Kellogg Snapshot: Consumers are strong in US and emerging markets, despite pressure on discretionary items; company is optimistic about Morningstar Farms, as drivers around health, wellness, environmental concerns, moving away from animal proteins remain

Sample article from our Consumer Wellness

February 16, 2023 () –

Overall Performance:

Kellogg had an “excellent year” competitively and financially, despite “extraordinary circumstances,” including a fire and strike in North America, as well as soaring inflation. 

  • Sales were ahead of expectations and growth accelerated sequentially every quarter  

  • Company saw broad based growth in all four regions (North America, Europe, Latin America and EMEA) and all four major category groups (snacks, cereal, frozen and noodles & other)

  • Company experienced economy-wide supply bottlenecks and shortages and worked to restore capacity, most notably in North America Cereal and Frozen Foods 

  • Snacks portfolio saw double-digit net sales growth across all regions, underpinned by strong end market performance

    • Snacks business is roughly half of the company  

    • Pringles, Cheez-It and Rice Krispies Treats brands remain "exceptional" 

    • Cheez-It is only now leaving the US and expanding overseas in Canada, Brazil, and other geographies 

North America:

  • Snacks is largest segment in the region, representing over half of sales

    • Results led by Pringles and Cheez-It, both of which generated double-digit consumption growth in 2022 

    • Pop-Tarts and Rice Krispies Treats also both sustained their multiyear momentum

  • Cereal entered the year depleted on finished goods inventories, but was able to replenish retailer shelves more quickly than anticipated

    • Ramped up commercial programs in H2

    • Business is "back on track" and poised to sustain growth in 2023 when company will have a full year of commercial activity

  • Frozen Foods ran into capacity and supply challenges in 2022 

    • Adding capacity allowed Eggo's consumption growth to accelerate amid strong demand over the last couple of years

    • Morningstar Farms experienced significant production issues at a co-manufacturer this year

      • After supply came back online in Q4, company "almost immediately" saw signs of market improvement

    • Kellogg previously sought spin-off for Morningstar Farms as valuation for peer companies became "stratospheric," but has decided to keep the company after valuations fell


  • Posted fifth straight year of growth in both organic net sales and operating profit

  • Cost inflation accelerated faster in this region than others as energy prices, other costs soared after the outbreak of war in Ukraine

  • Revenue growth management actions have yet to catch up to accelerated cost pressures, pulling down profit

    • Will likely remain a pressure on profits into H1 2023

  • Pop-Tarts and Rice Krispies Squares delivered rapid growth in the UK

  • Portable wholesome snacks have seen a surprising return to growth

  • In cereal, company is "particularly pleased" with accelerated growth and share gains for brands such as Rice Krispies in the UK, Tresor in France, and Special K in several markets

  • Company has an agreement to divest its Russia business, though the deal's timing, approvals and final details are still pending

    • Russia business represents a little more than 5% of Kellogg Europe's total sales

Latin America : 

  • Region posted strong and accelerating organic net sales growth all year attributed to brands, commercial execution and expansion of route-to-market capabilities, as well as its revenue growth management actions and its agility in managing through supply challenges 

  • Snacks business led organic net sales growth for the region with year-on-year growth of over 20% in both Q4 and full year

    • End market data shows sustained double-digit category growth for major salty snacks markets

  • Cereal business felt the impact of supply disruption coming out of North America's fire and strike, particularly in the Caribbean

    • Cereal net sales reaccelerated strongly with robust consumption growth, led by key brands including Frosted Flakes in Mexico and Brazil, Corn Flakes in Brazil and Puerto Rico, and Froot Loops in Colombia


  • Net sales grew organically in the high teens or better all year long

  • Company saw growth across all sub regions (Africa, Asia, Australia, New Zealand and the Middle East and North Africa) and all category groups

  • Company expects to see growth in cereal, led by markets in Asia

  • There is "plenty of runway" for Pringles to continue its strong growth 


Looking Forward:

Consumer balance sheet remains stronger than pre-pandemic, though continues to erode over time

  • Employment situation in the US is still very strong

  • Overall, the US consumer is "in a good place"

    • Consumers are also "very strong" and "surprisingly resilient" in virtually all of company's emerging markets

    • European consumers are likely under more pressure than anywhere else in the world

  • Company's categories remain "very strong," while discretionary and high-ticket items are still under pressure

  • Company predicts an "imminent shakeout" in the sector where Morningstar Farms plays, resulting in only a few players left standing

    • Company remains optimistic about Morningstar for 2023 and beyond 

      • Morningstar Farms still has "some of the highest household penetration, highest name recognition, fantastic foods, strong in the freezer space where this consumer is migrating back to, and profitable, unlike many of the peers," says CEO Steven Cahillane

      • Underlying consumer drivers around health and wellness, environmental concerns and moving away from animal proteins all still remain

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Chelsey Quick
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