Kellogg Company

Company Profile
Publication Date: 8 Sep 2010
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Kellogg Company
TABLE OF CONTENTS
Company Overview..............................................................................................4
Key Facts...............................................................................................................4
Business Description...........................................................................................5
History...................................................................................................................6
Key Employees.....................................................................................................8
Key Employee Biographies................................................................................10
Major Products and Services............................................................................18
Revenue Analysis...............................................................................................19
SWOT Analysis...................................................................................................20
Top Competitors.................................................................................................26
Company View.....................................................................................................27
Locations and Subsidiaries...............................................................................31
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Kellogg Company
TABLE OF CONTENTS
COMPANY OVERVIEW
Kellogg Company (Kellogg) is an American multinational producer of breakfast foods, snack foods,
cookies, and crackers. The company also manufactures and markets ready-to-eat cereals and
convenience foods such as toaster pastries, cereal bars, fruit snacks, frozen waffles and veggie
foods. The company is headquartered in Battle Creek, Michigan and employs 30,900 people.
The company recorded revenues of $12,575 million during the financial year ended December 2009
(FY2009), a decrease of 1.9% compared with 2008. The decline was driven by a negative impact
from foreign currency translation and an extra shipping week in 2008. The operating profit of the
company was $2,001 million in FY2009, an increase of 2.5% over 2008. The net profit was $1,212
million in FY2009, an increase of 5.6% over 2008.
KEY FACTS
Kellogg Company Head Office
One Kellogg Square
Battle Creek
Michigan 49016 3599
USA
1 269 961 2000 Phone
1 269 961 2871 Fax
http://www.kelloggcompany.com Web Address
12,575.0 Revenue / turnover
(USD Mn)
December Financial Year End
30,900 Employees
K New York Stock
Exchange Ticker
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Kellogg Company
Company Overview
BUSINESS DESCRIPTION
Kellogg Company (Kellogg) along with its subsidiaries is engaged in the manufacture and marketing
of ready-to-eat cereals and convenience foods such as cookies, crackers, toaster pastries, cereal
bars, frozen waffles and meat alternatives. These products are manufactured by the company in 18
countries and marketed in more than 180 countries worldwide. The companys brands include
Kelloggs, Keebler, Pop-Tarts, Eggo, Cheez-It, All-Bran, Mini-Wheats, Nutri-Grain, Rice Krispies,
Special K, Chips Deluxe, Famous Amos, Sandies, Austin, Club, Murray, Kashi, Bear Naked,
Morningstar Farm, Gardenburger and Stretch Island.
Kellogg operates through four geographic segments: North America, Europe, Latin America, and
Asia Pacific.
The companys cereal products are marketed under the Kellogg's brand, and are sold primarily to
the grocery trade through direct sales force. The company uses broker and distribution arrangements
for certain products in less-developed market areas. The company markets cookies, crackers, and
other convenience foods, under brands such as Kellogg's, Keebler, Cheez-It, Murray, Austin and
Famous Amos, to supermarkets in the US through a direct store-door (DSD) delivery system. Kellogg
also offers Special K2O flavored water and flavored protein water mixes.
The company's trademarks include logos and depictions of certain animated characters in conjunction
with its products, including Snap!Crackle!Pop! for Cocoa Krispies and Rice Krispies cereals and
Rice Krispies Treats convenience foods; Tony the Tiger for Kellogg's Frosted Flakes, Zucaritas,
Sucrilhos and Frosties cereals and convenience foods; Ernie Keebler for cookies, convenience foods
and other products; the Hollow Tree logo for certain convenience foods; Toucan Sam for Froot
Loops; Dig 'Em for Smacks; Coco the Monkey for Coco Pops; Cornelius for Kellogg's Corn Flakes;
Melvin the elephant for certain cereal and convenience foods; Chocos the Bear, Kobi the Bear and
Sammy the Seal for certain cereal products.
The company's research to support and expand the use of its existing products and to develop new
food products are carried out from the W. K. Kellogg Institute for Food and Nutrition Research in
Battle Creek, Michigan, and at other locations around the world.
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Kellogg Company
Business Description
HISTORY
Kellogg Company (Kellogg) was founded in 1906 as the Battle Creek Toasted Corn Flakes Company.
The company changed its name to Kellogg Company (Kellogg) in 1922 after it began making cereals
other than cornflakes.
In 1964, Kellogg began to diversify with the introduction of the Pop-Tart and the acquisition of Salada
Foods, which introduced tea and desserts to its product line. Kellogg then acquired Eggo waffles in
the 1970s, along with Fearn International, makers of soups, sauces, and other foods. In 1976, Kellogg
acquired Mrs Smith's Pie Company and Pure Packed Foods in 1977. During the same time, the
company began a restructuring program with the formation of the US Convenience Foods Division.
Kellogg also began production of a new cereal line in conjunction with ConAgra, under the Healthy
Choice label.
The company's operations expanded into Australia, the UK, Asia and Latin America during 1997
and 1998. In 2000, the company added natural cereal and convenience food maker Kashi to its US
cereal division. In 2001, the company acquired Keebler Foods, engaged in the production of a broad
line of cookie and cracker products and a number of other consumer food products such as Cheez-It
and Carr's.
Kellogg formed a multi-year global relationship with Disney in 2002. In the same year, the company
entered into a strategic alliance with Roskam Baking. The company relocated its US Snacks business
unit from Elmhurst, Illinois to Battle Creek, Michigan in 2004. Kellogg acquired Kraft's fruit snacks
operation during 2005.
During 2006, Kellogg extended its Special K product line into the diet and nutrition sections of grocery
and drug stores with the launch of three protein-fortified products. These were the first products to
come from the company's new health and wellness division. In the same year, the company introduced
Kellogg's Crunchy Nut sweet and salty granola bars.
Kellogg entered the fast-growing trail-mix granola bar category with the launch of new Nutri-Grain
fruit and nut bars, in 2007. In the same year, the company acquired Wholesome & Hearty Foods
Company, the US manufacturer of vegetarian foods marketed under the Gardenburger brand.
In 2008, the company acquired The United Bakers Group, one of Russia's largest cracker, biscuit
and breakfast cereal producers. During the same year, one of Kellogg's majority-owned subsidiaries
acquired substantially all of the assets of Zhenghang Food Company (Navigable Foods), a
manufacturer of cookies and crackers in the north and northeastern regions of China.
Kellogg, in 2008, acquired the assets of IndyBake Products and Brownie Products, a privately held
contract manufacturing business that produces cracker, cookie and frozen dough products. In the
same year, the company acquired Specialty Cereals, a privately owned manufacturer of natural
ready-to-eat cereals based in Sydney, Australia.
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Kellogg Company
History
In January 2009, Kellogg voluntary recalled certain Austin and Keebler branded peanut butter
sandwich crackers and select snack-size packs of Famous Amos peanut butter cookies and Keebler
Soft Batch Homestyle peanut butter cookies, as they were contaminated with Salmonella. Later in
March 2009, the company also recalled Keebler Soft Batch Homestyle Chocolate Chunk Cookies,
Oatmeal Raisin Cookies, and Special K Protein Meal Bar Honey Almond variety.
Kellogg's Special K brand introduced its first weight-management protein shake in May 2009. In the
following month, the company enhanced the nutrition credentials by adding essential fibre to popular
ready-to-eat cereals in Canada and the US.
In June 2010, Kellogg implemented a voluntary recall of certain breakfast cereals including Kellogg's
Apple Jacks, Fruit Loops, Corn Pops and Honey Smacks due to an uncharacteristic off-flavor and
smell from the liner in the package. The company introduced the new Kellogg's FiberPlus Antioxidants
Cereals in July 2010.
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Kellogg Company
History
KEY EMPLOYEES
Compensation Board Job Title Name
11419447 USD Executive Board President and Chief Executive
Officer
A. D. David Mackay
Executive Board Executive Vice President and Chief
Operating Officer
John A. Bryant
Non Executive Board Chairman James M. Jenness
224389 USD Non Executive Board Director Benjamin S. Carson
254389 USD Non Executive Board Director John T. Dillon
242389 USD Non Executive Board Director Gordon Gund
234889 USD Non Executive Board Director Dorothy A. Johnson
227389 USD Non Executive Board Director Ann McLaughlin Korologos
233889 USD Non Executive Board Director Sterling Speirn
251389 USD Non Executive Board Director John L. Zabriskie
236889 USD Non Executive Board Director Donald R. Knauss
233889 USD Non Executive Board Director Robert A. Steele
237739 USD Non Executive Board Director Rogelio M. Rebolledo
Senior Management Chief Financial Officer Ronald L Dissinger
Senior Management Senior Vice President, Global Public
Policy and External Relations; and
Chief Sustainability Officer
Celeste A. Clark
4275174 USD Senior Management Senior Vice President, Kellogg and
President, Kellogg North America
Bradford J. Davidson
4096450 USD Senior Management Senior Vice President, Kellogg;
Executive Vice President, Kellogg
Timothy P. Mobsby
International; and President, Kellogg
Europe
Senior Management Senior Vice President, Kellogg; and
President, Kellogg Specialty
Channels
David J. Pfanzelter
Senior Management Senior Vice President, General
Counsel, Corporate Development
and Secretary
Gary H. Pilnick
3390589 USD Senior Management Senior Vice President, Kellogg and
President, Kellogg International
Paul T. Norman
Senior Management Senior Vice President, Kellogg; and
President, US Morning Foods
Juan Pablo Villalobos
Senior Management Vice President, Research, Quality
and Technology
Margaret Bath
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Key Employees
Compensation Board Job Title Name
Senior Management Vice President and Global Chief
Marketing Officer
Mark R. Baynes
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Key Employees
KEY EMPLOYEE BIOGRAPHIES
A. D. David Mackay
Board: Executive Board
Job Title: President and Chief Executive Officer
Since: 2006
Age: 54
Mr. Mackay has been the President and Chief Executive Officer at Kellogg since 2006. He has been
the President of the company since 2003. Mr. Mackay joined Kellogg Australia as Group Product
Manager in 1985. He became Category Director, ready-to-eat cereals in 1987. He returned to
Australia in 1991 as Marketing and Sales Director, Kellogg Australia. In 1992, Mr. Mackay left Kellogg
and became the Managing Director of Sara Lee Bakery in Australia. He returned to Kellogg in 1998
as Managing Director, Kellogg Australia and was promoted to Managing Director, the UK and Republic
of Ireland later in 1998. Mr. Mackay was promoted to Senior Vice President, Kellogg and President,
Kellogg US in 2000. He became Executive Vice President, Kellogg. He was named President and
Chief Operating Officer of Kellogg in 2003. Mr. Mackay is also Director of Fortune Brands, Grocery
Manufacturers of America, The Consumer Goods Forum and the Kalamazoo Institute of Arts.
John A. Bryant
Board: Executive Board
Job Title: Executive Vice President and Chief Operating Officer
Since: 2010
Age: 44
Mr. Bryant has been the Executive Vice President, Chief Operating Officer, and a member of the
Board of Director at Kellogg since 2010. He has been the Executive Vice President at the company
since 2002 and Chief Operating Officer since 2008. He joined Kellogg in 1998. Mr. Bryant served
as Vice President, Kellogg North America strategy development/business understanding and, in
1998, he was named Vice President, Financial Planning, and Cereal. In 2000, Mr. Bryant was named
the Senior Vice President and Chief Financial Officer, Kellogg US. He became Senior Vice President
and Chief Financial Officer of Kellogg Company in 2002. In the same year, he was promoted to
Executive Vice President of Kellogg in addition to his role as Chief Financial Officer. Before joining
Kellogg, Mr. Bryant held leadership positions with Deloitte & Touche, Marakon and A.T. Kearney.
James M. Jenness
Board: Non Executive Board
Job Title: Chairman
Since: 2005
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Key Employee Biographies
Age: 63
Mr. Jenness has been the Chairman at Kellogg since 2005. He served as Chief Executive Officer
of the company until 2006. Before this role, Mr. Jenness served as Chief Executive Officer of
Integrated Merchandising Systems. Prior to joining Integrated Merchandising Systems, he served
as Vice Chairman and Chief Operating Officer of Leo Burnett Company. Mr. Jenness is also
Co-Trustee of the WK Kellogg Foundation Trust. He is a Director of Kimberly-Clark Corporation,
Children's Memorial Hospital and the Mercy Home for Boys and Girls.
Benjamin S. Carson
Board: Non Executive Board
Job Title: Director
Since: 1997
Age: 58
Dr. Carson has been a Director at Kellogg since 1997. He is also a Director of pediatric neurosurgery
at The Johns Hopkins Medical Institutions. Dr. Carson is also a Professor of oncology, pediatrics,
neurological surgery and plastic surgery at The Johns Hopkins Medical Institutions. He also serves
as a Director at Costco Wholesale Corporation, the Academy of Achievement and is an Emeritus
Fellow of the Yale Corporation, the governing body of Yale University. Dr. Carson is the President
and co-founder of the Carsons Scholars Fund.
John T. Dillon
Board: Non Executive Board
Job Title: Director
Since: 2000
Age: 71
Mr. Dillon has been a Director at Kellogg since 2000. Previously, he served as the Chairman and
Chief Executive Officer of International Paper Company. Mr. Dillon is also a Director of Caterpillar
and E.I. duPont de Nemours & Co. He served as Chairman of the Business Roundtable and the
American Forest and Paper Association and as the Chairman of the Board of governors of the
National Council for Air and Stream Improvement.
Gordon Gund
Board: Non Executive Board
Job Title: Director
Since: 1986
Age: 70
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Key Employee Biographies
Mr. Gund has been a Director at Kellogg since 1986. He is the Chairman and Chief Executive Officer
of Gund Investment Corporation. Mr. Gund is the Chairman and co-founder of the Foundation Fighting
Blindness.
Dorothy A. Johnson
Board: Non Executive Board
Job Title: Director
Since: 1998
Age: 69
Ms. Johnson has been a Director at Kellogg since 1998. She is the President of Ahlburg Company.
Ms. Johnson is a former Director of National City Bank Corporation, the Corporation for National
and Community Service, Council on Foundations, Foundation Center, Independent Sector, the
National Charities Information Bureau, the National Center on Family Philanthropy, Indiana Center
on Philanthropy and the Presbyterian Foundation.
Ann McLaughlin Korologos
Board: Non Executive Board
Job Title: Director
Since: 1989
Age: 68
Ms. Korologos has been a Director at Kellogg since 1989. Previously, she served as a Senior Advisor
to Benedetto, Gartland & Company. Currently, Ms. Korologos also serves on the Boards of AMR
Corporation (the parent company of American Airlines); Host Hotels and Resorts, Harman International
Industries and Vulcan Materials Company.
Sterling Speirn
Board: Non Executive Board
Job Title: Director
Since: 2007
Age: 62
Mr. Speirn has been a Director at Kellogg since 2007. He is the President and Chief Executive Officer
of the WK Kellogg Foundation. Mr. Speirn was previously the President of Peninsula Community
Foundation. He was also Founder and Chairman of the Center for Venture Philanthropy. He is a
former Chairman of Northern California Grantmakers and served on the Advisory Council of the
Global Philanthropy Forum. Mr. Speirn is Co-Creator and former Board member of the Raising A
Reader take-home book bag program.
John L. Zabriskie
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Key Employee Biographies
Board: Non Executive Board
Job Title: Director
Since: 1995
Age: 70
Dr. Zabriskie has been a Director of Kellogg since 1995. He is the President of Lansing Brown
Investments. From 1997 to 1999, Dr. Zabriskie served as the Chairman and Chief Executive Officer
of NEN Life Science Products. Previously, he was the Chairman, President and Chief Executive
Officer of Pharmacia & Upjohn, Executive Vice President of Merck & Co. Dr. Zabriskie is also a
Director of Array Biopharma, Area Discovery, PureTech Ventures and Protein Forest.
Donald R. Knauss
Board: Non Executive Board
Job Title: Director
Since: 2007
Age: 59
Mr. Knauss has been a Director at Kellogg since 2007. He also serves as the Chairman and Chief
Executive Officer of The Clorox Company since 2006. Prior to joining The Clorox Company, Mr.
Knauss spent 12 years with The Coca-Cola Company in a variety of general management and
division president roles. Prior to that, he held various positions in marketing and sales with PepsiCo
and Procter & Gamble, and served as an officer in the US Marine Corps.
Robert A. Steele
Board: Non Executive Board
Job Title: Director
Since: 2007
Age: 54
Mr. Steele has been a Director at Kellogg since 2007. He also serves as the Vice Chairman, Global
Health and Well-Being at Procter & Gamble since 2007. Mr. Steele was Group President - Global
Household Care at Procter & Gamble from 2006 to 2007 and Group President - North America from
2004 through 2006. Prior to that, he was President, North America from 2000 through 2004.
Rogelio M. Rebolledo
Board: Non Executive Board
Job Title: Director
Since: 2008
Mr. Rebolledo is currently a Director at Kellogg. Previously, he served as the Chairman of the Pepsi
Bottling Group, Mexico. Mr. Rebolledo also served as the company's President and Chief Executive
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Key Employee Biographies
Officer from 2004-2006. Prior to joining the Pepsi bottling business in Mexico in 2004, he held a
number of key positions during his 27-year tenure with PepsiCo.
Ronald L Dissinger
Board: Senior Management
Job Title: Chief Financial Officer
Since: 2010
Age: 52
Mr. Dissinger has been the Chief Financial Officer at Kellogg since 2010. He joined Kellogg in 1987
as a Supervisor in general accounting for the Mrs. Smith's subsidiary and was promoted to manager,
cost accounting in 1990.
Celeste A. Clark
Board: Senior Management
Job Title: Senior Vice President, Global Public Policy and External Relations; and Chief Sustainability
Officer
Since: 2010
Age: 56
Dr. Clark has been Senior Vice President of Global Public Policy and External Relations and Chief
Sustainability Officer at Kellogg since 2010. She joined the company in 1977 as a Nutritionist. Dr.
Clark also serves on the Boards of Auto Club Group and AAA Michigan. She also serves on the
Scientific Advisory Board of Mead Johnson Nutritionals.
Bradford J. Davidson
Board: Senior Management
Job Title: Senior Vice President, Kellogg and President, Kellogg North America
Since: 2008
Age: 49
Mr. Davidson has been the Senior Vice President of Kellogg and President of Kellogg North America
since 2008. He joined Kellogg Canada as a Sales Representative in 1984. He held numerous
positions in Canada, including Manager of trade promotions, Account Executive, Brand Manager,
area Sales Manager, Director of customer marketing and category management, and Director of
Western Canada. Mr. Davidson moved to Kellogg US in 1997 as Director of trade marketing. He
later was promoted to Vice President, channel sales and marketing and then to Vice President,
national teams sales and marketing. In 2000, he was promoted to Senior Vice President, sales for
the Morning Foods Division, Kellogg US, and to Executive Vice President and Chief Customer Officer
of Morning Foods Division for Kellogg US in 2002.
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Key Employee Biographies
Timothy P. Mobsby
Board: Senior Management
Job Title: Senior Vice President, Kellogg; Executive Vice President, Kellogg International; and
President, Kellogg Europe
Since: 2000
Age: 54
Mr. Mobsby has been the Senior Vice President of Kellogg; Executive Vice President at Kellogg
International; and President of Kellogg Europe since 2000. He joined the company in 1982 in the
UK. From 1988 to mid 1990, he worked in the cereal marketing group of Kellogg US. From 1990 to
1993, Mr. Mobsby was President and Director General of Kellogg France & Benelux. He was
subsequently appointed Vice President of marketing, innovation and trade strategy for Kellogg
Europe based in Manchester, England.
David J. Pfanzelter
Board: Senior Management
Job Title: Senior Vice President, Kellogg; and President, Kellogg Specialty Channels
Since: 2004
Age: 57
Mr. Pfanzelter has been the Senior Vice President of Kellogg and President of Kellogg Specialty
Channels since 2004. He began his foodservice career in 1975 with Oscar Mayer Foods Corporation.
In 1998, he joined the Keebler Foods Company as Vice President and General Manager of the
foodservice division and was also a Corporate Officer. Following the acquisition of Keebler in 2001,
Mr. Pfanzelter was named President of Kellogg's Food Away From Home. He was promoted to
Kellogg's Vice President in 2003.
Gary H. Pilnick
Board: Senior Management
Job Title: Senior Vice President, General Counsel, Corporate Development and Secretary
Since: 2003
Age: 45
Mr. Pilnick has been the Senior Vice President, General Counsel and Secretary at Kellogg since
2003. He joined the company in 2000 as Vice President, Deputy General Counsel and Assistant
Secretary. Prior to joining the company, Mr. Pilnick was affiliated with the Chicago law firm of Jenner
and Block from 1989 to 1995. He served as Vice President and Chief Corporate Counsel for Specialty
Foods Corporation from 1995 to 1997. Mr. Pilnick became Vice President and Chief Counsel of Sara
Lee Branded Apparel, North and South America in 1999.
Paul T. Norman
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Key Employee Biographies
Board: Senior Management
Job Title: Senior Vice President, Kellogg and President, Kellogg International
Since: 2008
Age: 45
Mr. Norman has been the Senior Vice President at Kellogg and President at Kellogg International
since 2008. He joined Kellogg's UK sales organization in 1987. Mr. Norman was promoted to Director
of Marketing for Kellogg de Mexico in 1997; to Vice President of Marketing for Kellogg US in 1999;
and to President of Kellogg Canada in 2000. He was promoted to Managing Director of UK/Republic
of Ireland in 2002. He was promoted to Kellogg Vice President in 2004.
Juan Pablo Villalobos
Board: Senior Management
Job Title: Senior Vice President, Kellogg; and President, US Morning Foods
Since: 2008
Age: 44
Mr. Villalobos has been Senior Vice President, Kellogg; President, US Morning Foods since 2008.
He joined Kellogg de Mexico in 1991 as Brand Manager, Marketing and was promoted to Group
Brand Manager in 1992. Mr. Villalobos became Marketing Director of Kellogg Brazil in 1993 and
General Manager of Kellogg Chile in 1994. Mr. Villalobos was promoted to General Manager of
Kellogg Colombia in 1995 and to Convenience Foods Director of Kellogg de Mexico and Latin
America in 1997. Later, he became General Manager of Kellogg de Mexico and Vice President of
Kellogg Latin America in 1999.
Margaret Bath
Board: Senior Management
Job Title: Vice President, Research, Quality and Technology
Since: 2004
Age: 46
Ms. Bath has been the Vice President of Research, Quality and Technology at Kellogg since 2004.
She joined Kellogg as Director, Global Product Development in 2000. Prior to joining the company,
Ms. Bath was employed by Frito Lay in Plano, Texas. She is a Board member of the American
Association of Cereal Chemists.
Mark R. Baynes
Board: Senior Management
Job Title: Vice President and Global Chief Marketing Officer
Since: 2008
Age: 49
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Key Employee Biographies
Mr. Baynes has been the Vice President and Global Chief Marketing Officer at Kellogg since 2008.
He joined the company in the UK in 1990 as Senior Brand Manager.
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Key Employee Biographies
MAJOR PRODUCTS AND SERVICES
Kellogg Company (Kellogg) is the global producer and marketer of cereal and convenience foods.
The company's key products and brands include the following:
Products:
Ready-to-eat cereals
Cookies
Crackers toaster pastries
Cereal bars
Frozen waffles
Meat alternatives
Brands:
Kellogg's
Keebler
Pop-Tarts
Eggo Cheez-It
Club
Nutri-Grain
Rice Krispies
All-Bran
Special K
Mini-Wheats
Chips Deluxe
Sandies
Morningstar Farms
Famous Amos
Kashi
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Kellogg Company
Major Products and Services
REVENUE ANALYSIS
The company recorded revenues of $12,575 million during the financial year ended December 2009
(FY2009), a decrease of 1.9% compared with 2008. For FY2009, North America, the company's
largest geographic market, accounted for 67.7% of the total revenues.
Kellogg operates through four geographic segments: North America, Europe, Latin America, and
Asia Pacific.
Revenue by geography*
North America, Kellogg's largest geographical market, accounted for 67.7% of the total revenues in
FY2009. Revenues from North America reached $8,510 million in 2009, an increase of 0.6% over
2008.
Europe accounted for 18.8% of the total revenues in FY2009. Revenues from Europe reached $2,361
million in 2009, a decrease of 9.9% compared with 2008.
Latin America accounted for 7.7% of the total revenues in FY2009. Revenues from Latin America
reached $963 million in 2009, a decrease of 6.5% compared with 2008.
Asia Pacific accounted for 5.9% of the total revenues in FY2009. Revenues from Asia Pacific reached
$741 million in 2009, an increase of 3.5% over 2008.
* Percentages rounded off.
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Kellogg Company
Revenue Analysis
SWOT ANALYSIS
Kellogg is the worlds leading producer of cereal and one of the leading producers of convenience
foods. The company markets more than 1,500 products in over 180 countries. A leading market
position provides Kellogg with significant bargaining power as well as stabilizes the company's
financial growth. However, a weak economic outlook for the important markets of Kellogg would put
pressure on its top line and bottom line growth.
Weaknesses Strengths
Dependence on few customers for major
portion of revenues
Leading market position built on strong
brands aided with robust advertising spend
Product recalls hampering brand image Strong product innovation creates
sustainable growth
Strong results in tough economic and macro
environment enhances investor's confidence
Threats Opportunities
Stringent regulations Emerging health consciousness would drive
the demand of the company's products Soft consumer spending in the mature
markets of US and Europe Cost saving and efficiency programs to
enhance profitability Intense competition and changing global
retail scenario Growing global breakfast cereals market
Strengths
Leading market position built on strong brands aided with robust advertising spend
With 2009 sales of $12,575 million, Kellogg is the worlds leading producer of cereal and of the
leading producers of convenience foods. The company markets more than 1,500 products in over
180 countries. It offers its products under a large portfolio of well recognized brands including
Kelloggs, Keebler, Special K, Pop-Tarts, Eggo, Cheez-It, Nutri-Grain, Rice Krispies, Mothers,
Morningstar Farms, Murray Sugar Free, Townhouse, All-Bran, Frosted Mini-Wheats, Club, Kashi,
Bear Naked, among others. Some top brands have even become synonymous with the category.
Kellogg has a strong focus on strengthening its brands through advertising and consumer promotion.
Advertising investment of nearly $1.1 billion in 2009 continued its consistent and strong investment
into building its brands. At approximately 9% of net sales, this investment is significantly above than
most of its peers in the packaged foods industry. In 2009, Kellogg took advantage of the significant
media deflation. Rather than cutting back on advertising spending, the company invested even
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SWOT Analysis
moreover $1 billion in advertisingresulting in more consumer impressions and a greater impact
from each dollar spent.
A leading market position provides Kellogg with significant bargaining power as well as stabilizes
the company's financial growth. Further, the company's strong brand strength supports the innovation
process, in launching new products and enhancing the revenue stream. Kellogg has leveraged its
high brand recognition to increase customer loyalty and compete effectively with regional players in
various markets.
Strong product innovation creates sustainable growth
Kellogg consistently develops products that are differentiated in the marketplace and respond to the
changing tastes and lifestyle needs of consumers around the globe. The company drives development
and visibility of a robust pipeline of new products. In 2009, Kellogg completed the expansion of its
primary research and development engine, the W.K. Kellogg Institute for Food and Nutrition Research.
Further, the company invests in an open innovation program which enables Kellogg to benefit from
external research from around the world to supplement its internal development capabilities. Among
its many innovations in 2009, Kellogg extended its largest brand, Special K, even further by introducing
Special K crackers, chocolatey pretzel bars, and fruit crisps, as well as new flavors of Special K
cereal around the world including cinnamon pecan, blueberry, chocolatey flakes, fruit & nut clusters,
and low-fat granola. The company also renovated many of its existing brands. Recent renovations
focused on reducing sugar, sodium and fats. Kellogg also focuses on enhancing the nutritional value
and benefits of the food products that it offers. For example, in 2009 the company added fiber to
Froot Loops and Apple Jacks in the US as well as Froot Loops and Corn Pops in Canada.
Strong focus on innovation and new product launches would enable Kellogg to expand its presence
and strengthen the depth of its portfolio. This would in turn translate into increasing revenues and
profitability.
Strong results in tough economic and macro environment enhances investor's confidence
Despite the backdrop of a difficult economic environment and a tough competitive landscape, 2009
was a profitable year for Kellogg. Total shareowner return on Kellogg shares for FY2009 was 22%,
ahead of the S&P Packaged Foods & Meats Index total return of 16%. Five-year cumulative annual
return of Kellogg shares (35%) significantly outperformed both the Packaged Foods & Meats Index
(13%) and the S&P 500 Index (2%). In addition, Kellogg generated $3.16 Earnings per Share, a
13% increase on a currency-neutral basis. Also, the company generated record cash flow of nearly
$1.3 billion. This enabled Kellogg to fulfill its commitment of returning cash to shareowners by
increasing the dividend by 10% and returning nearly three-quarters of a billion dollars through
dividends and share repurchases. Robust performance indicates financial soundness of the company
and enhances investor's confidence in Kellogg.
Weaknesses
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Dependence on few customers for major portion of revenues
Kellogg has a concentrated customer base. The companys sales are largely dependent on Wal-Mart
Stores and its affiliates. For instance, Wal-Mart accounted for approximately 21% of Kellogg's
consolidated net sales in FY2009. During the same period, the companys top five customers,
collectively, including Wal-Mart, accounted for approximately 34% of its consolidated net sales and
approximately 44% of US net sales. Moreover, approximately 17% of the company's consolidated
receivables balance and 26% of its US receivables balance comprised of amounts owed by Wal-Mart
and its affiliates as on January 2010. As the retail grocery trade continues to consolidate and mass
marketers become larger, Kellogg's large retail customers may seek to use their position to improve
their profitability through lower pricing. Overdependence on large retail customers could negatively
impact the company's profitability and volume growth.
Product recalls hampering brand image
Kellogg has been registering increasing instance of product recalls recently. For instance, in January
2009, Kellogg recalled certain Austin and Keebler branded peanut butter sandwich, crackers and
select snack-size packs of Famous Amos peanut butter cookies and Keebler Soft Batch Homestyle
peanut butter cookies. Products were recalled due to the potential to be contaminated with Salmonella,
an organism which can cause serious and sometimes fatal infections in young children, frail or elderly
people, and others with weakened immune systems. In the following month, the company recalled
Keebler Soft Batch Homestyle Chocolate Chunk Cookies, Oatmeal Raisin Cookies and Special K
Protein Meal Bar Honey Almond variety only. This voluntary recall was a part of a larger product
recall by Peanut Corporation's, one of Kellogg's peanut paste suppliers for crackers. Most recently
in June 2010, Kellogg implemented a voluntary recall of certain breakfast cereals including Kellogg's
Apple Jacks, Fruit Loops, Corn Pops and Honey Smacks due to an uncharacteristic off-flavor and
smell from the liner in the package. Recurrent product recalls could affect the brand image of the
company, which would lead to low customer loyalty and brand equity.
Opportunities
Emerging health consciousness would drive the demand of the company's products
Over the past few years, there has been a newfound emphasis on healthier eating. With a changing
lifestyle, people are becoming more aware of the negative effects of unhealthy eating habits. This
is leading to a higher demand for low carbohydrate and low calorie foods worldwide. Accordingly,
food items containing trans-fat are losing market share to low calorie, low fat, natural and organic
products. According to industry reports, the sales for organic food grew by 15.8% in 2008. The growth
rates exceeded the growth witnessed by conventional food products. Global demand for organic
foods is expected to grow by 46% for a period of at least five years starting 2009. Kellogg's
ready-to-eat cereal brands are well positioned to meet the demands developing from the growing
health and wellness trends. The companys largest brand Special K, a low-fat cereal, continues to
grow globally at nearly double-digit rates and triple-digit in India. And, although only recently launched
in South Korea, Special K is already a top cereal brand in the country. Furthermore, as the cereal
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category continues to be on trend with demographic shifts around the world, Kelloggs strong portfolio
of adult cereals is well positioned, meeting the needs of aging baby boomers seeking foods that aid
them with weight management and digestive health. The companys portfolio of brands catering to
the emerging health conscious consumers would fuel its profitability and strengthen its presence in
the future.
Cost saving and efficiency programs to enhance profitability
In order to cope up with the challenging operating environment, Kellogg has set a goal of $1 billion
in annual cost savings by the end of 2011. Supporting the cost challenge is K-Lean, the companys
ongoing initiative to drive continuous annual improvement. Lean principles ensure that Kelloggs
supply chain culture continues to foster improvement, drive waste reduction, create incremental
capacity, optimize manufacturing operations, and uphold exemplary quality and safety standards.
Kellogg began the implementation of Lean principles in its North American cereal operations in 2008.
In 2009, the company expanded K-Lean globally throughout its manufacturing network, and followed
with a broad implementation encompassing the supply chain support systems. Cost saving and
efficiency programs in 2009 provided substantial progress and the company now expects to exceed
$1 billion in savings over this three year period. These initiatives will not only give Kellogg excellent
financial visibility but also positively enhance its flexibility.
Growing global breakfast cereals market
The global breakfast cereals market has demonstrated steady growth over a long period of time.
According to Datamonitor estimates, the global breakfast cereals market generated total revenues
of $24.5 billion in 2008, representing a compound annual growth rate (CAGR) of 3.3% for the period
spanning 2004-2008. Ready-to-eat cereal sales proved the most important for the global breakfast
cereal market in 2008, generating total revenues of $21.5 billion, equivalent to 87.8% of the market's
overall value. The performance of the market is forecast to follow a similar pattern, with an anticipated
CAGR of 3.2% for the five-year period 2008-2013, which is expected to lead the market to a value
of $28.7 billion by the end of 2013. Kellogg is the worlds leading producer of cereal. The company
is thus well positioned to exploit the growing breakfast cereals market and enhance its top line and
profitability.
Threats
Stringent regulations
As a specialist in cereal and convenience foods, the company's operations are subject to extensive
regulation by the US Department of Agriculture, the US Food and Drug Administration and other
state and local authorities that oversee food safety standards and the processing, packaging, storage,
distribution, advertising and labeling of the company's products. Kellogg's manufacturing facilities
and products are subject to constant inspection by federal, state and local authorities. Some of the
acts like Clean Water Act, Clean Air Act, Solid Waste Disposal Act (as amended by the Resource
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Conservation and Recovery Act), Comprehensive Environmental Response, Compensation and
Liability Act, Emergency Planning Community Right-to-Know Act, Safe Drinking Water Act, Toxic
Substances Control Act, and the Federal Insecticide, Fungicide, and Rodenticide Act, and related
state and local laws and regulations, Claims or enforcement proceedings could affect the company.
Additionally, the company is routinely subject to new or modified laws, regulations, and accounting
standards. The company's failure or inability to comply with such requirements could subject the
company to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal
sanctions, which may impact the business of the organization.
Soft consumer spending in the mature markets of US and Europe
As a company dependent upon consumer discretionary spending, Kellogg will face a challenging
FY2010. All major western countries including the US, the UK, Germany, France, Italy, Spain, Japan
and Australia are still reeling under the affect of recession. For instance, the recent debt crisis of
Greece has the potential to contaminate the entire European economy. With Portugal and Spain
also showing contagion effects, the eminent threat of another downfall in Europe is gaining grounds.
Another economic turmoil and reduced consumer wealth may result in consumers becoming unwilling
or unable to purchase the company's products, with clear implications for turnover and profitability.
In the US, the consumer confidence is down being hit by both a property slump and rising prices of
food and fuel. Although consumer spending is seeing some positive growth, Americans seem cautious
and are not willing to increase spending, one of the reasons why the pace of the recovery is estimated
to be more subdued than in the past. High unemployment which is estimated to reach 10% in 2010,
sluggish wage gains and credit crunch are all expected to keep consumers relatively cautious. A
weak economic outlook for the important markets of Kellogg would put pressure on its top line and
bottom line growth.
Intense competition and changing global retail scenario
Kellogg faces intense competition across its product lines and also in both domestic and international
markets. Some of its competitors like Sara Lee, Kraft Foods and PepsiCo have substantial financial,
marketing and other principal factors of competition include new product introductions, product
quality, taste, nutritional value, price, and promotion. For instance, PepsiCo's Quaker Oats is perceived
to offer healthier and more nutritious cereals than Kellogg.
Furthermore, the companys products are sold in a marketplace which is experiencing an increased
trade concentration and the growing presence of large-format retailers and discounters. With the
growing trend toward retail trade consolidation, the company is increasingly dependent on key
retailers. Some of these retailers have a greater bargaining strength than Kellogg. They may use
this leverage to demand higher trade discounts, allowances or slotting fees, which could lead to
reduced sales or profitability. Kellogg may also be negatively affected by changes in the policies of
its retail trade customers, such as inventory de-stocking, limitations on access to shelf space, delisting
of products and other conditions.
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Changes in the policies of its retail trade customers and increasing dependence on key retailers in
developed markets may adversely affect its business. Increasing competition from multinational
manufacturers and private labels on the other hand could adversely affect the company's margins.
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TOP COMPETITORS
The following companies are the major competitors of Kellogg Company
Associated British Foods plc
ConAgra Foods, Inc.
General Mills, Inc.
McKee Foods Corporation
Nestle S.A.
PepsiCo, Inc.
Sara Lee Corporation
Interstate Bakeries Corp.
Hain Celestial Group, Inc., The
Ralcorp Holdings, Inc.
Kraft Foods, Inc.
Cereal Partners Worldwide
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COMPANY VIEW
A joint statement by David Mackay, President and Chief Executive Officer, and Jim Jenness, Chairman
of the board of Kellogg is given below. The statement has been taken from the company's 2009
annual report.
In 2009, we delivered strong, high-quality results while continuing to build an even stronger Kellogg
Company for the future.
Thanks to the hard work and passion of our 31,000 Kellogg employees around the world, the strength
of Kellogg was demonstrated again in 2009 with another year of sustainable and dependable
performance. By any measure, this was one of the most challenging operating environments in
decades. However, we are pleased that despite the backdrop of a difficult economic environment
and a tough competitive landscape, 2009 was a very good year for Kellogg. We once again delivered
high quality results while building an even stronger company.
Kellogg grew internal net sales, operating profit and earnings per share at, or above, our long-term
annual targets.
We posted 3 percent growth in Internal Net Sales, driven by a particularly strong year in cereal and
a solid year in snacks.
We delivered a 10 percent improvement in Internal Operating Profit, reflecting the success of our
cost savings and productivity initiatives.
We generated $3.16 Earnings per Share, a 13 percent increase on a currency-neutral basis.
We generated record cash flow of nearly $1.3 billion. We fulfilled our commitment of returning cash
to shareowners by increasing our dividend by 10 percent and returning nearly three-quarters of a
billion dollars through dividends and share repurchases.
Instead of viewing the economic climate as a roadblockwe see it as an opportunity. We intend to
emerge from this economic crisis as an even stronger, more focused, more effective organization.
Throughout 2009, we invested in our strengthsbuilding our brands in our core categories, spending
effectively on brand-building advertising and marketing, innovating and renovating our products to
meet our consumers changing needs, and identifying and implementing efficiencies and cost savings
throughout our organization. This investment lays the groundwork for continued sustainable and
dependable performance now and well into the future.
Our well-known and trusted brands are the strength of Kellogg. As a focused, branded food company,
we provide a balanced portfolio of brands that reaches consumers around the world. The key to our
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success is in the way we strengthen our brands to keep them relevant, resonant and powerful with
consumers. Consumers demand variety and convenience, and, now more than ever, value.
Consumers are trading into our core categoriessuch as cerealin markets like the United States
and the United Kingdom, and they recognize that Kellogg brands deliver on those needs.
We operate in two of the strongest categories in the food industrycereal and snacksas well as
frozen foods. Our strategy is to expand our cereal and snack business throughout the world and
grow our frozen foods business in North America. Through leveraging the power of our brands and
our proven ability to execute, we are intent on expanding our share in these categories.
The ready-to-eat cereal category is robust and growing on a global basis. Its strong appeal to
consumers continues even during this weak economy, as consumers seek greater value in addition
to taste and convenience. Our cereal portfolio continues to perform well, not only in the U.S., but
around the globe in Mexico, Australia, Canada and other core markets. In the U.S. we continue to
drive growth and advertising support behind our top eight brands plus Kashi.
The cereal category continues to be on trend with demographic shifts around the world. Our strong
portfolio of adult cereals is well positioned, meeting the needs of aging baby boomers seeking foods
that aid them with weight management and digestive health.
Our goal is to be consumers top choice within these categories and also the leader in category
growth. To accomplish this, we must develop new products to satisfy the consumer. The strength
of Kellogg lies in our world-class innovation capabilities. Our innovation process begins and ends
with the consumer. Our product development capabilities both in innovation (developing new
products) and renovation (improving existing products) are critical to our continued success. We
continue to invest in projects that expand our capabilities, focus our development efforts on
strengthening our core brands and the equity behind them, and maintain a balanced portfolio of food
offerings across our categories, markets, and brands.
In 2009, we completed the expansion of our W.K. Kellogg Institute for Food and Nutrition Research,
our world class R&D facility where we develop and renovate products to meet our consumers
changing needs and tastes. The open atmosphere of this facility fosters collaboration among diverse
team members, converging the strengths of varying talents and knowledge bases. Our pilot plant
and super-kitchen improvements allow for rapid prototyping and multiple, simultaneous prototyping
streams, both of which are critical to quickly launching successful innovation into the marketplace.
Continued investment in our open innovation program enables us to benefit from outside research
from around the world to supplement our internal development capabilities. We are seeing positive
results in our three areas of focustechnology, strategic alliances with world-class research partners,
and our online Great Ideas portal.
We have strengthened our core brands through innovation of new products and flavors. Among our
many innovations in 2009, we extended our largest brand, Special K, even further by introducing
Special K crackers, chocolatey pretzel bars, and fruit crisps, as well as new flavors of Special K
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cereal around the world including cinnamon pecan, blueberry, chocolatey flakes, fruit & nut clusters,
and low-fat granola.
We also strengthened our brands through renovation. Applying new ideas to adjust the ingredients
and nutrients in our existing foods, keeps our successful brands relevant with consumers today and
in the future, thereby protecting these equities going forward. Recent renovations focused on reducing
sugar, sodium and fats. Were also enhancing the nutritional value and benefits our foods offer. For
example, in 2009 we added fiber to Froot Loops and Apple Jacks in the United States as well as
Froot Loops and Corn Pops in Canada.
The strength of Kellogg is our long history of heavily investing in advertising and marketing to support
our new and established brands. In 2009, we took advantage of the significant media deflation in a
number of our markets. Rather than cutting back on advertising spending, we invested even
moreover $1 billion in advertising resulting in more consumer impressions and a greater impact
from each dollar spent.
To optimize our brand building, we consolidated our advertising agencies, market researchers and
other vendors to create greater scale across the globe, improving the effectiveness of our advertising.
We realigned our brands and marketing strategies by geographic regions to create even more
advantages from scale.
Soon after we consolidated our market research, we realized the benefit. We completed a broad-based
market research study in all of our major ready-to-eat cereal markets. Our global research found
that adult females across a variety of cultures share the same concerns and needs when it concerns
health and weight management. So when we had early successes in the United Kingdom with a
Special K marketing campaign Moments of Truth, we were able to roll it out across a variety of
markets that were culturally very different. We had great results Special K continues to grow
globally at nearly double-digit ratestriple-digit in India. And, although only recently launched in
South Korea, Special K is already a top cereal brand in that country.
We continue to embrace digital marketing, investing heavily in digital capabilities, online campaigns
and partnerships with experts in the space. In 2009, we partnered with leaders in the digital industry,
such as Facebook for social media and Microsoft for technology architecture. We began investing
in new technology infrastructures within Kellogg, increasing our ability to implement successful
programs from one area of the world to another with ease and speed.
The strength of Kellogg is our employees.
The guiding principles of our K Values provide a positive and strong foundation for everyone in the
Kellogg organization. Around the world, our employees are committed to excellence, focused on
achieving our goals and eager to embrace new challenges. The experience, ideas, and ingenuity
of the employees throughout Kellogg Company have generated a multi-year pipeline of cost-savings
initiatives and efficiency improvements. In 2009, the entire Kellogg organization was challenged to
deliver $1 billion in annual cost savings by the end of 2011. Our employees rose to the challenge,
and we are currently on track to exceed that goal. We dramatically increased our investment in
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productivity and cost-saving initiatives during 2009 to a level equivalent to 26 cents of earnings per
share, which is 12 cents above our strong 2008 level, while continuing to meet or exceed our long-term
performance goals. We are investing the savings from these initiatives back into the business,
providing fuel for future growth.
Supporting the $1 billion cost challenge is K-Lean, our ongoing initiative to drive continuous annual
improvement. Lean principles ensure that our supply chain culture continues to foster improvement,
drive waste reduction, create incremental capacity, optimize manufacturing operations, and uphold
exemplary quality and safety standardsall while enhancing our focus on consumer and customer
satisfaction.
We began the implementation of Lean principles in our North American cereal operations in 2008.
In 2009, we expanded K-Lean globally throughout our manufacturing network, and followed with a
broad implementation encompassing our supply chain support systems. We will eventually leverage
these concepts across the entire Company.
We see Lean as a culture-changing process that will take us to new levels of cross-functional
collaboration and continuous improvement. Our long-term approach to making our business more
efficient and effective rather than simply cutting functional costs will benefit us for years to come.
Already in 2009, cost and capacity improvement activities combined with top-line growth helped to
expand gross margins.
As we enter 2010, we anticipate that the operating environment will remain challenging for Kellogg,
our retailers and our consumers. However, we will maintain our focus on consumers, anticipating
their changing needs and tastes and keeping our products relevant. We will continue to invest
aggressively to support our brands. Our implementation of productivity and cost savings initiatives
in 2009 has given us excellent financial visibility into our 2010 financial performance. By setting
realistic financial targets, we will make decisions based on the long-term benefit to our Company
and to our shareowners. We could not achieve success without our consumers, our partners, our
employees, and, especially, our shareowners.
Thank you for your continued confidence and support. We will continue to execute our sustainable
growth model and focused business strategy to deliver sustainable and dependable performancethat
is the strength of Kellogg.
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LOCATIONS AND SUBSIDIARIES
Head Office
Kellogg Company
One Kellogg Square
Battle Creek
Michigan 49016 3599
USA
P:1 269 961 2000
F:1 269 961 2871
http://www.kelloggcompany.com
Other Locations and Subsidiaries
Keebler Foods Kellogg Mexico
Battle Creek Km 1 Canetera al Campo
MoichiganI 49016 1986 Militar
USA Queretaro 76200
MEX
Kellogg Brasil & Cia Kellogg
Av Das Nacoes Unidas 12995 Calle 3 Esq 8 Parque Industrial
Sao Paulo 04578 000 Pilar
BRA BS.AS. 1629
ARG
Kellogg Osterreich Kellogg De Colombia
Handelskai 388/5/Top 533 CL 17 NO. 68A 75
Vienna 1020 Santa Fe De Bogota
AUT COL
Nordisk Kellogg's Kellogg's Benelux
Stationsparken 24 st. Belgicastraat 7
2600 Glostrup 1930 Zaventem
DNK BEL
Kellogg's Produits Alimentaires Nordisk Kellogg's Finland
R Lon Blum Lars Sonckin kaari 16
Rosny Sous Bois 93110 Espoo 02600
FRA FIN
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Locations and Subsidiaries
Kellogg Company of Ireland Kellogg (Deutschland)
9 Saint Johns Ct Auf Der Muggenburg 30
Swords Road 28217 Bremen
Dublin DEU
IRL
Kellogg's (UK) Kellogg Espana
Talbot Road C/ Licoristas 2
Manchester Pol. Ind. De Valls
M16 0PU Valls Tarragona 43800
GBR ESP
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Locations and Subsidiaries