Close

Not a member yet? Register now and get started.

lock and key

Sign in to your account.

Account Login

Forgot your password?

Kellogg Idea Proposal (K)

Kellogg Idea Proposal (K)
 

Will Kellogg’s new growth strategy turn around declining sales?

 

Report Available: March 21, 2018

 

Blueshift’s initial research showed K’s distribution change to the warehouse model from direct delivery paying off as earnings beat forecast slightly and margins improved with cost savings from the new strategy, though sales dropped and still look shaky. K announced its new growth strategy, focusing on occasions over categories and products, pushing its strongest brands in the snack segment while admitting morning foods are no longer the growth driver for the company.

 

Observations

  1. K’s Q4 earnings were in-line with expectations while revenue beat forecast slightly. The transition away from direct-store delivery brought material cost savings, offsetting a double-digit increase in brand building across the company, including the snack division. Operating profit margin climbed to nearly 17%. Its U.S. snack division saw sales decline 6% with the change in its distribution model, while sales from its morning foods unit dropped 5%. Sales in its specialty category increased 2%.
  2. K just introduced its latest strategy to help the company move from its current 1% growth trajectory to a long-term growth rate of 1% to 3%. This shifts the company’s focus from reducing its cost structure through the change in its distribution model to growth through investment, M&A, and improved execution. K’s growth efforts will now emphasize occasions over categories and products in response to changing consumer habits. The plan is to deliver the right food at the right time in the right packaging for any occasion. As such, the focus will be in the snack segment with top growing brands like Pringles, Cheez-It, Rice Krispies Treats, and Eggo Waffles. It also is no longer expecting breakfast cereals and other morning foods to be the growth driver it once was. K said the successful transition to the warehouse delivery model sets it up well to invest more in building its brands to return to growth. As K makes this shift, it will do so without its North American president, who is retiring April 1 after more than 30 years with the company.
  3. Blueshift’s Sept. 28, 2017, report said K eventually will emerge a winner in its move to a warehouse distribution system from a direct-store delivery model. K’s sales were expected to fall because of the switch, but the immediate cost savings and expected supply chain efficiencies should compensate for the lost sales, especially when judged six months or longer after the transition is completed. Sales declines likely will stabilize after the first year of the transition.

 

What are stores seeing from K with regard to its new growth strategy? How do stores believe this new strategy will affect K sales? What does K need to do to reverse declining sales? What are K sales trends in grocery stores with the transition to the warehouse model? How are grocery stores responding to these delivery method changes? What effect is this having on supply chain efficiencies? How is losing endcaps affecting K sales? Is K having to give price concessions? What are competitors doing in response to K’s moves? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Category buyers and managers at grocery chains, Competitors, and Industry specialists.

 

Companies: Kellogg Co. (K), Koninklijke Ahold Delhaize NV (ADRNY), Campbell Soup Co. (CPB), General Mills Inc. (GIS), J & J Snack Foods Corp (JJSF), Kroger CO. (KR), Mondelez International Inc (MDLZ), PepsiCo, Inc. (PEP), Pinnacle Foods Inc. (PF), Post Holdings Inc. (POST), J M Smucker Co (SJM), TreeHouse Foods Inc. (THS), Walmart Inc. (WMT)

 

Research Begins: March 5, 2018

 

Are you aware Intro-act, our corporate access solution, is part of the Blueshift Research ecosystem? To learn more, go toIntro-act.com.