Dive Brief:
- Post Holdings saw sales and profits slip in its second quarter, attributing the decline to pricing pressure in its Michael Foods Group segment, according to a company release. The segment's sales dropped 7.7% to $515 million after reduced pricing connected to the 2015 avian flu outbreak sparked a double-digit decline in egg sales.
- The CPG giant's total revenue fell 1.2% to $1.26 billion, or $0.55 EPS for the quarter. Operating profit came in at $137.5 million, a decline of 15.4% from the year-ago period.
- Post's RTE cereal business sales also saw a 2% decline as Honey Bunches of Oats, Great Grains and other brands struggled. Other segments saw a sales increase, like Active Nutrition (23.3%), boosted by strong brand growth from Premier Protein, and Private Brands (1.9%).
Dive Insight:
Given the tumultuous state of the cereal category, it's not surprising that Post's ready-to-eat cereal business saw declines. Still, the company maintains its confidence in the category, and has introduced product and packaging innovation to try and lure consumers back to the cereal aisle.
Cinnamon-flavored Pebbles and new Malt-O-Meal varieties have driven small sales increases for both brands, and have expanded Malt-O-Meal's presence — a goal for Post since it acquired the company in 2015. The company has also added built-in measuring pouches to some of its cereal product packaging to try and attract millennial consumers, who are abandoning the segment for morning foods like Greek yogurt and protein shakes.
The company's most notable investment in cereal, however, is its acquisition of Weetabix, a U.K.-based CPG company centered on RTE cereal products. The deal is expected to close later this year for about $1.8 billion. It remains to be seen how Weetabix will impact Post's brand portfolio, or if Post will continue to look for M&A opportunities in this space. Weetabix recently rolled out Weetabix On the Go breakfast drinks aimed at consumers looking for convenient morning foods, a product that could potentially capture millennial interest.
It will also be interesting to see how long 2015's bird flu outbreak will continue to haunt Post. The aftershocks of the epidemic dragged Michael Foods Group's egg sales last quarter as well, despite an increase in the amount of eggs sold.