It was another sweet quarter for food giant Kellogg, which reported better than expected second-quarter earnings, beating on the top and the bottom lines as it was able to charge higher prices. What is working for Kellogg? CEO Steve Cahillane tells Cheddar News, “It was really about the brands and the brand momentum that carried us through in this quarter and has great momentum as we approach the back half of the year.” Kellogg’s stock responded to the earnings report by reaching a new 52-week high.


Closing Bell

Kellogg CEO: Brands Lift Q2 Earnings, Set Momentum for Second Half

Welcome back to cheddar news is closing bell everyone, it's another sweet quarter for the food giant Kellogg. That company reporting better than expected, second quarter earnings today, beating on the top and the bottom lines as it was able to charge higher prices. But as companies across the board continue to deal with headwinds and recessionary concerns, can Kellogg keep the momentum going? Well, joining me now is steve Gillon chair and Ceo of Kellogg steve, thanks so much for coming on the show, especially on a big earnings day for your company. I see the stock down here from the floor of the stock exchange at a new 52 week high just today. What was working in this latest quarter? Well, thanks for having me kristen, I mean what was working for is simply was the strength of our brands, both in the United States and around the world. And you know, we've been investing in our brand for for many, many years, but really stepped it up with our new deploy for growth strategy some four years ago and it continues to pay dividends and so if our snacking business around the world was strong or international, developing markets was strong and our cereal business, which had suffered through a fire and strike in the fourth quarter of last year, is recovering faster than expected. So it was really about the brands and the brand momentum that carried us through in this court and has great momentum as we approach the back half of the year and I think the numbers certainly do highlight that momentum that you're talking about steve. I see lifting your outlook for the rest of the year actually doubling what you expect to see in earnings per share as well as sales. So that is very bullish. How are you able to raise guidance that much with the confidence that you can meet those targets? Yeah, and it's really it's it's driven by the top line and so we're seeing an inflationary environment like we've really never seen before, but our ability to take, you know prices in the marketplace has been successful. You know, we start with productivity obviously try and drive productivity because affordability is absolutely key. But you know, we've had to take prices around the world and demand has held up, volume is held up, so the elasticity is that we would typically see, we're just not seeing and so consumers are able to handle it up to this point. And so it's really driven a very strong top line performance which has flowed through the bottom line is we've managed our costs very diligently. I did see in this latest quarter that Kellogg, your company is saying that the average selling prices were up about 14% in that second quarter hair drop and volume of 1.5% about retailers, I think in many cases actually passing on those higher prices to the tune of about 14% to customers in this current period, steve how much do you anticipate you'll be charging retailers for some of your goods, you know, we don't really see anything in inflationary environment that's letting up. Unfortunately, a lot of people are talking about commodities coming down costs coming down and they are coming down from their historic highs, but they're still higher than they were a year ago. Transportation still remains very expensive. And the bottlenecks and shortages that we're seeing in the, you know, the whole supply chain environment are still as pervasive as they've ever been. And so unfortunately we don't see a let up in the high prices for the back half of this year and even going into next, although we work diligently, you know, as I said before to remain affordable, you know, that's incredibly important right now, the cost environment end to end is just, is just as challenging as it's ever been. So with the average selling price up close to 14% in this previous quarter city, which your results cover? How much do you anticipate those prices will rise in this current period? You expect another double digit growth in terms of the prices that you charge retailers, I think we're gonna see what's, what's the status quo today is, you know, kind of plus 14% continuing for the foreseeable future as we look to next year, we would hope that that would start to, Uh, you know, mitigate, but we don't, you know, we're not into our planning cycle just yet or I should say, we're in our planning cycle, so we're making the plans, we've got all our input costs coming in and again, we'll start with productivity, try and mitigate that as much as possible. But I think you're you're really looking at an input cost environment that's very high teens, you know, close to 20, so very high teens and we don't see that, we don't see that letting up. I also want to ask you about the company's plans to spin off into three separate units. I know the snacks business doing very well for you. That will be a standalone business, cereal will be its own business and then the plant based foods, another business segment for you in the future. How is that spin off going? And do you expect in this current environment that is still very much inflationary. All three of these different businesses will be able to stand on their own. We do, we're very confident, in fact, you know, coming out of today's results. Um it's very clear that we're doing this from a position of strength, which we said when we made the announcement, we're not doing this for any other reason that it's really truly a way to unlock even more value for all three businesses. And so obviously the global snacking business tremendous momentum, the cereal business well ahead of plan and its recovery and we believe will do even better as a solely singularly focused company on cereal great brands obviously from frosted flakes to mini wheats um and to fruit loops, will, you know, will be the heart and soul of that. And then our plant based business which has the megatrends of health and wellness and sustainability behind it. So we don't see anything in the environment that doesn't make us any more, you know, actually builds our confidence and we're right on track. You know, we made the announcement just you know, in june june 21st and we've got the work plans in place and we're well on our way Investors rewarding your shares today Steve in the wake of these very positive results. Again, the stock reaching a new 52 week high in today's session. Always appreciate you taking the time post earnings that Steve. Kay Helene Chair and Ceo Kellogg.