Kellogg hopes innovation stirs U.S. Morning Foods segment

by Jeff Gelski
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Coming soon: Jolly Rancher flavored Pop-Tarts
 

BATTLE CREEK, MICH. — The U.S. Morning Foods business segment of The Kellogg Co. got off to a groggy start at the crack of the fiscal year, as did the North America Other segment, which includes the Kashi brand. Company executives hope sales wake up in those segments through recently launched Kashi nut butter bars and product launches set for Frosted Mini-Wheats and Special K, said Paul T. Norman, senior vice-president of The Kellogg Co. and president of Kellogg North America.

Paul Norman, Kellogg
Paul T. Norman, senior vice-president of The Kellogg Co. and president of Kellogg North America

The U.S. Morning Foods segment had net sales of $719 million in the first quarter ended April 1, down 6.3% from the previous year’s first quarter. Special K and Frosted Mini-Wheats started the year in decline, largely due to the year-on-year timing of innovation and renovation last year, Mr. Norman said in a May 4 earnings call. New and renovated products in both the Special K and Frosted Mini-Wheats brand are set to launch in the second quarter.

Special K and Frosted Mini-Wheats started the year in decline.
 

“We expect quarterly sequential improvement in sales for cereal and share, driven by continued momentum in our kid brands and by the renovation, innovation and new communication for the Special K and Frosted Mini-Wheats brands, which are breaking here in the month of May,” he said. “We’ve also had a major in-store event coming in late Q2 behind the movie release of “Despicable Me 3.’”

New Dunkin' Donuts flavors helped Pop-Tarts gain share in the toaster pastries category.
 

He added Pop-Tarts continued to gain share in the toaster pastries category, driven by the launch of Pop-Tarts in the Dunkin’ Donuts flavors of frosted chocolate mocha and vanilla latte.

“We’ll continue to drive this brand high in the back half of the year with the launch of Jolly Rancher-flavored Pop-Tarts,” Mr. Norman said.

The North America Other segment in the first quarter had sales of $393 million, down 5.1%, but positive news came from Kashi.

Kellogg launched Kashi nut butter bars in January.
 

“We launched our new nut butter bars in January,” Mr. Norman said. “Our early signs are good, and we’re following up with further renovations and innovations in the second half. So Kashi is another business in which we expect to see gradual improvement, as the year goes on, both in consumption and in net sales.”

Battle Creek-based Kellogg companywide posted net sales of $3,254 million in the quarter, down 4.1% from $3,395 million in the previous year’s first quarter. Net income of $262 million, or 75c per share on the common stock, was up 50% from $175 million, or 50c per share, in the previous year’s first quarter. Earnings increased because of year-ago interest costs related to a bond tender and a lower tax rate. Higher up-front costs related to the Project K restructuring program and adverse currency translation partially offset the earnings increase.
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