Kellogg has said accelerating its rate of innovation in Europe will help revitalise sales and profits in the region in 2013.
The US cereal and snacks giant saw sales in Europe fall 3.8% in 2012. Profits slid even faster, down over 13%. Like most food manufacturers, the company has faced challenging macro-economic conditions in the region, particularly in southern Europe.
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However, addressing analysts and investors at the Consumer Analyst Group of New York conference today (20 February), Kellogg CEO John Bryant sounded an upbeat note on the region, despite describing it as having been a “difficult” market for the company for a number of years.
“The macro-economic environment in Europe is difficult and [it is] an intensely competitive environment. But we are reorganising Europe to be more of a cereal, snacks platform. Accelerating our rate of innovation will help us drive the top line and it’ll help us drive the bottom line. We will have even more innovation than in 2011 and 2012. We expect both top and bottom line growth from the European business in 2013.”
Going into more detail, Andy Jones, VP of Kellogg’s businesses in central and eastern Europe, Middle East and Africa, said Kellogg wanted to “get back to sustainable growth”. in Europe.
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“Sustainably growing cereal in and out of the bowl, growing snacks … and accelerating growth in emerging markets, and to do this with bigger, better pan-European scalable ideas and an organisation designed for international growth.”
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By GlobalDataJones said the company is “making progress” in Europe where it has made “sequential improvements” in each of its four quarters in 2012.
“While this might not be where we want to be longer term, we believe it is a step in the right direction. We are innovating. In the last few weeks we launched a number of products and across 2013 we do expect to see a pick-up in our rate of innovation in Europe. We are on track versus our growth strategy, we are making progress and results are improving. We have fantastic opportunities for growth in the future.”
Jones said the acquisition of Pringles, which has a “much more balanced international footprint than our core business”, has been “transformational” for Kellogg. In particular, with Europe the biggest region for Pringles, Jones said the purchase has doubled the size of its existing business in Germany, for example.
“[Pringles] provides a tremendous platform for transforming our business and future growth. It is a brand with truly global appeal.”
The emerging markets, however, are also a key focus for Kellogg, and building a stronger platform in these regions is “critical” to the company, Bryant said. “We have become more comfortable in the different ways of opening up opportunities in emerging markets.”
He said the emerging markets are not “acquisition dependent” for growth, but said that if an acquisition opportunity arises that will allow Kellogg to build its business in these markets, the company will take it.
Bryant explained Eastern Europe and Africa are “still white space for the company” and said the regions will be ones where Kellogg will “take action” over the next few years.
Jones added: “We have almost endless opportunities for growth in the central Europe, Middle East and Africa regions.”
In particular, Jones highlighted Turkey as a country with a “young, dynamic and inquisitive, well-educated population”.
“It is already the 17th biggest economy in the world and the cereal category has tripled there in the last seven years,” he said. “In last few months, our focus there has been on accelerating growth though innovation and in 2013 already we have launched products.”
He also highlighted Russia as a market where it “arrived late to the party” but one that has the “potential to be the number one consumer market in Europe by 2020”.
In the Middle East, another target for FMCG companies, Kellogg was already well-established, Jones said. Nevertheless, the company plans to tweak its strategy in the region.
“We are now moving our mindset from being an export market to a growth focused market for the years ahead, building innovation in our big regional power brands like Special K and also by tailoring our marketing to our consumer needs in the region.”
