WK Kellogg Co, the maker of Frosted Flakes, is betting on expanding cold cereal to dinner and snacking to attract customers and fuel sales for the Kellogg spinoff.
(Bloomberg) — WK Kellogg Co, the maker of Frosted Flakes, is betting on expanding cold cereal to dinner and snacking to attract customers and fuel sales for the Kellogg spinoff.
About 25% of cereal consumption is already outside of breakfast, and that percentage can grow further, Chief Executive Officer Gary Pilnick said in an interview. Besides growth in more cereal-based snacks, the evening hours are a big opportunity to revive ready-to-eat cereal in North America with legacy brands including Raisin Bran and Special K.
“We’re encouraging people, ‘Hey, take the night off, you don’t need to have chicken tonight. Have cereal for dinner,’” Pilnick said. This strategy will help the company achieve its goal of holding sales steady in dollar terms, he said.
The separation of Kellogg into two independent companies, WK Kellogg and Kellanova, was complete as of Monday. Kellogg previously said that WK Kellogg would generate about $2.7 billion in net sales in 2024, while growth-focused Kellanova, which owns Pringles and Rice Krispies Treats, will bring in as much as $13.6 billion.
WK Kellogg shares dropped 7.1% Tuesday at 12:03 am in New York. The stock has declined in every session since its first day of trading last week.
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Cereal is a big deal in the US, with sales last year of $9.5 billion, according to Circana data. But volumes sold have been declining as shoppers cut back amid persistent inflation and eating patterns normalize as the pandemic impact fades. In 2022, volumes dropped 3.6% from the year prior, the data show. They were also well below 2020 levels when pandemic measures limited consumer mobility.
Expanding the cereal category to other parts of the day won’t be easy, said Bloomberg Intelligence analyst Wendy Soong. Americans are flocking to low-carb diets and other food trends. And traditional cereal doesn’t have as much protein as dinner staples such as meat and beans.
“I don’t know how much people want to have cereal for dinner,” Soong said. “I don’t know how well it will play into regular people’s daily lives. It might be a hard sell.”
Pilnick highlighted Special K high-protein cereal as a bright spot in the company’s portfolio. He sees more innovation in health and wellness foods, but said he’s also not moving away from decades-old brands and characters such as Tony the Tiger and Toucan Sam, the cartoon mascot for Froot Loops.
Battle Creek, Michigan-based WK Kellogg says it’s also open to growth through acquisitions as it focuses on modernizing its supply chain and expanding profit margin over the next two to three years.
“We believe we have an opportunity beyond cereal,” Pilnick said.
–With assistance from Deena Shanker.
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