Dive Brief:
- Kellogg's fourth quarter net sales fell 10.6% year over year to $3.1 billion, which missed Wall Street estimates, while full-year 2015 net sales dropped 7.2% to $13.5 billion. However, currency-neutral comparable net sales rose 4.2% for the quarter and 1.2% for the year, signaling the currency headwinds the food and beverage industry as a whole continues to battle.
- The company reported a net loss of $41 million for the quarter (impacted by asset returns on pension plans), but that was still an 86% improvement over last year's Q4 net loss of $293 million. Net income for the year fell 2.9% to $614 million.
- U.S. morning foods reported an uptick in quarterly comparable net sales of 1.5%, while U.S. snacks fell 1.9%. Both segments were down 1.6% for the year.
Dive Insight:
The increase in Kellogg's U.S. morning foods segment supports CEO John Bryant's assertion that trends in the struggling cereal business were ripe for a turnaround. Last quarter, the morning foods segment saw a 2.6% drop in sales, which followed a 2.3% decline the quarter prior and contributed to an overall sales dip for the year. After three consecutive quarters of soggy sales, is Kellogg's breakfast business is ready for the resurgence the CEO has been talking about?
Kellogg has dedicated R&D and marketing innovation to bring this resurgence full-circle, from introducing cereal products with healthier ingredients or a convenience factor to expanding the occasions for eating cereal beyond breakfast.
Snacks have not yet seen such a turnaround, having now reported its fourth straight quarter of sales declines. The key issue here is increased competition as the market has become saturated from all directions. Smaller companies and startups are introducing snack innovations in disruptive categories, while other major manufacturers are developing snack products or retooling existing brands to be more snack and convenience-friendly.