remember that this ready-to-eat cereal has been very popular in other parts of the world, and retailer acceptance in the U.S. has been encouraging. We’ve got a lot of activity planned for the launch, and we’re excited about the potential.”
More recently, Pumpkin Spice Mini-Wheats “were a big hit,” he said. The company’s six core cereals grew in total in the third quarter and gained market share. Bolstered by strong advertising and a popular cranberry innovation, Raisin Bran posted double-digit sales growth, he said.
Mr. Bryant also identified a number of positives for the Kellogg snacks business.
“Overall, we saw sequential improvement in the cracker, cookie, wholesome snack, and Pringles businesses in the third quarter,” he said. “In all channels, overall consumption of our crackers was essentially flat in the quarter, and our big three brands posted low-single-digit consumption growth in measured channels. The Cheez-It brand posted consumption growth of 3%, driven by increased display and the success of two new products — Cheez-It Grooves and Extra Toasty.”
Still a challenge, Mr. Bryant said, were the Special K cracker and popcorn chips.
Pringles enjoyed double-digit growth and gained share in the third quarter, Mr. Bryant said. He attributed the positive result, in part, to a Retailer Choice Award for Zip Dip, a product that features both chips and dip.
Even the company’s North America Other business, which includes U.S. frozen foods, Kashi and Canada, which experienced a number of difficulties in the third quarter, Mr. Bryant found plenty of cause for optimism. The company’s frozen Eggo hand-held sandwiches continued to do well. Third-quarter operating income for the Other segment was down 36% versus the same period last year.
A range of influences adversely affected the business, including egg prices, network improvements, the timing of activity and the drawing down of inventories in anticipation of packaging changes, Mr. Bryant said.
“The Kashi business is seeing stabilized distribution and sequential improvement in cereal consumption and share performance, although sales still declined,” he said. “In cereal, our Sweet Potato Sunshine and Sprouted Grains cereals are doing well. In fact, overall consumption trends improved significantly as the year has progressed. In the latest data, year-to-date cereal consumption was down 13%, 12-week consumption was down 7%, and four-week consumption was down only 3%. The team has done a great job, and we're on track to return the business to growth in 2016.”
