Milling & Baking News - December 9, 2014 - (Page 23)

Ready-to-eat Cereal Update Cereal makers seek fresh start Dollar sales in category down 4% over past year ' T is the season. For hot breakfast cereal makers, it's the time of year when sales begin to heat up as temperatures outside drop. For ready-to-eat cereal makers, it's a time to regroup and gear up for a new year and new trends. The R.-T.-E. cereal industry no doubt will be looking for a fresh start in 2015 after 2014 proved to be challenging. In the 52 weeks ended Nov. 2, dollar sales in the R.-T.-E. cereal category totaled $8,955,986,944, down 4% from the same period a year ago, while unit sales also fell 4% to 2,799,655,680, according to Information Resources, Inc., a Chicago-based market research firm. Few R.-T.-E. cereal makers were immune to the declines in the category. Segment sales leaders General Mills, Inc. and Kellogg Co. sustained dollar sales declines of 3% and 6%, respectively, during the 52 weeks ended Nov. 2, while MOM Brands' sales fell 11% and Quaker Oats dipped 3%. Private label also struggled, falling 6% in the period tracked by I.R.I. Positives at Post Among the major participants in the category, only Post Holdings Inc., St. Louis, was able to generate positive yearover-year dollar sales growth, climbing 2% to $1,004,500,864, according to I.R.I. Dollar sales of the company's Honey Bunches of Oats brand increased nearly 5% to $390,983,712, while Great Grains inched up 0.39% to $124,455,536. Perhaps most impressive was the performance of Fruity Pebbles, which increased 15% to $122,946,992, by far the sharpest yearover-year dollar sales increase among the top 20 R.-T.-E. cereal brands tracked by I.R.I. Pebbles has benefitted from the launch of Pebbles in large bags, and also behind an uptick in the core box business. But even with its success, Post executives were cautious in their comments about the R.-T.-E. cereal category. "While we have stabilized our cereal business, the category itself remains challenged, and it resulted in a reduction in the long-term growth rates that underlie the fair value calculation," Rob Vitale, president and chief executive officer, said during a Nov. 25 conference call with analysts to discuss fourth-quarter results. "In fact, our F.Y. 15 / plan assumes a 4% category decline." The outlook for the R.-T.-E. cereal category was further discussed following comments and then a question from Andrew Lazar, an analyst at Barclays Capital. "It would seem to us ... the category will have to take a much more severe look, I guess, at the cost structure to preserve profitability longer term," Mr. Lazar said. "I wanted to get your perspective on that. You had four plants at the time of the spin (Post Foods' spin-off from Ralcorp Holdings in 2012). You've closed the smallest one (Modesto, Calif.). Volumes in general in the category are quite a bit lower than they were even then, when I think you had mentioned you probably had some excess capacity. I guess I'm trying to get a sense, longer term, if the category continues to decline at this sort of pace, I'm assuming your belief would be some other things you're going to have to cap in from a category perspective, whether it's cost work or consolidation activity. It seems like it can't go on at that rate without some additional actions. Your perspective would be helpful." Mr. Vitale called Mr. Lazar's characterization of the situation "quite fair." "If the category rate of decline is in the 2% to 4% range, that will create additional excess capacity and require a reaction to that," Mr. Vitale said. "We're not prepared to say today exactly what that reaction may be because we want to let some of that time develop and see where that greater decline and hopefully the rate of decline changes. "We obviously, as an 11% share (of the R.-T.-E. cereal category), don't have the ability to drive category volumes. We compete for share more than trying to impact the category. If the category continues to decline at that rate, it will require a reassessment of the cost structure, some of which may occur through consolidation and some of which may be self-directed." 'Ks' get care at Kellogg At The Kellogg Co., Battle Creek, Mich., company executives have talked at length in recent months about the need to find a way to invigorate the R.-T.-E. cereal category, especially within the company's Special K and Kashi brands. In the 52 weeks ended Nov. 2, dollar sales for Kashi plummeted 20% to $194,440,848, according to I.R.I. In describing plans to revive the two brands, John Bryant, chairman and chief executive officer of Kellogg, said during an Oct. 30 conference call that a shift in approach for Special K will move the brand away from a weight-loss focus. "We have communicated Special K around dieting, 'lose weight over a twoweek period,' and we really need to move that to a weight wellness discussion," Mr. Bryant said. "(We need to) move away from reduced calories and to the food itself having tremendous nutrient benefits." Mr. Bryant said new packaging and advertising will highlight "simplicity and goodness." In November the company announced plans for an expansive new product launch of R.-T.-E. cereals featuring protein, sprouted grains and gluten-free. In total, the company plans to debut seven new cereals over the next few months to Top-selling ready-to-eat cereal vendors Dollar sales General Mills, Inc. $2,727,340,288 Kellogg Co. $2,676,782,080 Post Holdings, Inc. $1,004,500,864 MOM Brands $595,687,616 Quaker Oats co. $571,521,344 Kashi Co. $194,440,848 Small Planet Foods, Inc. $84,870,880 Nature's Path Foods, Inc. $73,259,392 Bear Naked, Inc. $56,269,984 Private label $765,946,880 % change from year ago -3.4 -5.7 2.1 -11.3 -3.2 -20.3 1.0 9.3 -7.2 -6.1 Unit sales 836,144,128 824,138,176 310,180,512 163,003,168 190,368,736 57,638,692 26,224,890 26,224,890 14,329,232 308,044,064 % change from year ago -2.3 -5.0 -1.3 -11.1 -3.3 -19.1 5.2 5.2 -5.1 -6.6 52 weeks ended Nov. 2, 2014 Total U.S. multi-outlet (Supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains) Source: Information Resources, Inc. Milling & Baking News December 9, 2014 / 23

Table of Contents for the Digital Edition of Milling & Baking News - December 9, 2014

Milling & Baking News - December 9, 2014
January-September flour output sets new record, rises 0.9%
Consumer Reports casts doubts on merits of gluten-free diet
Late News - Reading to double facility’s size
Table of Contents
News Comment - Finally, commodity relief for grain-based foods
Editorial - India agreement offers hope for W.T.O.
Late News
Luna shifting line of bars to gluten-free ingredients
Business - Fire damages Canada Bread baking plant in Ontario
Girl Scout Cookies enter digital age
Sosland Publishing relocating company headquarters
Cargill reaches settlement, to change labels in Truvia case
C.H. Robinson to acquire Freightquote for $365 million
Financial Results - Campbell Soup baking unit profits strong; U.S. business soft
Charges bog down Post profit; adjusted EBITDA up sharply
Aryzta revenue in North America grows through acquisitions
ADM growth plans include Wild and Brazilian oilseeds
Input costs, plant start-up costs hinder Weston Foods
People - Mayo Schmidt to join Louis Dreyfus as c.e.o.
George Deese to retire as executive chairman at Flowers
Ready-to-eat Cereal Update - Cereal makers seek fresh start
Regulatory Affairs - Air emission calculation for particulate matter: Flour
Industry Activities - Wild, wild East: NAMA given ‘tour’ of Southeast Asia milling industry
AIB names new director of food safety services innovation
Nutrition and Health - USA Rice Federation disputes latest arsenic report
Supplier Innovations
Ingredient Market Trends - Grain volume requirements for Canadian railroads extended
Ingredient Week
Marketplace Business Network
Ad Index

Milling & Baking News - December 9, 2014