Kellogg Company Q2 2009 Earnings Call Transcript

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2009-07-30 12:33:18.0

Tags: Call Transcript, Earnings, Consumption, Credit Suisse Group AG, Inventory Reduction, Q2, Sales Strategy, Performance Management, Corporate Governance, Sales Force Management, Sales, Human Resources, Workforce Management, Business Operations, Corporate Law, Seeking Alpha, Kellogg Co.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from Robert Moskow - Credit Suisse.

Robert Moskow - Credit Suisse

I just had a question about the sales growth. You know it came in a little bit lighter than what we had hoped. The Nielsen data for the U.S. showed that, you know, you had pretty strong retail consumption but you mentioned inventory reductions and can you give us a little more color on those inventory reductions? Is it just a Kellogg specific situation? Or is it a category situation?

David Mackay

I think it’s more, Robert, specific to Kellogg as we looked at it. We’re always very, very pleased when inventories drop and they did drop in Q2 for us in the cereal category. As we look at our growth it was very strong. Consumption was up 6 to 7%, shipments up 4. The biggest differential between the two was the inventories coming down in Q2 so they are at a lower level than we saw them Q2 last year. So we’re very pleased with that.

And really if you look around the world, we feel very good about Q2 and the year-to-date growth. That’s in line with our targets. A few factors in there that impacted apart from what we mentioned on the difference in consumption versus shipments in Q2 cereal, we mentioned some customer issues in Europe and one in Australia, a small impact from the snacks recall. We did see a couple of inventory reductions in Q2 in Italy and the UK. Nothing significant but meaningful for those two markets. But in general terms, we’re very happy with the performance in the quarter.

Robert Moskow - Credit Suisse

So in the U.S., if I could focus on that, there’s no evidence that you were shipping ahead of consumption over the last couple of quarters and this is some kind of a snap back or something?

David Mackay

No, I don’t believe so. As we looked at the inventory levels as we finished Q2 this year versus last year, it was down significantly. And there wasn’t anything that untoward from the year ago. It might have been a tad higher but nothing significant. I think this is really a Kellogg issue and you know we are constantly working with our retail partners to try and reduce inventory across the board, particularly in the current environment.

But I don’t think it was category specific. I think it was more Kellogg specific and to be quite frank while it might have shown our shipments a little lower than you would have expected, we did grasp 1 point of share in the category. We’re very, very happy with the performance.

 

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