Location as irony -- Battle Creek, Michigan-based Kellogg Company is in a constant battle for the #1 spot in the US cereal market with its main rival, General Mills. (General Mills' fiscal 2010 sales totaled about $14.8 billion, compared to Kellogg's second place $12.4 billion.) But Kellogg boasts many a familiar brand name, including Kellogg's Corn Flakes, Frosted Flakes, Corn Pops, and Rice Krispies. And while the company fills many a cereal bowl every morning, it puffs up its bottom line with snacks and cookies (Keebler, Cheez-It, and Famous Amos), along with convenience foods such as Eggo waffles and Nutri-Grain and Bear Naked cereal bars. Its products are sold in more than 180 countries worldwide.
The last two years haven't been Gr-r-reat! ones for Kellogg, which saw sales decline by about 2% in 2009, followed by a 1.4% drop in 2010. Kellogg's sales declined in North America, Europe, and Latin America, while sales in Asia/Pacific rose about 12%. The company blamed the year's weak performance on a lack of innovation (new and improved products), supply chain problems in its waffle business, a recall of select packages of its breakfast cereals, and price deflation for some of its products. Kellogg's snack food segment posted a modest 1% gain, driven by Pop-Tarts and better sales of more wholesome snacks.
To further enhance its global snacks business, Kellogg agreed to acquire Procter & Gamble's Pringles canned chip business in early 2012 for some $2.7 billion in cash. If completed, the deal would make Kellogg the second largest snack food company behind PepsiCo. Pringles boasts more than $1.5 billion in sales in 140 countries and manufacturing operations in Asia, Europe, and the US. It's a strategic fit as the global snacks market is showing growth in both developed and emerging regions.
Kellogg is also looking for continued growth from its vegetarian business, particularly its Morningstar Farms and Worthington Foods brands of meat alternatives. The veggie business has performed well as consumers look for healthier foods.
Kellogg's largest customer is Wal-Mart, which accounted for about a fifth of its consolidated net sales in 2010. (Wal-Mart also had a tepid year in the US in 2010, which probably didn't help the cereal maker's business.) Kellogg's top five customers, including Wal-Mart, accounted for 34% of its revenue. The company's dependence on just a few companies makes it vulnerable to the loss of or weakness at any one of these retailers. It's also vulnerable to competition from lower-priced private-label cereal brands, which consumers flocked to during the deep recession in the US.
Kellogg manufactures its products in 18 countries. Kellogg's international business focuses almost exclusively on the cereal and wholesome snacks.
The private charity the W. K. Kellogg Foundation owns about 23% of the company.