Changing tastes put crunch on Kellogg

Kellogg's flagship Special K cereal is falling out of favour with dieters. Photo / AP
Kellogg's flagship Special K cereal is falling out of favour with dieters. Photo / AP

Kellogg's cereal sales are struggling, in part because Special K is falling out of fashion with dieters.

The company, based in Michigan, said its profit fell 16 per cent in the second quarter as its flagship cereal unit continued to suffer.

Cereal sales in the US have been sluggish for some time now, given the ever-expanding number of breakfast options including Greek yoghurt, egg sandwiches and even waffle tacos from fast-food chains.

But Kellogg is also dealing with problems specific to some of its most popular brands.

The movement away from calorie counting in the dieting world, for instance, has hurt Special K, which includes snack bars, crackers and frozen waffles. The main selling point for those products has traditionally been their relatively low calories.

Kellogg chief executive John Bryant noted that people are now more interested in foods that provide nutritional benefits, rather than those that simply keep their calorie counts down.

It's why Kellogg has been getting rid of some of its 100-calorie products.

"There's a shift in consumer expectations," Bryant said.

To cater to those changing tastes, Special K has already been rolling out new products, including an instant hot cereal that includes grains such as quinoa. But the efforts haven't yielded a significant impact, with the company reporting a 4.9 per cent decline in core sales for its US Morning Foods unit in the latest quarter.

Bryant said Kellogg planned to introduce new Special K products toward the end of the year to address changing nutrition trends, but declined to provide any details.

"I don't want to give my friends in Minneapolis any more help than they need," he said. General Mills is based in Minneapolis and makes cereals including Cheerios and Lucky Charms.

Given its weak results, Kellogg lowered its outlook for the year, saying it now expects core sales for the year to decline slightly. The maker of Frosted Flakes, Pop Tarts and Pringles had previously said it expected the figure to rise by 1 per cent.

For the quarter ended June 28, the company said net income fell to US$295 million ($347 million), or US82c per share. Adjusted for one-time costs, it earned US$1.02 per share, in line with Wall Street expectations.

Total revenue declined to US$3.69 billion and missed analyst expectations for US$3.71 billion, according to Zacks.

- AP

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