Kellogg sets its sights on Africa, reports positive Q1 growth
The US cereal giant announced it was investing $420m in a stake in Tolaram Africa Foods (TAF) - a packaged foods manufacturer in Nigeria and Ghana - and was increasing its stake in Multipro - one of the largest distributors in the region.
“Expansion in emerging markets is an important element in our growth strategy and Africa offers incredible growth opportunities,” said Steve Cahillane, Kellogg’s chairman and CEO.
Kellogg first established a partnership with TAF and acquired a 50% stake in Multipro in 2015. It also formed a joint venture with TAF – Kellogg Tolaram Nigeria Limited (KTNL) – to manufacture and market its cereal and snacks in West Africa and Kellogg noodles across the entire continent.
"In just two years, we have seen rapid expansion in this venture. These are the right companies to build on, giving us a strong foothold in Nigeria, a market of 200 million consumers and the opportunity to expand into surrounding markets in West Africa and, ultimately, across Africa overall," said Amit Banati, president, Asia Pacific, Kellogg Company, during the earnings call.
The company recently built a cereal plant in Nigeria and launched Kellogg's cereals in the first quarter, which it reported were "off to a strong start".
Pringles and frozen foods drive sales
Moving across the Atlantic to North America, the company's largest business unit - US Snacks - also reported good progress, now realizing the financial benefits of transitioning from its direct store distribution model and showing the company's "best performance in several quarters," said Cahillane.
The company posted a 4.7% increase in revenue to $3.4bn overall in the first quarter ending March 31, 2018, compared to $3.25bn the year prior, driven by Pringles chips and Eggo frozen waffles.
"In Q1, Pringles boosted its consumption and share via our successful Flavor Stacking campaign, involving both media and in-store activation and via big promotional events with Cheez-It," said Cahillane.
Its North American Other unit, which operates brands such as Kashi Organic and the recently acquired RXBar, reported a 21% jump in sales, while frozen foods saw a 10% increase, thanks to increased popularity among younger generations and the removal of artificial colors from its waffles.
“The millennial generation really thinks about frozen differently than other generations. “It’s kind of the new fresh and the new convenient," said Cahillane.
However, Kellogg’s Q1 growth was offset by its morning foods business (-2%) due to the soft US cereal consumption, although the company reported progress in stabilizing its key health and wellness brands, including Special K.
Kellogg forecast its full-year 2018 net sales to grow around 3% to 4% on a currency-neutral basis.