- Kellogg was a step ahead of the game when it acquired Kashi Co., a fast-growing pioneer in better-for-you foods, in 2000. By 2008, Kashi was reporting 24 times the sales at its acquisition, growing sales about 42% annually on a compound basis to about $600 million during those first eight years.
- However, Kellogg took some missteps with Kashi, including taking over various operations, which once worked mostly autonomously, and fervently supporting the use of GMO ingredients while calling the cereal "natural."
- "U.S. retail sales of Nature’s Path’s ready-to-eat cereal jumped 43% between 2010 and 2014, compared with a decline of 35% for Kashi," reports The Wall Street Journal citing market-research firm IRI.
The better-for-you foods market is growing — Nielsen data shows that packaged foods labeled "natural" increased by 11.7% in 2014, while sales of packaged foods that are certified organic, some of which also bear a "natural" label, jumped 14.7%. At the same time, packaged food sales as a whole saw only a 1.4% uptick.
As a ready-to-eat cereal producer, Kashi is poised to achieve important growth for Kellogg, whose sales come largely from that category. Kellogg's U.S. morning foods segment saw a 2.3% currency-neutral comparable net sales decline in its latest quarter, so growth from Kashi's cereals could help offset some of the lagging sales generated by Kellogg's legacy brands.
Kellogg reported its lowest net profit in over a decade in 2014 as well as a 24% decline in earnings last month. Achieving growth in the natural foods sector might be more important than ever for Kellogg, and Kashi is a foothold in that market that Kellogg can use to reposition itself within the better-for-you trend.