Okay, well investors are snacking on Kellogg company's
quarterly earnings today.
The cereal and snack manufacturer reporting beats on
the top of the bottom lines and raising.
It's for your guidance.
And this has led to a snap crackle pop on the stock,
reaching a new 52 week high in today's session
stock, currently hired by 4%
and joining me now is Kellogg company chair and Ceo
steve cahill in steve. Thank you so much for taking the time.
Congratulations on a very strong quarter. And
and what is otherwise a horrible day for the stock market.
Your shares clearly holding up what is working for the company.
Well, Kristen thanks for having me.
And yeah,
obviously a tumultuous day in the market today and I was
very happy to represent the results of our people this morning.
And what we did in the quarter was we delivered a
solid top line performance and that was across our geography.
He's, you know, in the US we did particularly well
despite the shortages in cereal coming off
the strike from last quarter internationally,
our europe business had a very,
very strong quarter are latin America business in our media business,
all performing very strongly inside of that.
Our snacks portfolio in every geography,
also doing quite well and earning price in the marketplace.
That's allowed us to cover some extraordinary inflationary pressures and
put all that together and we did what we said we
were going to do and actually somewhat better than that.
So we're ahead of pace for the first quarter
in what is an otherwise challenging set of circumstances
certainly is challenging out there. We see prices rising
across the board,
steve what kind of price hikes should consumers anticipate this year
when it comes to your different segments from snaps to cereal?
Well, you can see in our results,
obviously just about all of our top line
performance was driven by price and unfortunately that's
been necessary because despite the best productivity plans
that you have and best productivity execution,
you're not going to cover the type of input costs that we're seeing.
And we're seeing double digit, you know, low double digit teens,
input inflation. And we don't see that changing for the back half of the year.
And we really don't see it abating in 2023.
So I think consumers can see unfortunately more of the same, Excuse me,
more of the same that they've seen so far in the last 6 to 12 months,
we continue to see the humanitarian crisis play out in eastern europe,
with Russia's ongoing invasion there now stretching
more than two months and Vladimir Putin showing no signs
of backing down,
steve how much of your input ingredients come from eastern europe in that region
and based on the fact that the invasion is still happening.
How confident can you be in this guidance
knowing that prices could continue to stay elevated?
Yes. So it's obviously it's just a tragedy.
What's happening in Ukraine humanitarian crisis and, you know,
we hope for the best there in terms of a resolution, but as you say,
it will certainly affect things for the foreseeable future.
The spring crop will not be harvested, there won't really be planting. We know that.
And so the Ukrainian wheat um output and oil output, edible oils,
sunflower seed oils won't get planted Russia because of sanctions,
obviously for most of the most of the developed world,
that that wheat crop is off the market as well.
And so we've had to pivot to the rest of the world, quite frankly,
from Argentina to the United States to
um all four corners of the globe to meet our needs.
And the team has done a terrific job, very agile job at procuring that supply.
It's obviously at a higher price though,
and it will remain elevated so long as the pressure
on demand stays where it is because as I said,
we don't see that crop,
those countries coming back online. Unfortunately
anytime in the foreseeable future,
well, the serial business certainly does still remain impacted adversely steve by
the strike at your cereal plants across the country here in the last quarter
of last year, what do you expect those negative headwinds to subside?
And the cereal business to return to growth?
So in the first quarter of the year,
we always knew that our cereal business
would be down fairly substantially because we just
didn't have the inventory to cover the demand that would otherwise be out there.
We are however ahead of pace in rebuilding that inventory are for
us.
Cereal plants are running extremely well,
workers are back doing a terrific job and so we're ahead of pace in the
second quarter will continue to build inventory and
we'll be laying on more commercial programs,
getting back to a more normal level of activity.
But it's not really until the second half that
will have the inventory and the production that we would
would require to really meet the demand that's out there.
And we would hope to exit the year
in a very strong position with a lot of momentum.
So it's really going to be a tale of the first half and the second half.
But each day gets better and we're looking at instead of year over year
performance really what's our sequential week over
week performance and it gets better.
We're building distribution
in increasing distribution each week sequentially and our
share is improving each week sequentially as well.
And we would anticipate that continuing as we continue to rebuild supply.
So noting that prices will be rising for consumers
certainly as your own input costs rise as well,
Steve what should consumers budget for price increases
of 5-10% in the coming year higher than
that lower than that what's an estimated range.
I think it depends on the categories and it depends on, you know,
the input costs that, you know, continue to rise.
But I think you're looking at from a consumer standpoint in the high single digits,
broadly speaking, and like I said, we don't see an abatement of that,
we're going to do everything we possibly can to minimize
um price increases going forward through productivity as best we possibly can.
But the environment out there is very challenging for all consumer goods makers,
just because the input cost inflation is higher
than we've seen in more than 40 years.
So when it comes to long term changes to the supply chain for your company,
knowing that eastern europe has historically,
I have been a key place to get those ingredients
long term.
Are you thinking about moving some of that supply chain
on a longer term basis here to the US?
I think what we've learned,
kristen is just the importance of agility and redundancy of supply.
So, you know, most of our food,
virtually all of our food is made
locally sourced with local ingredients and there's,
you know, some exceptions to that, the wheat crop in Ukraine being example,
that goes to africa mainly,
but for the most part,
everything that we make here in the United States comes from farmers in the US,
Likewise,
all the individual countries and so the supply chain that we
have built will just have to be more agile in terms of
if there's a failure anywhere in the system that we have
backup plans where we can import or export as needed for,
you know, whatever potential crisis looms in the future.
And one thing we've learned over the course of the last
two plus years is to expect the unexpected and agility,
particularly in supply chain, is of paramount importance.
Certainly, we all need agility these days to get by that Stella,
company chair and Ceo steve Killing
steve, thanks again and congratulations on the quarter.