WK Kellogg Co. 1Q24: Strong Margin Growth Despite Slight Sales Decline

May 21, 2024 | Corporate Insights, No Bull Economics

Kellogg reported that while the U.S. cereal category improved sequentially during 1Q, sales were flat with volume declining low single digits. While other food companies are reporting that stressed consumers are shifting their spending towards at-home meals, Kellogg has not observed this trend although management noted that it could represent a potential tailwind for its sales in the future.

WK Kellogg Co manufactures, markets, and distributes ready-to-eat cereal products primarily under the Frosted Flakes, Special K, Froot Loops, Raisin Bran, Frosted Mini-Wheats, and Kashi brands.

Revenue Trends

  • 1Q24 adjusted net sales declined -0.8% y/y (U.S. -1.3% & Canada +4.6%), reflecting +6.3% pricing offset by a -7% volume decline (underperforming the category). Kellog’s sequential volume decline represented an improvement from 4Q23’s -10.1% results, reflecting improving consumer tolerance of its price increases (the company’s last major price increase was in March 2024).
  • 4 of its 6 brands grew during 1Q24 despite the headwind from lapping pricing.
  • Fastest-growing brands in the U.S. included: Frosted Flakes, Raisin Bran & Rice Krispies.
  • A new marketing model was launched during the quarter with a unified Frosted Flakes campaign which was optimized for TV, digital & social.
  • Successful marketing collaboration during the quarter included a co-branded cereal box promoting its iconic Tony the Tiger & Toucan Sam characters along with Crocs shoes.

Margin Trends

  • 1Q24 adjusted EBITDA increased +13.6% y/y, driven by the benefit of improved price/mix & productivity (including supply chain efficiencies & reduced waste).

Kellogg 1Q24 Financials

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