Kellogg chasing after boomers

by Monica Watrous
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BATTLE CREEK, MICH. – Peanut butter-flavored Pop-Tarts, Kashi chia cereal and Town House pita crackers are among the launches planned by Kellogg Co. in the coming months.

The company offered a peek into its product pipeline during a May 2 call with financial analysts to discuss first-quarter earnings.

To strengthen softer segments, including snacks and cereal, Kellogg is leaning heavily on innovation. While growth in children’s cereals remains solid, adult consumption, particularly that of high-income boomers, is lagging.

“I think the real issue there is our innovation,” said John Bryant, president and chief executive officer. “And the innovation in the category needs (to be) more nutrition- and benefit-oriented and, quite frankly, less about pricing and merchandising.”

Forthcoming products that promise health benefits include Kashi Heart to Heart Chia, Raisin Bran Omega-3 and Special K Multigrain. Addressing another weakness in the category, Kellogg is redefining ready-to-eat cereal by offering different formats with Kellogg’s Breakfast To Go shakes, Nutri-Grain breakfast biscuits and hot cereal.

Snack sales, too, have slumped in recent periods. While Pringles delivered strong results during the quarter in part with the relaunch of Pringles Stix breadstick snacks, Kellogg’s cracker and cookie businesses declined.

“Though we’re not happy with the recent performance of the snacks business, some of the weakness is due to timing, though core results could be better,” Mr. Bryant said. “The team is working hard, and we have plans for improved innovation and support. The business will likely remain challenging in the first half, but we’re optimistic that results will improve over time.”

Kellogg is unveiling two new crackers, Cheez-It Zings and Town House Pita, and two varieties of Keebler Simply Made cookies, which contain eight ingredients.

Innovation benefited the company’s wholesome snacks business, which grew with help from new Special K Pastry Crisps and Nutri-Grain Fruit Crunch bars. Additionally, the frozen breakfast segment delivered double-digit growth, fueled by new Special K Flatbread Sandwiches and Eggo Waffles varieties launched during the quarter. Morningstar Farms, which also helped lift the frozen foods category, has “strong innovation planned,” Mr. Bryant said.

For the quarter ended March 30, the company had income of $311 million, equal to 86c per share on the common stock, which compared with $351 million, or 98c per share, in the same period a year ago. Sales for the quarter were $3,861 million, up 12% from $3,440 million during the same quarter of the prior year.
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