Kellogg, P&G continue sales momentum despite economic gloom

Posted by Daniel Palmer on 30th October 2008

Kellogg Company, the world’s largest cereal manufacturer, has reported third-quarter 2008 sales growing 9% to US$3.3b – driven by price increases and the trend toward more people eating at home.

“The Kellogg business model and strategy continue to give us the ability to offset inflationary headwinds while hitting our targets and delivering sustainable, dependable performance in these very volatile times,” said David Mackay, Kellogg’s chief executive officer.

Mr Mackay noted a shift in eating patterns, which has led to consumers choosing to eat at home more often, has helped sales.

Kellogg North America posted broad-based reported net sales growth of 10%, while Kellogg International reported third-quarter net sales growth of 9%, or 3% on an internal basis – but this excluded the favourable effects of currency translation, acquisitions and differences in the number of shipping days. The Asia Pacific region posted strong internal net sales growth of 10% and the quarter saw the completion of the acquisition of Australian natural cereal maker Specialty Cereals.

Mr Mackay remained bullish about the coming months, although predictions for the future have been tempered by market conditions.

“We remain confident in our ability to deliver another year of sustainable and dependable performance despite the uncertain economic environment and unpredictable foreign exchange markets,” Mr Mackay concluded.

The cereal and convenience foods producer has been looking for innovation to spur future growth. They recently launched a new website to facilitate the creation of new partnerships with outside companies, through which they hope to discover new technologies and new product ideas.

“When it comes to innovation, one of our guiding principles is that “Ideas Come from Anywhere, Always,” said Jim Melluish, Director of Marketing for Kellogg Company’s Open Innovation team, upon launching the site on October 3. “With this Web site we can do an even better job of connecting external ideas and opportunities with the Kellogg teams who can drive them.”

Specifically, Kellogg Company reports the website seeks promising new food, packaging, or processing technologies; partially or fully developed new products, as well as innovation collaboration opportunities. It is also designed to facilitate greater communication with consumers by allowing the public to submit their own suggestions for new products or product improvements.

“We have a long history of listening to consumers and responding to meet the growing needs of all families,” Mr Melluish claimed. “Providing an easy way for consumers who are passionate about our brands to tell us what they’d like to see is what ‘Ideas Come from Anywhere’ is all about.”

Procter & Gamble, the world’s largest consumer goods maker, has also reported solid results overnight as net sales grew nine per cent on the back of price increases and positive exchange rates.

Snacks, Coffee and Pet Care net sales increased nine per cent to $1.2 billion for the quarter on two per cent volume growth, seven per cent pricing and favourable foreign exchange rates adding two per cent. The company reported that those contributions were partially offset by a negative two per cent product mix impact from the disproportionate growth of snacks (which have lower selling prices than the segment average). The ever-popular Pringles brand was primarily behind the solid mid-single digit boost to snacks volume.

“This quarter was yet another example of the strength of P&G’s balanced brand and geographic portfolio,” said Chairman of the Board and Chief Executive Officer, A.G. Lafley. “We continue focusing on leading innovation and improving productivity to deliver superior consumer and shareholder value. This focus on delighting consumers with trusted household and personal care products that consumers purchase weekly and use daily gives me continuing confidence P&G will deliver target growth over the long term, even in a challenging economic environment.”

Procter & Gamble advised that high commodity prices remained a concern going forward, however. “We’re not seeing that commodity recession. You might be seeing it on television, but we’re not seeing it in the reality in the marketplace,” A. G. Lafley, chairman and chief executive, added in a conference call.