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May 6, 2013

Kellogg's PR Challenge: Company Brainstorming Taps Fresh Marketing Ideas For Getting Adults To Eat—And Buy—More Cereal

Thanks to Pop-Tarts and Pringles, breakfast and snack giant Kellogg is holding its own, but its trademark cereal lines aren't helping—except for those targeting kids. But now, the company has a plan to get adults to eat more cereal: Pile on the nutrients. Kellogg said this week that it's introducing Raisin Bran with omega-3 and a multigrain version of Special K later this month as it works to boost struggling cereal sales in North America. Kellogg is also trying to redefine its cereal category—this year, the company is rolling out a "Breakfast To Go" dairy drink intended to be sold almost as a liquid cereal.

Such offerings are intended to appeal specifically to higher-income people and baby boomers, CEO John Bryant said in a conference call with analysts, an AP news release reports.

Overall cereal sales have lagged in the U.S. for years as Americans increasingly reach for foods that are easier to eat on the go. But Bryant noted that the category is very fragmented and that particular groups are dragging down results, reports the news release by AP writer Candice Choi.

For example, Bryant said that kids and lower-income adults are still spooning up plenty of cereal. It's the higher-income adults who are cutting back. "I don't think they're really that price sensitive. The real issue there is innovation," Bryant said, noting that products need to more nutrition oriented.

Notably, Bryant said Special K has helped cereal sales among adults. The brand has been a strong performer with Kellogg rolling out a variety of product extensions, including bars, shakes, crackers, chips and flatbread breakfast sandwiches.

Competitor General Mills, which also makes cereals including Cheerios and Lucky Charms, is introducing a similar product to Kellogg's soon-to-be-launched "Breakfast To Go" dairy drink called "BFast" that promises the nutrition of a bowl of cereal and milk.

To diversify its stable of brands, Kellogg last year bought Pringles chips, which gets two-thirds of its revenue from overseas. The deal was intended to give Kellogg a big presence in the salty snack food market and expand its international reach. For the first quarter, Kellogg said strong sales growth for Pop-Tarts helped lift internal sales growth for the U.S. Morning Foods division, which includes cereal, by 1.6 percent.

The U.S. Snacks division, which includes Keebler cookies and Cheez-It crackers, saw internal sales decline by 1.7 percent. Kellogg said it has new products planned for the latter part of the year. The company noted that its results were hurt by higher costs for ingredients. Those higher costs for the year fell mostly in the first quarter, Kellogg said, and should ease in the second half of the year.

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