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Kellogg One Kellogg Square, Battle Creek, MI 49016-3599
www.kelloggs.com (616) 961-2000    Fax: (616) 961-2871  

The Scoop  

Breakfast's fearless pioneer

Will Keith Kellogg invented Corn Flakes, and the modern breakfast cereal, after experimenting with flaked wheat berries in the kitchen of his brother's Battle Creek health sanitarium. After the invention was publicized and widely imitated, Kellogg formed his own brand and triumphed over the 41 competing cereal companies in the area. Kellogg went on to become the world's leading cereal producer, leading the pack in marketing innovations such as product giveaways and color magazine advertising. Kellogg currently sells eight of the world's top 10 cereals, including Corn Flakes, Raisin Bran, Frosted Flakes, and Rice Krispies, as well as ready-to-eat products such as Pop-Tarts, Eggo waffles, Rice Krispies Treats, and Nutri-Grain cereal bars. In recent years, the company has responded to the nation's increasing health-conscious shopping habits by introducing products like low-fat Pop Tarts and Healthy Choice cereals.

Bruised and battered from the cereal wars

Even though Kellogg has fewer competitors today, the competition is no less fierce. Years of price hikes rendered cereal prices bloated beyond market demand, attracting consumer surliness and a condemnation on the floor of the House. In 1996, as the cereal industry scrambled to address public outrage, flagging sales, a disappearing customer base and posturing politicians, a price war erupted. Kellogg found itself locked in battle with General Mills and Post (a subsidiary of Philip Morris), forcing the firm to cut cereal prices by 19 percent. Kellogg market share dwindled as a result of the cereal battles. Today, Kellogg's must contend with guerilla action in the guise of increasingly popular store-brand knockoffs of its flagship products. However, the biggest problem that Kellogg faces is the change in modern eating habits. While cereal continues to be the most popular breakfast food, many harried consumers now either skip breakfast or wolf it down in the car.

Underwhelmed by Chocolate Chip Rice Krispies

In an attempt to catch up to consumers on the go, Kellogg has focused on new marketing strategies to add some umph to its convenience foods business. The company's earlier acquisition of Lender's Bagels combined with product extensions such as Razzle Dazzle Rice Krispies and Rice Krispie Treats Cereal failed to increase Kellogg's market - Chocolate Chip Rice Krispies have already been discontinued. However, Kellogg's move to expand the infrastructure of its global convenience foods by marketing Nutri-Grain products and Rice Krispies Treats in "on-the-spot, often unplanned purchase" locations worldwide is aiding the company's rise. Kellogg reports that 22 percent of its business comes from convenience foods - a number expected to rise with global expansion.

Wall Street cool on Kellogg

Until new management filled Kellogg's upper ranks, the company's corporate structure hampered its flexibility. Nearly 50 percent of its stock is closely held, divided between the Gund family trust, four trustees (including one former CEO) and the company's corporate executives and directors. The lack of outside stock-holder pressure bred lackluster innovative skills and an unwillingness to change in the past, earning Kellogg a reputation on Wall Street as a "nightmare stock" despite its status as a breakfast product leader. In early 1999 five top executives resigned - including Kellogg's CFO, its general counsel, and its head of European operations. Moreover, two groups of nuns brought lots of attention to the company by recommending that the cereal maker stop using genetically altered crops. The company rejected the proposal, but went ahead with the removal of genetically altered ingredients from its products in Europe and Australia where consumer backlash over the ingredients' safety had been growing. And in perhaps the most disappointing development in the company's history, General Mills passed Kellogg in 1999 and became the largest cereal seller in the U.S.

Time for a turnaround?

In 1999, Cuban-born Carlos Gutierrez took Arnold Langbo's position as CEO. Four months into his job, Gutierrez shocked Battle Creek, Michigan, Kelloggs' hometown, by closing the company's hometown plant and eliminating 550 jobs in the city. He also sold the company's disastrous Lender's Bagels business in 1999. Gutierrez hopes to turn Kellogg into a "healthy snack" company, with foods like Rice Krispies Treats and Nutri-Grain Twist bars contributing half of sales by 2005. The vision seems reasonable to many given that convenience foods is maintaining an annual growth rate of 10 percent, while cereal's growth rate is at about one or two percent.

The new Kellogg

The company has given health-conscious gastronomes plenty of reasons to cheer recently. In 1999 Kellogg announced plans to acquire Worthington Foods, which makes vegetarian foods, for $307 million. That same year the company introduced psyllium and oat bran-laced products in its Ensemble line. The Ensemble Functional Foods Division, which has benefited from considerable research and development resources, comprises 21 products, including pastas, cookies, snack cakes, breads, potato snacks, frozen entrees, and of course, cereal. In June 2000 the company announced that it had acquired Kashi Company, which makes products with a blend of sesame and seven whole grains, and whose brands include Kashi Pilaf, Puffed Kashi, Kashi Baby & Me, and Kashi To Good Friends.

Getting Hired  

Downsizing at Kellogg made it a "hard place to get a job" in 1998. While there are rumors of a general "hiring freeze," company representatives say that they continue to recruit and hire new employees. Even though Kellogg's production plants conduct their hiring separately, applicants searching for jobs at Kellogg's corporate headquarters can send a resume there.

Being a large company, employees are drawn from a number of college backgrounds with varying degrees. Positions in the company's science and technology area require a degree in chemistry, food science, nutrition, or statistics. In addition, Kellogg requires a degree in electrical or mechanical engineering or computer science for positions related to food process design and packaging projects. In an effort to diversify its workforce, Kellogg recruits at traditionally black colleges and universities.

Our Survey Says  

No more Mr. Nice Guy

For years Kellogg's lived in its Battle Creek oasis, distanced from the corporate downsizing trends of the last two decades. But with the cold reality Kellogg's reduced waistline in 1998, one employee somberly relates that "the company cut back its main offices" and "forced early retirements with buyouts." Smaller profits and fierce competition have prompted Kellogg to hire more workers on part-time contracts, a move that many employees say was "widely resented."

The pros of working at a breakfast leader

Kellogg employees also say "people at Kellogg's are Grrrrrreat!" and are "excited about the future" and "overjoyed" to be working for a company that is "on more breakfast tables than any other company." As Kellogg strives to create a family environment, "the dress code is to dress nicely." Employees point to citations that Kellogg has received "for creating a harmonious and productive work environment," including mentions for its enthusiastic minority recruitment, and comment that "the company?s benefits are generous." Moreover, they call Battle Creek a low cost town with "small-town comforts but big-city attitudes." And, thanks to contributions from Kellogg, it is a boomtown with a "new Kellogg Research Center, Kellogg Cereal City [City Attraction], Full Tilt [Blast] Recreational Family Center, Binder Park Zoo, Fort Custer Industrial Park," Kellogg Arena Sports Complex, and many other downtown businesses.

Key Competitors  

Diageo;General Mills;Nestle;Philip Morris;Quaker Oats;RJR Nabisco;Sara Lee

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