KANSAS CITY — When it comes to ready-to-eat cereal, General Mills, Inc. and Kellogg Co. dominate the category, accounting for a combined 60% of dollar sales, according to IRI, a Chicago-based market research firm. The two companies’ actions go a long way in determining the health of the category. Over the past few months, the category leaders have been experiencing very different realities.
Battle Creek, Mich.-based Kellogg has been mired in extensive negotiations with the union representing approximately 1,400 cereal plant workers who have been on strike since Oct. 5. Already dealing with industry-wide supply chain disruptions that have restrained growth in the company’s cereal business, Kellogg’s management team has now spent nearly seven weeks dealing with the additional challenge of finding and training temporary staff to keep RTE cereal flowing into the market.
In a Nov. 4 conference call with analysts, Steven A. Cahillane, chairman, president and chief executive officer of Kellogg, said the company is by no means “complacent.”
“We’ve got big challenges in front of us,” he said. “But we’re quite confident that we’re not going to be at a long term or any kind of permanent disadvantage. This is a transitory event, and we’ll work our way through it.”
He also noted that management knew the contract with union workers was expiring on Oct. 5 and has spent many months developing contingency plans and taking all sorts of measures to prepare, including building inventory.
“Building inventory was a little bit challenged because of the fire in Memphis,” Mr. Cahillane said. “But we also have deployed our white collar workers. We’ve deployed outside labor to keep the plants running, to get the plants running. They’re gaining productivity each and every day. We’ve also leveraged our global supply chain network for cereal to also mitigate. And so we’re working very, very hard on two fronts, to mitigate the effects of the strike on the one hand, and we’re doing that successfully and getting better every day; but also, to get our workers back to work.”
Kellogg met with union officials on Nov. 22 to try once again to hammer out a new agreement, but a day later the company said negotiations again broke down.
“We recognize the hardship that this prolonged strike represents for our employees,” the company said on Nov. 23. “After 15 negotiations sessions in 2021 — and no proposals put to membership for a vote — we are left with no choice but to best serve the short- and long-term interests of our customers and consumers by moving to the next phase of our contingency plans.”
Kellogg said that plan includes continuing to use temporary workers to operate plants and in some cases hiring permanent replacements for striking workers.
Just prior to the expiration of its contract with union workers, Kellogg in September said it would eliminate 212 jobs at its Porter Street RTE cereal plant in Battle Creek. The job cuts will take place over the next two years and are part of the company’s efforts to streamline its RTE cereal production across North America.
Like Kellogg, General Mills has been dealing with supply chain issues, a problem Jonathon J. Nudi, group president of North America Retail, described in late September as almost “whack-a-mole.” But unlike Kellogg, Minneapolis-based General Mills has been undeterred in moving its RTE cereal business forward.
“Our top priority as a company in recent years has been to compete effectively across our core business,” Mr. Nudi said during a Sept. 8 presentation. “I’m tremendously proud of the way that we’ve improved our competitiveness in North America Retail over the past three years, leveraging stronger execution and support behind brand building and innovation. Nowhere is that more evident than in US cereal, where General Mills has posted market share gains for 34 consecutive months in four consecutive years, strengthening our position as the No. 1 player in the category.
“The keys to our success at cereal have been great marketing and innovation on the best brands in the category. We’re continuing that playbook in fiscal ‘22, including taste-focused messaging and innovative partnerships on Cinnamon Toast Crunch, new product news on our Cheerios and Lucky Charms franchises, and fun seasonal initiatives.”
General Mills recently announced several new products will be joining its RTE cereal lineup later this year and in the early part of 2022. New products include CinnaGraham Toast Crunch, Strawberry Banana Cheerios, Reese’s Puffs Cluster Crunch and PJ Masks Cereal.
A little more than a year after launching the new brand Ratio, General Mills is expanding the line of granola bars and yogurt cultured dairy snacks into the RTE cereal category with the debut of :ratio Keto Granola. The new line will launch with two flavors: toasted almond and coconut almond.
Another new cereal set to launch is Plentifull. The new brand is made with “32 grams of whole grain (over half of the Whole Grains Council’s recommended daily serving for adults) per serving and either real peanut butter or almond butter,” according to General Mills. Plentifull will be available in two flavors: peanut butter and cinnamon almond butter.