With cereal sales for the quarter declining more than the industry average and profit for the company down 16% for the quarter, Kellogg's is promising new marketing efforts and is looking for new blood to revitalize its mainstay business.
“Underscoring its challenges, the maker of Special K and Frosted Flakes also said it is replacing the head of its U.S. morning foods division, which includes cereal, for the second time in about a year,” report Annie Gasparro and Anna Prior in The Wall Street Journal. “Kellogg's chief growth officer, Paul Norman, who ran the division from 2004 to 2008, is managing it again while Kellogg looks for a permanent replacement.”
Gasparro and Julie Jargon surveyed the breakfast battleground — and consumers’ shift from carbs to proteins that are often served up at fast-food joints — in a comprehensive piece last week.
"The good news is that more people are eating breakfast; the bad news is that there are more alternatives," Bryant acknowledged in an interview with Gasparro and Prior yesterday.
Bryant reviewed the company’s Q2 results in detail in an earnings call with analysts yesterday transcribed on Seeking Alpha. He vowed to “have all guns loaded” heading into 2015.
“We need category-building activity, brand-specific activity, large tent-pole events in-store, which enable us to execute in-store with excellence,” Bryant said on the call. “Innovation or renovation is on trend for where consumers are heading, and put the feet back on the street in terms of improve the merchandising support behind the business.
Bryant also announced that David Denholm, “who ran Kashi very successfully in the 2000s,” is returning to become its CEO in an effort to “to address the brand's positioning and our ability to execute quickly enough in the evolving world of natural and organic foods.” It “will be a largely autonomous business within the Kellogg family … based in La Jolla [Calif.], where it began.”
Among other jobs, Denholm most recently ran Kellogg’s U.S. breakfast foods division before being named president and COO at Chobani last year.
Sales for Special K have been particularly disappointing.
“Dollar sales of the main variety fell by 22.3% in the 52 weeks ending June 15 to $175 million, according to IRI,” reports E.J. Schultz in Ad Age. “Special K with red berries dropped by 13.2% to $134 million. The steep declines compare to a 4% sales drop in the overall $9 billion ready-to-eat cereal category, according to IRI.”
In a phone interview with the AP’s Candice Choi, Bryant noted that people are more interested in foods that provide nutritional benefits rather than those with low calorie counts, which is why it has been ditching some of its 100-calorie products.
“There’s a shift in consumer expectations,” Bryant said, telling Choi “Kellogg planned to introduce new Special K products toward the end of the year to address changing nutrition trends.” He declined to provide any details, quipping, “I don’t want to give my friends in Minneapolis any more help than they need.”
Bloomberg Businessweek’s Venessa Wong covered General Mills’ plans for a “breakfast cereal revival” in an article earlier this month. Several factors beside increased advertising spend weigh into GM’s optimism for the category, which COO Jeff Harmening pointed out is still “consumers’ top choice — and by far” for those eating at home.
For one thing, “fast-growing consumer groups in the U.S. — children, older adults, and Hispanic — eat more cereal than average,” Wong reports. More squishy, it is expecting “adult nostalgia” for the likes of Lucky Charms to boost overall sales figures.
Earlier this week, Time’s Brad Tuttle catalogued nine other staples of the pantry, garage and rack that, like cereal, have fallen out of favor recently. We covered several of them — soda, golf, razors, cupcakes — others, such as convertibles and bread, are clearly grist for milling in the future.
Playfully ruing that “America is just not the clean-shaven, gun-buying, soda-drinking, Chef Boyardee-eating place it used to be,” Tuttle points out that “it’s no coincidence” that dairy milk sales have been slumping alongside that of cereal, although the rise of alternatives such as soy and almond milk has more to do with it.
We’re not sure what G.Love & Special Sauce’s take on this trend would be, but good luck getting the standard version out of your head this weekend.