Kellogg continues to struggle in North America
Kellogg (K) continues to report sluggish sales in North America—like most of its peers. Weak consumption trends, primarily in the US (SPY), resulted in lower volumes. The company’s sales in the region fell 2% on a currency neutral basis. However, management noted sequential improvements in volumes during the reported quarter.
Kellogg’s peers are also struggling in the US. Kraft Heinz’s (KHC) 2Q17 sales fell 1.2% in the US due to lower volumes and a negative mix. Meanwhile, General Mills’ (GIS) North America Retail segment witnessed a sharp decline in volumes. Conagra Brands (CAG) and Mondelēz (MDLZ) are also seeing similar trends in the US.
In North America, the company’s U.S. Morning Foods’ net sales fell 6.6%, which reflects lower volumes. It partially offset the improvement in pricing and mix. Management stated that the category-wide consumption slowdown is taking a toll on the segment’s performance. Despite challenges, the company’s cereal brands including Froot Loops and Frosted Flakes continued to gain market share due to innovation and efficient marketing.
The company’s US Snacks category’s sales remained flat in 2Q17. Category softness and reduced promotional activity continued to a remain a drag. In the North America Other segment, net sales fell 3.6% due to lower volumes and currency headwinds—partially offset by improved pricing and mix.
On contrast, the company’s US Specialty category reported a 1.8% YoY improvement in sales. Innovation-led products resulted in higher volumes as well as improved pricing and mix. The company’s expansion of distribution channels supplemented the sales growth.