Food Business News - February 23, 2016 - (Page 12)

Snacks 'area of weakness' for Kellogg BATTLE CREEK, MICH. - A priority for Kellogg Co. in the year ahead is to stabilize its snacks business, admittedly "an area of weakness" for the Battle Creek-based company, said John Bryant, chairman and chief executive officer. "We've had a disappointing couple of years in U.S. Snacks," Mr. Bryant said during a Feb. 10 earnings call with financial analysts. "We have had a headwind from Special K in snacks over the last couple of years. You've seen that come through in our cracker business, with Special K Cracker Chips; it has come too in our wholesome snacks business with Special K bars. "The good news is 12 FOODBUSINESS NEWS ® where we have renovated those foods, similar to what we've done in cereal, we're seeing the business stabilize." For the fiscal year ended Jan. 2, Kellogg net income was $614 million, equal to $1.74 per share on the common stock, down 3% from $632 million, or $1.76, in the prior year. Net sales were $13,525 million, down 7% from $14,580 million the year before. Full-year currency-neutral comparable earnings were $3.81 per share, which was in line with the prior year, and currency-neutral net sales increased by 1.2%. With a new leadership team in place, Kellogg is confident in returning the snacks business to modest top-line growth in 2016. The company noted sequential improvement in consumption in its crackers, cookies and wholesome snacks businesses in the recent quarter. "We have had strong growth in Cheez-It over the last several years," Mr. Bryant said. "We're seeing good growth in Pringles; we're seeing good growth in Rice Krispy Treats and wholesome snacks. Our cookie business is stable over the last couple quarters, so actually we've seen better trends within the business. "So as we go forward into 2016, we expect to return this business to topline growth, although modest. And we absolutely expect to return the business to bottomline growth." Kellogg's snacks strategy includes product innovation, expanded distribution and stronger in-store execution. The company is set to debut new Nutri-Grain bars and a Special K Chewy Nut Bar in the year ahead. "Our wholesome snacks piece is more about ensuring all of our foods are on trend," Mr. Bryant said. "There is work that has been done there, we have done that work, we have seen better results and there's still more to do." Meanwhile, Kellogg's cereal business posted solid growth in the quarter, led by significant improvement in Special K consumption. "This was driven primarily by changes to messaging and the renovation work we did last year on Red Berries," Mr. Bryant said. "And the good growth we saw all year on Raisin Bran was the result of the introduction of Raisin Bran with cranberries, which should have good results for the entire franchise." The company credits strategic investments in brand building and product development for the boost in breakfast products. "We're going to continue to drive sales in 2016 with the introduction of new products like Special K Nourish... a cereal with positive nutrition and ingredients the consumer can see, and the food includes fruits, nuts and on-trend grains like quinoa," Mr. Bryant said. "We have a range of new products launching in 2016; some are on-trend foods such as Special K Nourish and Harvest Delights Mini-Wheats. Some are fun additions, including Smorz, Disney Dory-themed cereal and Orange Crush Pop-Tarts." For the fourth quarter, Kellogg recorded a loss of $41 million, which compared with a loss of $293 million in the fourth quarter of 2014. Adjusted comparable earnings were 79c per share, down 6% from comparable e.p.s. in the fourth quarter of 2014, the company said. Net sales for the quarter were $3,142 million, down nearly 11% from year-ago sales of $3,514 million. Fourth-quarter currency-neutral comparable net sales increased by 4.2%. Within Kellogg North America, operating profit for the company's U.S. Morning Foods business decreased 1% for the year and increased 5% for the quarter, while U.S. Snacks profit was down 5.8% for the year and nearly 13% for the quarter, and U.S. Specialty Channels profit declined 2.3% for the year and gained 5.3% for the quarter. Operating profit for North America Other, which includes Kashi, U.S. frozen and Canada, was down 40% for the year and 45% for the quarter. The U.S. Morning Foods segment's comparable sales declined 1.6% in the full year and increased 1.5% in the fourth quarter, reflecting improving trends in the cereal business. Comparable sales for the U.S. Snacks segment declined 1.6% for the full year and 1.9% for the quarter; however, consumption improved sequentially in each of the categories in the segment, the company said. Kellogg North America comparable net sales on a currency-neutral basis were down 1.6% for the year and 0.4% for the quarter. Kellogg reaffirmed its previous guidance for adjusted 2016 earnings per share growth of 6% to 8%, net sales growth of 1% to 3%, and operating profit growth of 4% to 6%, all on a currencyneutral basis. The company expects to generate a total of $200 million in savings in 2016 through its Project K and zerobased budgeting programs. FBN February 23, 2016

Table of Contents for the Digital Edition of Food Business News - February 23, 2016

Food Business News - February 23, 2016
Campbell Soup defends G.M.O. labeling decision
Whole grains versatility
Dairy Business News - The many shades of cocoa
Table of Contents
Web Contents
Editorial - Pickup ahead in food m. & a. activity
WhiteWave broadening its Horizon
Pilgrim’s Pride plans sizable strategic investment
Consumers not clear on clean label definition
W.H.O. report urges tax on sugar-sweetened drinks
Snacks ‘area of weakness’ for Kellogg
US Foods files for initial public offering
Beyond Tyson 2.0
General Mills ahead of natural, organic sales goal
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Food business blossoming for
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Three trends driving gluten-free market
Market Insight - The demise of orange juice
Washington - President’s budget for food safety leans heavily on user fees
Ingredient Trends - Manufacturers responding to non-G.M.O. trend
Whole grain intake still could improve
Is there a U.S. cocoa shortage?
New Food Products
Ingredient Market Trends - Secretary Vilsack says reports demonstrate net energy benefits of ethanol
Ingredient Markets
Supplier Innovations and News
Ad Index
Food Business in the News

Food Business News - February 23, 2016