Kellogg’s

Kellogg’s CEO told CNBC it was hiking prices: “our goal is to cover all of those input costs with pricing and productivity, and we think we’re in very good shape to do that.” “Kellogg may raise prices and increase productivity to offset the skyrocketing inflation it’s seeing for input costs, CEO Steve Cahillane told CNBC on Thursday. ‘As we enter 2022, we are still seeing double-digit cost inflation,’ Cahillane said on “Squawk on the Street” ‘We’re going to see the wraparound benefits of the pricing that we took in 2021 into 2022 … but our goal is to cover all of those input costs with pricing and productivity, and we think we’re in very good shape to do that.’”(CNBC, 2/10/2022)

Kellogg’s CEO: “We don’t want prices to get too high, but we’re in an environment where it’s broad-based, it’s across everything, but we’ve been able to cover it. Our pricing performance has been very solid.” “Implementing price hikes last year helped boost the company’s profits and combat the inflationary pressures it was experiencing. Cahillane said customers have been willing to pay up even with higher price tags, but Kellogg still plans to be cautious about marking up prices this year. ‘We don’t want prices to get too high, but we’re in an environment where it’s broad-based, it’s across everything, but we’ve been able to cover it. Our pricing performance has been very solid,’ he said.” (CNBC, 2/10/2022)

Kellogg impressed Wall Street by announcing it had raised profit expectations thanks to increased prices. “Kellogg, however, expects adjusted full-year profit per share to grow by 1% to 2% on a currency-neutral basis thanks to increased prices for its breakfast cereals and snacks such as Pop-Tarts and Pringles. Analysts on average expected a 0.1% rise, according to Refintiv IBES data. The company said its forecast accounted for further inflationary pressures and the impact of the workers’ strike. Shares of the Michigan-based company rose about 3.5% in morning trading.” (Reuters, 2/10/2022

Kellogg’s CFO bragged about sales growth thanks to “strong price realization around the world.” “Amit Banati – CFO: These factors, along with lapping the year ago quarter’s extra week, reduced year-on-year declines in currency-neutral adjusted basis, operating profit and earnings per share. Meanwhile, though organic basis net sales growth remained very strong led by sustained momentum in key businesses and brands, along with strong price realization around the world. So aside from transitory supply-related factors, the business remained in good shape through quarter four.” (Kellogg Company Earnings Call, 2/20/2022)

Kellogg’s CFO said the company benefited from “revenue growth management actions we took all year as we endeavour to cover rising cost inflation.”“Amit Banati – CFO: Price/mix growth for the year was more than 5%. This reflects the revenue growth management actions we took all year as we endeavour to cover rising cost inflation. This price/mix growth accelerated to nearly 9% in quarter four, giving you an idea of just how much our cost inflation has accelerated and just how well, we are executing revenue growth management.” (Kellogg Company Earnings Call, 2/20/2022) 

Kellogg’s CFO said it covered inflation thanks to “very effective revenue growth management actions that enabled us to realize price early and sufficiently.” “Amit Banati – CFO: Allow me to wrap up with a brief summary on Slide number 41. What you have seen from us this year should give you confidence of what we can do going forward. Firstly, we executed well through what were extraordinarily challenging business conditions, overcoming obstacles to deliver on full year guidance that we had already raised earlier this year. We faced a rapid acceleration in market-driven input cost inflation, and you saw us substantially cover it with productivity and with very effective revenue growth management actions that enabled us to realize price early and sufficiently.” (Kellogg Company Earnings Call, 2/20/2022)

Kellogg’s said it would continue to manage inflation and cover their margin with “ revenue growth management initiatives.”“Amit Banati – CFO: Yes. So I think in terms of inflation, I’ll start there, it’s continued to accelerate, and we’ve seen that through ’21. So we are expecting double-digit inflation in 2022, and bulk of it is market-driven. So I think that’s our planning stance. We’re seeing inflation in ingredients and packaging, oil, corn, wheat, and on the packaging side, cans, carton. So we’re seeing broad-based inflation across our ingredients We’re about 70% hedged on our exchange-traded commodities. So where we can hedge, we are at around a 70% hedged. So that’s kind of typical of where we are at this time of the year. We will look to cover the gross margin impact of all the market-related pricing – inflation through our productivity initiatives, through our revenue growth management initiatives.” (Kellogg Company Earnings Call, 2/20/2022)

Kellogg said it had taken “significant pricing, double-digit pricing” in some markets, but “elasticity has been better than expected.” “Amit Banati – CFO: Yes. I think, Alexia, the driver for that is really — I mean we’re seeing commodity inflation. We’re seeing currency inflation. So I think a lot of that is driven by pricing. And if you look at markets, Multipro is a good example, where we’ve — we’re taking significant pricing, double-digit pricing, multiple rounds of that to cover the currency and the commodity. I’d say elasticity has been better than expected. So the elasticity has held up, and volumes have held up. What you’re seeing in some of the volume declines is also the impact of supply constraints.” (Kellogg Company Earnings Call, 2/20/2022)

Kellogg’s CEO stressed: “what we’ve seen so far is much better than historical elasticity performance. So much more inelastic.” “Steve Cahillane – CEO: Yes, Michael. So what we’ve seen so far is much better than historical elasticity performance. So much more inelastic. We don’t forecast for that to continue. Obviously, inflation continues to rage on. We are very pleased with the price/mix that we’ve seen, but we are forecasting a more return-to-normal elasticities as the year progresses. I don’t know, Amit, if you want to…”(Kellogg Company Earnings Call, 2/20/2022)

Kellog’s predicted “most of our — if not all of our net sales growth for 2022 would be driven by price/mix.” “Amit Banati – CFO: Yes. I think most of our — if not all of our net sales growth for 2022 would be driven by price/mix. So I think, as I mentioned, right, we’re seeing double-digit inflation into 2022. And so I think we’re working through plans, both productivity as well as revenue growth management, to counter that and to hold margins. So, you will see most of the sales being driven by price/mix. And RGM activity will continue to be a focus into 2022.” (Kellogg Company Earnings Call, 2/20/2022)