Tuesday, November 2, 2010
Kellogg Third-Quarter Profit Falls
Kellogg Co., the largest U.S. maker of breakfast cereal, said third-quarter profit dropped 6.4% as North American cereal sales continued to decline. Kellogg cut its 2010 earnings forecast last month for the second time this year because of slumping demand for cereal after a June recall and heightened competition. The CEO plans to introduce new products to help boost demand after they cut back on innovation during the recession. Kellogg will introduce new cereal products amid rising costs for commodities such as wheat, soybean oil, and sugar. The company said it expects costs to increase about 6% in 2011, which will be partially offset by cost-savings programs, and they will likely raise prices to counter the higher production costs.
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It should be interesting to see in the coming months what they decide to do because this could be an opportunity for a generic brand to gain some market share since this is an elastic good so demand will decrease and people may choose to seek out substitute goods.
ReplyDeleteI agree. I also think this is a sign of inflation to come. There have been numerous reports about increasing costs, including a 20% increase in the cost of turkeys. The fed continues to increase the money supply, saying that it will not negatively impact inflation. I believe they are increasing it too much and we are going to see higher numbers than usually expected in the checkout lines. I am uneasy about the Fed's next $600 billion increase in the money supply. I hope people in the Fed start reading these articles.
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