Kellogg Company (NYSE:K) is leveraging the strength of its brand portfolio, driven by innovative efforts, to its advantage. The company has been expanding its market presence through strategic acquisitions. However, it’s not immune to the challenges posed by the current cost inflation landscape. Let’s delve into the details.
Power of Brand and Strategic Acquisitions
Kellogg boasts an impressive brand portfolio that includes well-known names like Pringles, RXBAR, Bear Naked, Cheez-It, and Rice Krispies Treats, among others. The company’s frozen food brands, including Morningstar Farms and Eggo, have contributed significantly to its growth. During the second-quarter earnings call, the management highlighted the exceptional performance of the Pringles brand in the salty snacks category.
Kellogg is committed to enhancing its portfolio by introducing new products under existing brands, focusing on innovation, and ramping up marketing initiatives. The company has been actively investing in brand development, utilizing digital media, traditional advertising, and consumer promotions. Kellogg is also dedicated to improving in-store capabilities, which includes bolstering the sales force for its struggling segments.
In 2017, Kellogg made a strategic move by acquiring the Chicago Bar Company, a prominent protein bar maker responsible for the popular RXBAR brand. The acquisition of Pringles has also proven to be a lucrative venture, propelling Kellogg from a major U.S. snacks business to a globally recognized player in the snacks industry. Furthermore, Kellogg continues to expand its acquired brands through the introduction of new products.
Addressing Challenges
While Kellogg enjoys these successes, it’s not shielded from the challenges brought about by soaring input costs and broader economic obstacles. The company’s selling, general, and administrative (SG&A) expenses surged to $824 million during the quarter, marking an increase from the $728 million reported in the corresponding period of the previous year. With businesses resuming normal operations post-pandemic and the consequent revival of meetings and travel, it’s anticipated that SG&A expenses will remain elevated. Additionally, higher interest expenses have impacted Kellogg’s quarterly bottom line.
To combat the effects of rising inflation, Kellogg is actively implementing strategies for effective revenue growth management and increased productivity.
In the last three months, Kellogg’s shares have experienced a decline of 7.6%, slightly more pronounced than the industry’s 5.4% decrease during the same period.
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