Quarterly earnings

Kellogg's Q2 sales weakened by soft US consumption and declining EU Pringles sales

By Douglas Yu contact

- Last updated on GMT

Declining Pringles sales in the EU impacted the overall bottom line for Kellogg's Q2 financial results. Pic: ©iStock/eskaylim
Declining Pringles sales in the EU impacted the overall bottom line for Kellogg's Q2 financial results. Pic: ©iStock/eskaylim
Kellogg’s Q2 2017 net sales have declined 2.5% year-over-year to $3.19bn, while its operating profit increased by 0.7% during the period, reported the company.

This marks the 10th​ straight quarter of revenue decline for Kellogg's.

However, Kellogg's chairman and CEo John Bryant believes the "results keep us on track to deliver on our full-year financial targets, with sequential improvement in net sales performance and continued profit-margin expansion.

“More importantly, we continued to make progress toward the transformation of our company​. For instance, during the quarter, we made strong progress on our transition out of direct store delivery (DSD) in US snacks,” ​he added.

Soft US consumption

The company’s declining sales were mainly caused by a shift in consumer preference to healthier foods in most parts of North America, Zacks Investment Research said.

Kellogg’s North America net sales declined by 2.6% during Q2 year-over-year to $2.15bn.

Kellogg Q2
Source: Kellogg

The US snack segment, in particular, posted flat sales of $803m.

Despite the regional sales decline, Kellogg’s US specialty segment posted a growth of 1.8% with sales of $276m.

“Across our business, we also continue to see exciting growth in emerging channels, notably e-commerce,” ​said Bryant.

Kashi gaining share in cereal

Kellogg’s 'North America Other' division - comprised of US frozen food, the Kashi brand and Canadian businesses - posted a 3.6% sales decrease during the period.

Frozen foods sales increased and Canada’s sales were flat, but Kashi's sales declined “owing to exited non-core businesses and previously lost distribution in snack bars​.

“However, renovated and new products are gradually moderating the rate of decline, with Kashi gaining share in cereal while markedly decelerating its share declines in snack bars,”​ the company added.

Euromonitor data showed Kellogg's and Kashi accounted for 22.4% and 2.3% respectively of the overall US breakfast cereal market.

Pringles sales decline

Declining Pringles sales in EU - caused by the loss of promotional activities - also pulled down Kellogg’s Q2 revenues.

Bryant said Kellogg's remains committed to returning to top-line growth, as outlined in the company’s 2020 growth plan.

The company also continues to forecast a net sales decline of about 3% for full-year 2017, with DSD transition to have a one-percentage point negative impact.

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