Pringles performance pops

by Eric Schroeder
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BATTLE CREEK, MICH. — Fiscal 2013 may have been a difficult year for the U.S. Snacks segment of Kellogg Co., but Pringles were a positive.

Within the U.S. Snacks segment, operating profit in the year ended Dec. 28, 2013, totaled $447 million, down 6% from $476 million during fiscal 2012. The segment had sales of $3,534 million, up 4% from $3,400 million.

For Pringles, though, innovation and core products helped drive high single-digit internal net sales growth for the full year and double-digit growth in the fourth quarter. John Bryant, president and chief executive officer of Kellogg, said the integration of Pringles, which was acquired from Procter & Gamble for $2.695 billion in May 2012, has gone smoothly, is on track and is largely complete.

“This has been a great acquisition for us,” Mr. Bryant said. “Sales and profit growth have exceeded our expectations in every quarter since the transaction closed. The integration has transformed our global snack business and significantly increased its growth potential. We now have category teams based in each of our regions to drive future growth.

“We launched some exciting innovation in 2013, including tortilla Pringles in the U.S. late in the year. We’ve been capacity constrained since completing the acquisition, but we have more capacity coming on-line in 2014 in Europe and in 2015 in Asia, which will help us manufacture closer to demand and supply future growth.”

That capacity includes a new snacks manufacturing plant in Malaysia, part of Kellogg’s recently announced Project K four-year efficiency and effectiveness program. The new facility, in Bandar Estek, Negeri Sembilin, will increase Kellogg’s Pringles production capacity in the Asia Pacific markets and create at least 300 jobs, locally, the company said when the project was announced in mid-January.

Kellogg also recently announced it plans to add capacity for Pringles in China with its joint-venture partner Wilmar International Ltd.

“Sales growth in China has been good,” Mr. Bryant said. “The j.v. has been going well, and this is an exciting step for us in this important region.”

Elsewhere in the company’s snacks portfolio, Mr. Bryant pointed to some challenges in cookies and wholesome snacks. Nutri-Grain and Rice Krispies Treats performed well within the wholesome snacks segment, but their growth was more than offset by weakness in other parts of the portfolio and lower inventories at retail, Mr. Bryant said.

“So we saw growth in the wholesome snack business where we’ve innovated, but frankly, we’ve been disappointed with the performance of this business,” he said. “So we’re changing direction and are planning innovation and advertising that returns to the core in both Special K and Nutri-Grain brands. And with Kashi, much like we’re doing in cereal, we’re returning the brand to its roots, so we’re taking the right steps to drive improvement over time.”

In the year ended Dec. 28, 2013, net income at Kellogg was $1,807 million, equal to $4.98 per share on the common stock, up 88% from $961 million, or $2.68 per share, in fiscal 2012. Net sales increased to $14,792 million from $14,197 million.
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