Kellogg seeks innovation via startups

Without sounding like a broken record, the key to the resurgence of cereal is innovation. We have also seen that much of that innovation is coming from small companies, eager to try new things, but often without the adequate resources to do so. The large companies are often too entrenched in their ways and culture to really effect creative change.

Silicon Valley has long been the hotbed for tech innovation, fueled by venture capitalists investing in the wild (and sometimes crazy) ideas of entrepreneurs. The cereal industry, desperately needing an injection of life, is now trying the same thing. Last fall we indicated that General Mills launched 301 INC to do just that. Not to be outdone, Kellogg is the latest to join the trend.

Kellogg recently announced the formation of eighteen94 capital (1894) to "to make minority investments in companies pursuing next-generation innovation, bolstering access to cutting-edge ideas and trends. The investment mandate includes start-up businesses pioneering new ingredients, foods, packaging, and enabling technology." Approximately $100 million will be invested.

To be fair, 1894 is not just about cereal, but food innovation more broadly. But, hopefully some of this rub off on a cereal industry needing some fresh ideas

Startups and Innovation

A few weeks ago General Mills announced the formation of a new business development and venturing unit called 301 INC, designed to help entrepreneurs obtain the capital and resources they need to expand their businesses. 

This is a significant move, as it is a recognition from a large food corporation like General Mills that some of the best innovation comes from creative startups. As I've said here many times before, innovation is absolutely essential for the future of the cereal industry, and with this initiative we are seeing lessons being learned from other industries like high-tech where venture capital investing is all the rage.

Over the years we have watched a number of exciting cereal concepts emerge, but few have survived. Sure some reached a point of success that enabled them to be bought out by bigger companies, but many have perished due to lacking the finances needed to get their ideas off the ground.

Hopefully this will foster some exciting new cereal ideas for the breakfast table.

Cracks in the cereal bowl

Just a few weeks ago there were some reports, at least from General Mills, that these were good times for cereal. But, new reports this week suggest that the picture is far from bright.

Kellogg's announced that sales are down 4% and cuts its earnings outlook. A UBS Securities analyst suggests that overall cereal is a sluggish performer right now, possibly due to fewer innovations, the effects of the current economic conditions, and even Kellogg's recall this year.

Also announced this week are upcoming price increases from General Mills and Kraft, largely due to higher grain prices. These increases are likely to further impact cereal sales as consumers look to alternatives.

All these developments suggest that we could be in for some dramatic changes in the cereal aisle in the next year. The question is, will the big cereal companies continue to lose ground as consumers shift their allegiances and preferences to more focused brands that offer perceive value?

I'll be watching.

Technorati Tags: cereal, General+Mills, Kraft, Kellogg, breakfastbowl

The price of a recall

Not to dwell on the topic, but the recent Kellogg's recall has hit the company's bottom line. Second quarter financial results reveal a 15 percent drop in profits. Their stock price dropped over 4% as a result of the news.

Kellogg is certainly to recover eventually from this costs associated with this recall. The bigger question is how long it will take to restore consumer confidence, especially since they were less than forthright in fully explaining the causes behind the recall.

Source: AP

Technorati Tags: cereal, Kellogg, recalls, breakfastbowl

Limited outlook for Kellogg

Commenting on the financial performance of cereal companies is not always a useful endeavor, but in light of the current economy and the shifting cereal marketplace it seems to be more relevant right now. Recently I reported on successes at General Mills. But, the future may not be as bright for Kellogg. An analyst with BMO Capital Markets has downgraded Kellogg's stock, foreseeing limited growth from core brands, fewer new products, limited growth with Wal-Mart, and increased competition from Post. Of course, these are mere projections, but they are indicators of some of the challenges cereal companies are facing right now.

Source: BusinessWeek

Technorati Tags: cereal, Kellogg, breakfastbowl

Cereal gains in a recession

General Mills announced today third quarter financial results which included increased sales and profits. Of particular interest is the growth of their cereal division:

"Net sales for Big G cereals grew 6 percent in the quarter, led by strong introductory sales of new Chocolate Cheerios and Wheaties Fuel, and gains by several established brands such as Multigrain Cheerios and Lucky Charms."

Obviously something is working for General Mills and confirms that cereal seems to do well in a recession, a point we noted several months back.

(Source: General Mills)

Technorati Tags: cereal, General+Mills, recession, breakfastbowl

Kellogg financial results

I don't normally focus too much here on the financial ups and downs of the major cereal corporations, but Kellogg's latest financial results are worth noting.

Kellogg announced better-than-expected results, maintaining its number one position among cereal makers. Both sales and profits are up.

That's good news for a company and industry that is highly competitive, and there are signs beginning to appear (see my post last week) that we are beginning to turn away from traditional cereal consumption.

Even Kellogg's latest results are telling. While company sales overall rose 8%, U.S. cereal sales increased only 2%. That's still growth, mainly because Kellogg has worked hard at innovation, but the company is seeing its most significant success in other sectors of its business.

We'll keep an eye on these trends.

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Technorati Tags: cereal, Kellogg, finance, breakfastbowl, BreakfastBowl, The Breakfast Bowl