Kellogg Company K recently announced a couple of leadership changes in its struggling North American business in an attempt to instigate some growth in the segment.
Paul Norman has been appointed the President of the North America segment. Norman was, until now, serving as Kellogg's Chief Growth Officer and led the U.S. Morning Foods business on an interim basis. The company also announced the hiring of Craig Bahner as the President of the U.S. Morning Foods business under the broader North American segment. While Craig will report to Norman, the latter will report to Kellogg’s Chairman and CEO, John Bryant.
Kellogg’s North American business comprises four segments — U.S. Morning Foods, U.S. Snacks, U.S. Specialty and North America Other.
The North American business has been struggling due to weakness in its cereals and snacks businesses. Kellogg’s mainstay U.S. cereal business — accounting for 40–45% of sales — has been performing poorly since 2012 due to sluggish category growth. Lower demand for cereals due to competitive pressures from other breakfast alternatives, such as yogurt, eggs, bread and peanut butter, is hurting category growth. Moreover, changing consumer views on health and wellness and shift in consumer attitude from dieting to health and wellness has hurt sales of Kellogg’s weight management cereal brands, like Special K and Kashi.
The U.S. snacks business has been struggling since 2013 due to weak volumes. Though Pringles has done well, the U.S. snacks downfall in 2014 resulted from weakness in weight management products like Special K bars, Special K cracker chips and Right Bites' 100-calorie cookie packs due to the same issues that hurt sales of weight management cereal brands.
Though the company is trying to reinvigorate these struggling businesses by innovation and aggressive marketing campaigns, these activities are yet to show results.
In order to improve sales performance, the company is investing in brand building including digital media, consumer promotions and traditional advertising. It is also investing in in-store capabilities like the sales forces of the struggling cereals and snacks businesses. Moreover, it is channeling funds toward product and packaging innovation as well as reformulation of many existing products to meet the rapidly changing views of consumers regarding health and wellness.
These investments in brand-building initiatives, in-store execution and innovation are being funded through savings from Kellogg’s four-year restructuring program, Project K. The program aims to optimize the supply chain through consolidation of facilities and elimination of excess capacity; improve productivity through consolidation of common processes or business services across multiple regions and functions; and a new global focus on categories.
It needs to be seen if changes at the top management can turn the North American business around.
Bahner boasts a vast experience of working in various leadership positions at popular companies like The Wendy's Company WEN and The Procter & Gamble, Inc. PG. Norman, on the other hand, has led the U.S. Morning Foods segment for the past several months. Together they should be able to bring about some positive changes in the struggling business.
Norman's appointment is effective immediately and Bahner will join Kellogg on Jul 7, 2015.
Another company that is struggling due to weak demand for cereals is General Mills, Inc. GIS.
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