FOR PUTUL ONLY SOURCES ATTACHED

28 July 2015

USE THIS FOR THE CAUSAL ANALYSIS Various obstacles facing Kellogg

Regarding the various problems that the Kellogg Company has experienced in recent times, the rate of product recalls in recent times has gone up considerably. For example, as recent as February the year 2013, 36,000 boxes of Special K Red Berries cereal that were suspected of having glass fragments in them were recalled from retail stores. In the year 2012, the company had to call back particular boxes of its single serving bowls of Mini-Wheat’s cereals suspecting they had fragments of metal in them. This recalls are injurious to the company's image and to that of the particular brand being recalled as consumers loose the confidence in the brand and in the company (“Company profile” 7).It is a symptom of a deeper problem in the companies quality control department and in the long run has an effect in the sales of the company's other offerings as well especially during the period the recall is affected. As a result of this quality problems Kellogg might face tough competition from its peer group who might grab the market share left open by the consumers who doubt the company’s quality control measures. The particular recalls have been in the cereals category which is the company’s flagship commodity and which operates in a very competitive breakfast market (“Company profile” 7).

In an article dated 30th October 2014 in the Fortune magazine, it was reported that Kellogg’s cereals sales had taken a beating (Kell n.p). The company had experienced a 31 percent decline in its third quarter profits as sales of breakfast foods dropped in the U.S. markets. The recall back in 2012 and 2013 could have contributed to this factor, but also as per the article the decline has been brought about by changes in breakfast consumption habits for consumers in America where foods such as eggs, fruits and yoghurts have become preferred to cereals, pastries, cereal bars, crackers and fruit flavored snacks that make up Kellogg’s breakfast offerings. The lack of consumption of these various offerings from Kellogg could be a symptom of another problem and this could be that the company is not adapting as fast as it should be. This fact has been admitted to by its CEO John Bryant who according to the article claimed that no question the consumer in the U.S. is changing the perceptions of food," and that there is no doubt that Kellogg’s needs to increase the pace of adapting to new consumer tastes (Kell n.p.). Because of the drop, the company is said to have suffered in sales numbers with there being a decline by 2 percent to $3.64 billion, which is worse off than the $ 3.69 billion which had been projected by analysts looked assessed by Bloomberg (Kell n.p.)

In an article from February of 2015, Business reporter Stephanie Strom for the Newyork Times business daily wrote about the failing sales for Kellogg cereals. Kellogg is said to have lost $293 million or 82 cents a share in the fourth quarter which came to a close in Jan 3, this was in comparison to the same period in 2014 when the company made a profit of $819 million (,n.p).Sales stagnated at $3.5 billion and Kellogg is said to have reassessed its goals for 2015 as it did not expect things to get better in the sales department, also its operating profits would as well get lower. Bryant the CEO said that "One of the key targets of success, I think, is targeting realistic goals, which can be achieved over the long term,” when he held a meeting with investment analysts. However, the gathered analysts according to the article asked some pertinent questions that might point to the causes of the falling sales numbers of the company for example Citi Research analyst who follows Kellogg asked what was been done with the funds that were gotten from’ project K’. A restructuring plan that was begun by Kellogg, to this the CEO said that the money from project K was not meant for bottom line recovery purposes, but the money has been reinvested in the business for growth purposes. Yet another analyst a Jason English from Goldman Sachs asked why the company was moving goals and rebasing its compensation to its workers when the company was not doing so well, to this Bryant said that payment made in 2014 were less than expected and therefore with the change of goals in 2015 this was the reason for the adjustment of the bonuses. At the end of the article the writer mentions how the CEO blames the increasing preference for what he calls "functional foods" as the main reason for the lagging sales but also he mentions that some of the company's brands like the Kashi line are going to be made more organic as the company seeks to move away from sourcing genetically modified ingredients(Strom,n.p.).

Work Cited

Company profile. Kellogg Company. Market line. p 7.

Kell John.Decline in cereal sales bites into Kellogg’s results..Oct.30.2015.Web.14.July.2015.

STROM STEPHANIE .A Sharp Loss for Kellogg as Sales of Cereal Falter.FEB. 12, 2015.www.NewYorkTimes.comWeb.14.July.2015.