More than 90% of U.S. households buy cereal, yet the category’s unit volume has declined for three years.
Not good news for fluid milk: The maker of Corn Flakes and Rice Krispies will cut about 2,000 jobs amid a persistent slowdown in breakfast items and snacks.
Duane D. Stanford
Kellogg Co., the maker of Corn Flakes and Rice Krispies, will cut 7 percent of its global workforce, or about 2,000 jobs, as part of a four-year cost-saving plan amid a persistent slowdown in breakfast items and snacks.
The program, known as "Project K," will result in pretax charges of $1.2 billion to $1.4 billion, the Battle Creek, Michigan-based company said today in a statement. Kellogg had about 31,000 employees as of Dec. 29, according to regulatory filings.
Kellogg and competitors such as JM Smucker Co., Kraft Foods Inc. and ConAgra Foods Inc. have struggled to get U.S. families to stock up their shopping carts as unemployment and declining incomes make them spend less. With store promotions failing to spur sales growth, Kellogg has resorted to cost-cutting to boost profitability.
"It’s not worth discounting if you’re not driving volume," Brian Yarbrough, an analyst for Edward Jones & Co. in St. Louis, said today in an interview. "So you’ve got to retrench, you’ve got to look for cost savings, you’ve got to look for ways to be more productive, whether its through the supply chain or manufacturing."
Yarbrough, who recommends buying Kellogg, said barely improving employment and uncertainty over the U.S. economy have conspired to restrain shoppers. The challenge for manufacturers is figuring out how to get them shopping again, he said.
The issue is hitting Kellogg particularly hard at the breakfast table. Sales growth for morning foods have slowed amid increased competition from growing options such as Greek yogurt and oatmeal bars. Net sales were little changed in the third quarter, hurt also by snacks, Kellogg also reported today.
More than 90 percent of U.S. households buy cereal, yet the category’s unit volume has declined for three years, both Kellogg and General Mills Inc. say.
Cereal sales have slid particularly among baby boomers and higher income consumers as they try to eat healthier and reach for a broadening array of breakfast choices, Kellogg Chief Executive Officer John Bryant said. He plans to add more healthful ingredients such as Omega-3 fatty acids to compete with everything from eggs to yogurt, rather than focusing as much on creating new flavors.
"There’s an opportunity to be more pioneering in some of the innovations," Bryant said. "If we innovate more around nutrition, there’s an opportunity to bring people back into the category."