Milling & Baking News - March 30, 2004 - 10

B U S I N E S S

Kellogg Co. responds to consumer
demand with low-carb items
SCOTTSDALE, ARIZ. - Low-carbohydrate and reduced-sugar offerings are
among the new products executives of
Battle Creek, Mich.-based Kellogg Co.
discussed in outlining the company's
strengths and future focus before participants at the Consumer Analyst Group of
New York meeting in Scottsdale.
"One of the key focuses for us is sustaining support for products that were
launched in the second half of 2003
because if we do not those products
may not reach their ultimate goals," said

David Mackay, president and chief operating officer, Kellogg.
Mr. Mackay said that as Kellogg sustains support for its newer products the
company would continue to expand its
offerings.
"We will be launching a Special K lowcarb cereal in April, and two variants of
our best-selling cereals, Frosted Flakes
and Fruit Loops, with one-third less
sugar," he said. "We firmly believe consumer choice is important and we think
those products will give consumers better
choice. And they will do well for us."
Mr. Mackay said that Kellogg's priorities for its U.S. retail snacks unit in 2004
will range from containing the decline in

cookies to growing crackers and sustaining growth in wholesome snacks.
In line with those priorities, Kellogg
will be debuting Fudge Shoppe sugar free
Fudge Stripes cookies.
"On trans fatty acids, we are working
hard on that," Mr. Mackay said. "One of
our major brands should be reformulated
in totality by the third quarter of this year
and one of our major cookie brands should
be reformulated by the third quarter. And
throughout the balance of this year and
next year we will be looking at how we
take trans fatty
acids out without
affecting
taste
or quality of our
foods."
Carlos Gutierrez, chairman and
chief
executive
officer of Kellogg,
said, "We are feeling very good
about our business
and where it is
taking us. We are
not here to unveil
a new bold direction but simply to
show you what
we are doing to
continue to drive
the business and continue to drive the
dependability that we have talked about
so often. We said 2001 was going to be a
year of transition, a lot of reorganization
inside the company, we had the Keebler
acquisition, the Keebler integration. We
said 2002 would be a year of acceleration,
2003 a year of momentum and from here
on we will be keeping it going. It is really
a daily grind on execution, on ideas. On
making sure that the financial model continues to drive the business forward."
He pointed to back-to-back 4% increases in net sales in 2002 and 2003 and
commented, "We continue to drive the
business in that direction."
Mr. Gutierrez defined Kellogg as a

Kellogg unveils plans for new wholesome
snacks production plant in Toluca, Mexico
BATTLE CREEK, MICH. - In response to
strong sales of wholesome snacks in Mexico, Kellogg Co. will build a new production
facility in Toluca, Mexico. The Toluca facility will be the company's third manufacturing operation in Mexico.
On March 22, Arturo Montiel Rojas, governor of the state of Mexico, placed the first
10 / Milling & Baking News, March 30, 2004

stone at the new facility. He was accompanied by Carlos Gutierrez, chairman and
chief executive officer, Kellogg Co.; Gustavo
Martinez, president, Kellogg Latin America
and senior vice-president, Kellogg Co., and
Juan Pablo Villalobos, vice-president, Kellogg Co. and managing director, Kellogg
Co. Mexico.

"focused company." "We are not a food
conglomerate and our portfolio is very
integrated," he explained. "A lot of our
cereal brands are now being transferred
to snacks and we see how extendable
those brands are. We see great opportunity long term in this whole wholesome
snack area. We built the business in the
U.S., in Canada, in the U.K., in Australia.
We will develop those markets and eventually we will roll it out even further, but
we see a big future in that whole area of
wholesome snacks.
"The great thing for us as we think about
our focused company is that most of these
products are in the same location regardless of the channel. So we have our sales
force drawing to one aisle in the store and
focused on one aisle in the store in managing our space in one aisle in the store. We
think that is a huge advantage that we get
from focus. I would hate to think that our
sales force would have to worry about 25
to 30 different places in the store.
"We are constantly looking at ways
to expand the portfolio in a way that is
linked ... in a way that is integrated. We
do not want unrelated businesses just for
the sake of scale."
Mr. Gutierrez said Kellogg operates
behind the strength of two financial
principles. "One is volume to value,
which starts out with the whole notion
of what really counts is how many dollars you put through your plants," he
said. "Not how many tons or how many
bushels of corn we can manufacture in
one day regardless of how much we sell
them for or what the margin is. It is all
about currency. It is all about dollars. It
is all about value and that has been ingrained throughout the company.
"Managing for cash is another example
of people really getting behind this. We
have indicators that go all the way down
to the shop floor. If you walk into a spare
parts warehouse in any Kellogg plant,
I would like to think that that manager
knows exactly what his or her inventory is
and where they are taking it.
"We have extendable brands and we
see a huge opportunity in combining our
principles of volume to value/manage
for cash with our brands." MBN

"Since 1951, when we built our first manufacturing facility in Mexico, we have experienced outstanding growth," Mr. Gutierrez
said. "This project extends our capability to
offer Mexican consumers innovative products of the highest quality and wholesome
nutritional value."
Mr. Villalobos added, "(Mexico's) economic
and industrial growth, and its proximity to key
markets, represent an excellent opportunity for
the further expansion of our business." MBN
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Milling & Baking News - March 30, 2004

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