Kellogg Co has raised its 2022 forecast, banking on more price increases to help counter the impact of supply shortages stemming from a workers’ strike at the company’s U.S. plants last year and the war in Ukraine.
Shares of the Michigan-based company rose 4 percent after it also beat first-quarter profit estimates.
Kellogg, which also makes Pringles and Eggo waffles, said it was increasing the pace of price hikes it pushes to consumers as costs soar, and was expecting demand for some cereals to slow as surging global inflation bites into spending power.
Regarding shoppers swapping out Kellogg products for cheaper items, CEO Steve Cahillane said “we haven’t seen evidence yet of that but as we look forward – just because inflation is so intense, and because the benefits of stimulus money is so significant – our forecast is it (will) have pressure.”
Costs from freight and ingredients such as wheat, corn and edible oils have surged in the last year due to pandemic-induced disruptions to the global supply chain, forcing the packaged food industry to raise product prices to cushion the hit to their profit margins.
The company plans to emphasize the affordability of a bowl of cereal and milk as a meal in marketing and merchandising, Cahillane said.
“It’s convenient and it’s very affordable when you think about the number of bowls,” in a box, he said.
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