Kellogg's road to cereal recovery

by Monica Watrous
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A key part of Kellogg’s focus on wellness is repositioning the Special K brand to align with modern-day health trends like protein and gluten-free.

BATTLE CREEK, MICH. — Kellogg Co. has identified four critical elements to return its cereal business to growth. The maker of Froot Loops and Frosted Flakes hopes to revive sales by focusing on wellness, investing in product innovation and renovation, engaging with consumers in new ways, and improving in-store execution.

 “Whilst we still have plenty to do, we are pleased with the progress we are making on our cereal business, behind better core brand performance, relevant innovation and renovation, and better execution through the path to purchase,” said Paul Norman, president of Kellogg North America, during an Aug. 4 earnings call with financial analysts. “In fact, sales are on trend to be flat to up in 2016, a great improvement.”

A key part of Kellogg’s focus on wellness is repositioning the Special K brand to align with modern-day health trends. Product lines focused on weight management have fallen out of favor with consumers, who today associate healthy eating with such attributes as gluten-free, high-protein and organic. This year, Kellogg introduced protein and gluten-free varieties of Special K and added more fruit to the Special K Red Berries cereal.

“We have introduced new packaging, and new communication to support all of this,” Mr. Norman said. “I’m pleased to say, we have seen steady improvement in performance over the past few months.”

The company also recently introduced a new product line called Kellogg’s Origins, which is a range of cereals, granola and mueslis made with simple ingredients.

Innovation has been a priority for Kellogg in revitalizing its challenged Kashi brand. The company is introducing overnight mueslis, gluten-free frozen waffles, organic chewy granola and seed bars, and sprouted grain cereal, and is expanding organic varieties within the Kashi portfolio.

Innovation has been a priority for Kellogg in revitalizing its challenged Kashi brand.

“The second critical element to returning cereal to growth is investing more in our food,” Mr. Norman said. “Our work on Kashi, Special K and Origins all demonstrate actions to invest more in our foods.”

As an example of recent product renovation, Kellogg launched Froot Loops and Apple Jacks with less sugar. The also company revealed plans to remove artificial colors and flavors across its cereal portfolio by 2018.

“And as we look forward, we will continue to renovate our core offerings to give consumers more of what they want in the way of nutritional benefits, such as protein, gluten-free choices and simpler ingredient lists,” Mr. Norman said.

Kellogg’s third area of focus is finding new ways to engage with consumers by “dialing up the fun,” Mr. Norman said.

“Keeping our category vibrant and on-trend also means bringing fun to life on pack and in-store in impactful ways,” he said. “We have seen good results behind our Disney Frozen cereal this year, and also strong in-market performance behind our in-pack Avengers promotion, an event in April.

Kellogg's Disney Frozen cereal has produced good results.

“Looking forward, we believe initiatives like these are just as important as what we do on the health and nutrition front to drive category engagement.”

The final piece of Kellogg’s cereal plan is in-store execution with the goal to drive incremental purchases.

“With our dedicated sales force, including field sales reps, back in place, we are seeing tangible improvements come through in the area of assortment gains, in-stock performance, and merchandising behind the initiatives I outlined earlier,” Mr. Norman said.
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