After a strong first quarter, the Kellogg Company has raised its guidance for the full year, expecting sales growth to be flat, having previously forecast a small decline.
Matching last year’s sales
Following a record year in 2020, it is impressive that the company is expecting to match last year’s sales, which included the pandemic driven surge in demand. While it continues to benefit from elevated at-home demand, there are several additional factors supporting its optimism for 2021:
- Many of the pandemic behaviours will remain in place, even as the crisis eases and mobility improves. This includes working from home practices, which even if they do return to pre-pandemic levels, will do so on a gradual basis. This benefits its snacking and breakfast items
- Improving sales trends in the away-from-home segment, after a challenging 2020
- Increased and more effective brand marketing investments to help it retain the millions of new households it attracted last year
- Additional supply chain capacity which will help it to drive new commercial activities and fully meet demand
- High growth opportunities in emerging markets through population growth and an expanding middle class
- Expectation of higher inflation and the ability to push through list price increases with its retail customers
- Strong pipeline of innovative new products, building on the work it has already taken to develop the portfolio, including its leading plant-based offer, convenient meals, snacks and focus on occasions
- Continued development of its digital and ecommerce capabilities (channel is around 7% of total sales)
Source: IGD Research
As with most suppliers, Kellogg is experiencing input cost inflation. It is aiming to manage this through a range of levers, including driving productivity gains and revenue growth management initiatives. This includes trade optimisation, price pack architecture and list pricing. To support this, the business is focusing hard on driving innovation and investing in its brands to enable it to earn the pricing it gets in the market.
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