BOCA RATON, FLA. — A wave of brand building investment at Kellogg Co. from 2017 to 2019 was successful. During this period, the company invested in its Pringles, Cheez-It, Pop-Tarts and Rice Krispies Treats brands and achieved double-digit growth in three of the four. Now the company is embarking on a new wave of investment.
The investment will be more modest than the first, management has said, and focus on such cereal brands as Froot Loops, Frosted Flakes, Frosted Mini-Wheats, and Raisin Bran as well as RXBAR, Special K and MorningStar Farms.
“The important point here is that this incremental investment is proactive and it’s opportunistic, and it should be viewed as yet another reason for confidence in our ability to deliver consistent growth,” Steven A. Cahillane, chairman, president and chief executive officer, said during a Feb. 19 presentation at the Consumer Analyst Group of New York conference.
Expansion of the RXBAR brand was interrupted by a supplier-related recall in 2019. With distribution rebuilt, management plans to invest in the brand to accelerate growth.
“In 2020, we’re launching Minis for additional on-the-go occasions,” said Christopher M. Hood, senior vice-president of Kellogg North America. “We’ll continue the gradual expansion of Nut Butters, and we’ll reposition the RX Kids bar range. We’ve also launched a single-serve hot oat offering, which will be expanded at a measured test-and-learn pace.”
In cereal, plans include reintroducing Toucan Sam to consumers, launching more licensed and seasonal cereals, and continuing to co-brand within its portfolio by introducing two new flavors of Eggo cereal.
“It’s equally important to emphasize the wellness attributes of cereal because that’s what brings the category back to growth,” Mr. Hood said. “So, we’ll elevate cereal’s wellness credentials and bust some myths with the ‘did you know’ promotional campaign, leveraging social media and in-store signage. This approach has been very successful in Canada, and we’re reapplying it to the U.S. And we’ll get sharper on-pack claims, like the protein, fiber and sugar claims.”
Kellogg also will seek to shift some cereal consumption into the snacking occasion.
“As we’ve discussed many times, out-of-breakfast consumption has grown to nearly one-third of overall cereal consumption,” Mr. Hood said. “So, on-the-go snacking with cereal is a great opportunity for us. To that end, we’re expanding our On the Go Bear Naked Bites. And in the second half of this year, we’ll be launching new jumbo snacks versions of some of our tastiest cereals.”
MorningStar Farms is getting a packaging overhaul to make it “more Instagram-worthy,” Mr. Hood said, and the brand is expanding beyond frozen and into the refrigerated case through the Incogmeato sub-brand. The ready-to-cook application also has opportunities to expand in food service, school and university channels.
“We have the right to win,” Mr. Hood said. “We have better food crafted with simple ingredients, a positive nutrition profile versus meat, a brand that is very well-known for high-quality food and great taste and a well-established supply chain.
“We’ll launch burgers at the end of Q1, followed in Q2 by sausages. Others (applications) will follow in subsequent quarters, giving us a steady flow of news in the category.”
Mr. Cahillane conceded the investments Kellogg has planned in 2020 may disappoint shorter term investors who would like to see more profit flow to the bottom line.
“Keep in mind that we’re making this incremental investment from a position of real strength,” he said. “We just came from a year of broad-based organic net sales growth, and in the second half, a return to operating profit growth, excluding the divestiture. This is anything but investment out of urgent need. This is investment in sustaining steady, dependable, balanced growth well into the future.”