17 Feb 2015 Healthy habits are eating into the packaged foods industry
Several top US food makers have served up grim financial news and disclosed leadership changes, highlighting the industry’s struggle to adapt to shifting consumer tastes and global economic challenges.
Last week, Kraft Foods said its profits fell 62 percent last year, results that led chief executive John T Cahill to call 2014 a “difficult and disappointing” year for the company behind Jell-O and Oscar Mayer.
Kellogg Company, which also reported earnings, said comparable sales for 2014 were down 2 percent, with an even steeper decline in its North America division. And while chief executive John Bryant promised that 2015 will be a “rebuilding year” for the cereal maker, Kellogg also cut its guidance for long-term revenue growth.
Meanwhile, ConAgra Foods, whose brands include Chef Boyardee and Swiss Miss, cut its profit forecast for the year.
These companies have had a variety of headwinds to contend with recently, including a strong dollar that has made their products more expensive abroad and the high price of cheese and beef. Those, though, are the kind of temporary challenges that surely they’ve weathered before. And so their real problem is a much thornier and enduring one: Your eating habits are changing, and they have been having a hard time keeping up.
Kellogg, for example, saw sales tumble 5.7 percent last year in its US. “morning foods” category, which includes cereals such as Corn Flakes and Raisin Bran. And the struggle in this business segment is not new: Sales have been weak for years, part of the reason the company announced plans in 2013 to lay off 7 percent of its global workforce.
Think about how much breakfast routines have changed, and it makes sense. People are increasingly seeking out on-the-go options such as a granola bars and Greek yogurt that they can scarf down easily during their commute. Fast-food chains have been gunning hard for your breakfast money, with McDonald’s wooing you with free coffee and chains such as Taco Bell entering the morning fray for the first time.
And, the way we watch our waistlines has changed, which is especially noticeable in the trajectory of sales in Kellogg’s Special K brand.
The cereal aimed at dieters hit shelves decades ago and gained traction in an era when counting calories was the weight-loss routine du jour. Kellogg’s has expanded Special K to include snacks such as bars and crackers. But the latest diet crazes are low on carbs and heavy on protein, and that’s been tough for Special K, which, despite its promise of “11 essential vitamins and minerals,” counts rice, wheat and sugar as its key ingredients. The company said declining sales in Special K products were one of the chief drags on its earnings this quarter….
Washington Post: Read the full story
Related reading:
Changing tastes give indigestion to top food makers
Big packaged food companies have been wrestling for years with diminished demand for established products from consumers increasingly interested in items deemed healthier or more natural. Kraft and Campbell are in the midst of reorganising their businesses to cut costs, and Kellogg and General Mills are closing factories and laying off employees in light of weaker demand for their food. Read more