Dean Best

Editor's viewpoint: Searching for special K

By Dean Best | 10 February 2014

Kellogg wants to put more emphasis on its "strong" namesake brand as it looks to boost sales

Kellogg wants to put more emphasis on its "strong" namesake brand as it looks to boost sales

Scrutinising Kellogg's latest financial results on Thursday, one number jumped out: the figure for the cereal giant's "morning foods" sales in the US.

For the fourth quarter of 2013, which for Kellogg ran to 28 December, the "internal" sales of its morning foods in the US, which excludes factors like M&A, dropped 4%.

Following the 2.2% fall recorded in the third quarter of the year, the result, from Kellogg's perspective, makes for worrying reading.

That the US breakfast cereal market is under pressure is well known, as we reported last June. Consumers (and not just in the US but in other developed markets) are looking for healthier or more convenient options. What the market wants to know is: what is Kellogg planning to do about it?

Speaking to analysts after the results were published, Kellogg boss John Bryant said the Special K owner was preparing a major marketing push this year to try to arrest what he described as an "unconscious migration" by consumers to other foods for breakfast.

Central to that push will, Bryant said, be the Kellogg brand itself. "We've not plugged it yet. It is a strong brand. We think it will work," he said.

One cannot say Kellogg is not rolling up its sleeves and looking to address what has become a serious problem for its core business. Part of the reason for its well-publicised Project K restructuring programme is to free up funds to invest back into areas like its cereal businesses in markets like the UK, US and Australia.

However, with the Kellogg name largely synonymous with a bowl of cereal, will placing more emphasis on the company's "master brand" be enough to reignite consumer interest in the category?

It is too early to say. Although as Credit Suisse analyst Robert Moskow pointed out on Kellogg's results call on Thursday, companies home to brands with close association with specific categories (like Campbell and soup) have tried similar tactics "and shifted right back again". He told Bryant: "On masterbrand advertising, I've seen the attitude towards that kind of wax and wane in consumer packaged foods."

To reinvigorate growth from breakfast cereal - and its top line - Kellogg may be better off turning to M&A to invest in more buoyant parts of the category - just as US rival Post Holdings has done.

Speaking to analysts on Thursday, Bryant singled out Special K as a brand that has seen some "softness" in sales, in part as consumers turn away from weight management to looking at their diet overall.

That much is true - although broader challenges remain before the company as a whole rediscovers its lustre.

Sectors: Advertising & labelling, Cereal, Financials

Companies: Kellogg, Post Holdings

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