Kellogg’s new US on-the-go breakfast mix

US food giant Kellogg has blamed tough conditions in UK supermarkets for its seventh successive decline in quarterly sales.

Revenues in the third quarter fell 2.2% to $3.25bn as the business struggled with changing consumer tastes around the world and currency translation effects of a strong dollar, an earnings statement on the New York Stock Exchange showed.

The group said sales were affected by the challenging UK market, trade-inventory reductions in US cereal and delays in transforming its portfolio of products.

Kellogg has failed to record top-line growth since the fourth quarter of 2014 as shoppers in the US have abandoned its cereals in search of healthier alternatives and on-the-go products. It has been revamping its cereal line-up to adjust to new consumer trends, with launches including a new range based around ancient grains and a breakfast mix with no milk needed.

Last month, The Grocer reported that latest UK accounts for Kellogg’s in the year to 2 January 2016 revealed plunging cereal sales as the Corn Flakes, Frosties and Special K maker battles falling prices, discounter copycats and the growing popularity of breakfast-on-the-go.

Profits at the US parent did improve in the third quarter, however, as its massive cost-cutting drive boosted margins.

Operating profits jumped 23% to $410m as one-off costs were lower and all regions managed to expand margins. Currency-neutral comparable operating profits increased 3.3% to $482m as a result of its new policy of ‘zero-based budgeting’, where managers have to build budgets from scratch each year.

CEO John Bryant said: “Our third quarter earnings exceeded our expectations, on the strength of good operating margin expansion and a favourable tax rate.”

“Our sales were affected by trade-inventory reductions in US cereal, a challenging UK market and portfolio transformations that have taken longer than anticipated to execute.

“However, we did realize growth in US snacks, US specialty channels, Latin America and Asia-Pacific, and every region posted operating-profit margin expansion. Most importantly, we continued to make progress against priorities that will enable improved performance in Q4 and in 2017.”