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Sweetened Cereal Sales Aid Kellogg's 2Q, but Sustainability Far From a Slam Dunk; Shares Attractive

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Kellogg has gone to great lengths the last several years to diversify its mix beyond its legacy cereal lineup (now less than 40% of its consolidated base), in favor of on-trend snacking fare (including Pringles, Cheez-Its, and RXBAR to name a few, about half of its sales). However, amid the current pandemic, which has seen consumers staying closer to home (especially during the breakfast daypart as work-from-home mandates persist), cereal has been an outsize beneficiary. This was particularly evident on its home turf, which boasted a nearly 26% increase in sales this quarter (including a nearly 16% bump in consumption, as Kellogg and its retail partners each sought to boost inventory levels that had been depleted since the onslaught of COVID-19), head and shoulders above the 6% organic sales growth in its North American snacks portfolio.

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Company Profile

Business Description

Founded in 1906, Kellogg is a leading global manufacturer and marketer of cereal, cookies, crackers, and other packaged foods. Its offerings are manufactured in 21 countries and marketed in more than 180 countries. Its product mix includes well-known brands such as Special K, Frosted Flakes, Froot Loops, Rice Krispies, Pop-Tarts, Eggo, Kashi, and Morningstar Farms. The firm added the Pringles brand to its mix in 2012. Sales outside its home turf account for around 40% of Kellogg's consolidated sales base.

One Kellogg Square
Battle Creek, MI, 49016-3599
T +1 269 961-2000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 31,000