Kellogg manufactures and markets cereal and convenience foods. Co.'s key products are cereals and convenience foods such as cookies, crackers, savory snacks, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and veggie foods. Co.'s cereal products are generally marketed under the Kellogg's name and sold to the grocery trade via direct sales forces for resale to consumers. Co. also markets cookies, crackers, crisps, and other convenience foods, under brands such as Kellogg's, Keebler, Cheez-It, Murray, Austin and Famous Amos. Co. operates the following segments: U.S. Morning Foods; U.S. Snacks; U.S. Specialty; North America Other; Europe; Latin America; and Asia Pacific.
Kellogg’s economic moat is dug by a strong and focused brand portfolio. K commands a 30% market share in breakfast cereal with brands such as Frosted Flakes, Corn Flakes, Rice Krispies, and Froot Loops. Acquisition of the Pringles brand from P&G has tripled Kellogg’s international snack division. The company does operate in a highly competitive marketplace.
Although Kellogg’s stock has been flat for the last year it is still trading near a multi-year high. Kellogg’s image is probably benefiting from recent acquisitions of Kraft Foods & H.J. Heinz. Kellogg’s is facing changing breakfast preferences of the consumer. Kellogg is revamping its product portfolio to meet the changing dynamics in the breakfast category. Recent breakfast additions include Special K flatbreads, Eggo breakfast sandwiches, and a number of ready-to-drink breakfast products. It may take some time for these new products to gain traction. This stock is untimely, and the recent run-up on speculation of a possible merger or acquisition discounts a good deal of the earnings growth we envision to 2018-2020. That said, Kellogg stock does remain a decent option for those accounts stressing income.
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Strong brand portfolio aided by appropriate investments on brand building
Focus on product innovation helps to retain customers and improves the product mix
Consistent revenue and profit growth
Frequent product recalls could hamper brand image
Geographic and customer concentration
Increasing private label penetration Intense competition and changing global retail scenario
Rising commodity costs may negatively impact the company's profitability
Increase in food safety regulations
Growing breakfast cereals market in the US
Local focus to drive sales in developing and emerging markets
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