A revamp of Post Holdings’ marketing team and a greater focus on the US cereal maker’s largest retail accounts are among the ways the firm plans to grow its business after it spins off from private-label group Ralcorp Holdings.
In the week before Christmas, Post, the third-largest ready-to-eat cereal company in the US, outlined its strategy to revitalise sales, halt its falling market share and stem losses once it splits from Ralcorp at the end of this month.
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Post said its sales strategy had suffered since it was acquired by Ralcorp from Kraft Foods in 2008. When the deal was signed, then Ralcorp co-CEO and president David Skarie called it “a transforming event” that handed the company “truly distinctive” cereal brands and a business it could build on.
However, Post’s sales have fallen and its bottom line has deteriorated in each of Ralcorp’s last three financial years.
In a filing with the US Securities and Exchange Commission on 23 December, Post said its sales efforts became “less focused” and “erratic” under Ralcorp’s ownership.
“Under Kraft’s ownership, sales management was part of Kraft’s in-house sales force, which we believe was generally considered one of the best in the consumer packaged goods industry. Upon the separation from Kraft, Post adopted a primarily broker sales strategy. We believe this resulted in a less focused sales effort as well as a loss in terms of general retail presence and its resulting scale benefits,” Post said.
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By GlobalDataIt added: “Kraft utilised a powerful proprietary tool for managing trade spending. Once this became unavailable to Post, we believe trade spending became erratic and lacked measurement discipline. As a result, the return on investment on trade programmes fell sharply.”
Post also claimed that its prices had increased at more than twice the industry average while the money spent on supporting its brands fell 6%.
The company, which has 11.2% of the US ready-to-eat cereal market, plans to reorganise its marketing department to put “business leaders” in charge of its brands. It also wants to “retool” its agency roster and increase its use of social and digital media.
Elsewhere, Post plans to “upgrade” its “coverage” of its largest accounts, use analytics to improve the ROI on its trade spending and improve the “value proposition” of its brands.
Post is targeting growth among Hispanic consumers, in “adjacent” categories like cereal bars and in retail outlets including dollar and club stores. It also stated it believed there were “opportunities for growth” through acquistions.
“This high level of competition by our competitors could result in a decrease in our sales volumes,” Post said. “In addition, increased trade spending or advertising or reduced prices on our competitors’ products may require us to do the same for our products which could impact our margins and volumes. If we did not do the same, our revenue, profitability, and market share could be adversely affected.”
The spin off is expected to be completed around the end of the month. Ralcorp will receive approximately $900m from Post, which it said it will use to reduce debt, “aggressively” pursue private-brand acquisitions and buy back shares. The company expects to retain up to 20% of the outstanding shares of Post.
