Kellogg raises sales forecast after hiking price of cereals

Kellogg stated it was rising the tempo of worth hikes it pushes to shoppers as prices soar.
REUTERS

Kellogg raised its 2022 forecast on Thursday, banking on extra worth will increase to assist counter the impression of provide shortages stemming from a employees’ strike on the firm’s US vegetation final 12 months and the struggle in Ukraine.

Shares of the Michigan-based firm rose 4%, after it additionally beat first-quarter revenue estimates.

Prices from freight and elements reminiscent of wheat, corn and edible oils have surged within the final 12 months because of pandemic-induced disruptions to the worldwide provide chain, forcing the packaged meals trade to lift product costs to cushion the hit to their revenue margins.

Kellogg, which additionally makes Pringles and Eggo waffles, stated it was rising the tempo of worth hikes it pushes to shoppers as prices soar, and was anticipating demand for some cereals to sluggish as surging world inflation bites into spending energy.

The corporate’s cereal gross sales in North America fell by 10.3% within the first quarter because of a close to three-month lengthy strike that began in October at its vegetation that make Froot Loops, Corn Flakes and different cereal manufacturers.

Kellogg, which additionally makes Pop Tarts, raised its 2022 natural gross sales development forecast to 4% from 3%.

REUTERS

Kellogg warned that cereal shortages stemming from the strike may final for a minimum of the primary half of the 12 months.

Russia’s invasion of Ukraine can be anticipated to harm provides within the second half of the 12 months, Kellogg stated, as that a part of Europe is a significant supply of elements for packaged meals corporations.

Nonetheless, analysts stated Kellogg elevating its 2022 natural gross sales development forecast to 4% from 3% regardless of these setbacks was a reduction to traders.

“There’s been a whole lot of concern from traders about Kellogg’s capability to take care of revenue steering, particularly given the corporate’s attainable publicity to wheat from Jap Europe,” JP Morgan analyst Ken Goldman stated.

“Right this moment’s outcomes may lay many of those fears to relaxation, a minimum of for now.”