Kellogg, Hershey’s, Hormel and Post Talk Strategy in Hopes of Growth

Meagan McGinnes

Over the last two weeks, The Kellogg Company, Hershey Company, Hormel Foods Corporation, and Post Holdings all held quarterly earning calls and shareholder meetings.

Analysts view these presentations as mile markers, allowing the company and its investors to see if they are on course for 2017. Though their brands and products span a myriad of grocery categories, each CPG giant saw growth and losses, and spoke to how it plans to move the needle for the remainder of the fiscal year.

Q1_970-BKellogg Announces New Distribution Method For Snacks

The news of Kellogg’s growth in Q4 was overshadowed by its announcement to switch to a new distribution method for its snacks segment, as stated in its earnings report.

Previously Kellogg had touted its direct store delivery (DSD) distribution system, which was used for 60 percent of its snacks. The company is now changing to utilize a warehouse model for its snack brands, which has the potential to result in the loss of 1,100 jobs through the closure of its 39 regional delivery centers, according to USA Today.

“It has become clear to us that we must redeploy resources, currently invested in our DSD distribution system, to other forms of marketing that can more effectively and efficiently reach today’s consumer,” Paul Norman, President of Kellogg North America, said during the call. “This action demonstrates just how serious we are about creating a more competitive and faster growing Snacks business. We can generate more growth by shifting resources to brand building while improving margins for both our retailers and our sales.”

Norman elaborated that funds currently being used for trucks and distribution centers can now be used to invest within the company’s cross category brands and maintain a presence within stores. One way Kellogg’s has already embraced that mission was through its initiation of a venture-capital fund called “eighteen94 capital,” which invests about $100 million into startups pioneering new ingredients, foods and packaging.

Hershey’s ‘Not Satisfied’ With Brookside Performance

Hershey’s may have seen a sweet Q4 overall, but Brookside, its line of premium fruit and chocolate products, did not.

Hershey’s reported sales growth of 3.2 percent to $1.97 billion, and raised its earnings outlook for the year. While Hershey’s candy, mint and gum retail takeaway increased more than three times the rate of the category, that growth was driven by chocolate.

“We are not satisfied with our non-chocolate candy,” CEO John Bilbrey said during the company’s latest quarterly earnings call. “In Brookside performance, the work is underway to improve their trends. Although it will be a multistep process, we continue to believe that candy, mint, and gum is an attractive category capable of solid growth over the long term, when supported with the right mix of customer and consumer marketing.”

Innovation with new products will be a major contributor to the company’s growth in 2017. RBC Capital Markets analyst David Palmer said the company is looking to replicate the success it’s had with the release of Reese’s Pieces Cups, Reese’s Crunchers and Reese’s Crunchy Cookie Cup.

The brand also hinted at possible future investments to help expand the company’s portfolio to fit more “snacking occasions.” Hershey’s Michele Buck said the company will look to put capital into other lower margin initiatives, like Krave. Hershey’s last acquisition 10 months ago was barkThins parent Ripple Brand Collective.

Hormel Uses Justin’s As Example of Successful M&A

During the company’s 2017 shareholder’s meeting, Hormel executives reiterated what they saw as the recipe for success: rejuvenating brands, creative product innovation, acquisitions and expanded portfolios. New CEO Jim Snee told investors that the company is always on the lookout for potential companies to acquire. Hormel acquired both Applegate and Justin’s within the last two years, saying that the companies are built on “inspired people and inspired products.”

Justin’s Founder Justin Gold also “rode” into the meeting, live streaming into the conference while on a bike in his Boulder office. Gold said he was excited to work to make the nut butter company a global brand and innovate within the nut butter space with Hormel’s other longtime brand, Skippy.

Post Holdings To Innovate Within Active Nutrition

Post Holding’s legacy cereal brands may not be part of a growing category, but the company thinks its “active nutrition” businesses could be.

The company said during its quarterly earnings call that active nutrition continues to show great growth driven by premium protein shakes and bars. Net sales were $154 million, an increase of 33 percent compared to the prior year. ”In regards to declines with its Dymatize protein powder line, Chief Executive Officer Robert Vitale said the company is trying to respond with better innovation, more unique product category, better packaging… to try to remain distinct and unique in the channel.”

Vitale said active nutrition has the most opportunities for M&A, but the company is cautious because many of these smaller businesses are “a bit more volatile.” He added that he thinks the company’s active nutrition channel needs to develop a more compelling value proposition to enable it to compete more effectively within the market.

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