Kellogg sees progress, challenges in frozen food

by Eric Schroeder
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NEW YORK — David MacKay, president and chief executive officer of Battle Creek, Mich.-based Kellogg Co., reflected on both the good and the bad within the company’s frozen foods business as part of a presentation at the Sanford C. Bernstein Strategic Decisions Conference held June 4 in New York.

While the bulk of Mr. MacKay’s comments at the conference centered mostly on the company’s cereal and snacks business, he did take time to point out some of the successes of the Kashi frozen entree line, which was first introduced in 2006 but over the past year has expanded with ethnic-inspired flavors.

“It’s done very well,” Mr. MacKay said of Kashi frozen entrees. “When you look at the Kashi entrees, the great thing is they’re very consistent with the brand; natural, very healthy relative to some of the other entrees you’d get. They don’t compete with the mainstream entrees that typically are sold very heavily on discount.”

He said that while the entrees have drawn new consumers into the Kashi franchise “they’re not going to be a massive part of the portfolio.”

“We’ve been spending a little bit of time ensuring that the margin and return from those products is where we want it to be, and we’re getting close to getting them there,” he said. “But I think they will be a positive, small, but healthy, part of Kashi as we go forward.”

On the other end of the spectrum, Mr. MacKay cited “self-inflicted wounds” in regards to Eggo Waffle plant disruptions that have affected sales of the frozen breakfast product over the past year.

“We took Rossville (Tenn.), which is our biggest plant, half of their network down, and were doing massive restorations on all sorts of parts of it — good sensible work to do,” he said. “When we tried to bring the plant back up, we inflicted a bit more damage on ourselves than we had ever intended, and it took us a long time to actually rectify and fix those. So that plant is now getting back to close to where it was six to nine months ago.”

He noted while Kellogg still expects Eggo to be a drag on the second quarter, the company has started to promote a little bit, and customer service levels are improving and retail partners are happy.

“Hopefully, as we head into the back half we won’t see that being a drag on our top line as we go forward,” Mr. MacKay said. “But over and above that, what it has taught us is we were probably running a little bit tight on capacity. So if anything went wrong, we had nowhere to go. So we are planning to look at the potential to add more capacity as we head toward the end of this year and into next year.”

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