Kellogg Stares Down High Costs As New Products Flow

Kellogg will continue to push for product innovation and put marketing muscle behind these higher-margin products, even as wheat costs continue to soar.

In yesterday's conference call with analysts, CEO David Mackay said the company boosted its 2007 earnings forecast while reporting net profit was down in the fourth quarter of 2006.

The nation's No. 1 cereal maker said it will continue its focus on profit growth and the development of healthier, higher-profit foods. It plans to spend heavily on advertising. The exact amount wasn't forthcoming, but Kellogg spent $553 million on advertising from January to November of last year, according to Nielsen Monitor-Plus. Already this year, Kellogg has introduced an enormous number of products. "Right across the board, we've got a lot of innovation coming," Mackay said.

In the cereal category, Kellogg recently has launched Smart Start Cinnamon Raisin, Rice Krispies with Real Strawberries, Cocoa Krispies ChocoNilla and Special K Chocolatey Delight.



Among the crackers, cookies and wholesome snacks newly out are All-Bran crackers, new flavors of Right Bites in 100-calorie packs, Special K Honey Nut Cereal Bars, Nutri-Grain Fruit and Nut Bars in two varieties, Cheez-It Stix for kids and tweens, Keebler Dunking Delights Sandwich Cookies in two varieties, and Pop Tarts Hot Chocolate and Strawberry Cheese Danish.

Four products are new to the frozen category: Morningstar Farms Breakfast Starters Classic Scramble, Morningstar Farms Breakfast Veggie Bites, Eggo Stuffed French Toaster Sticks and Eggo Buttery Maple Syrup Minis.

"Our commitment to investment continues," said Mackay. "Despite ... pressures, we will meet and beat our long-term targets."

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