Kellogg's Chairman and CEO Steve Cahillane joined Cheddar News to discuss the company's latest quarterly earnings.

Kellogg's Chairman and CEO Steve Cahillane joined Cheddar News to discuss the company's latest quarterly earnings. "Brand strength" helped results, he said.

Kellogg Tops Earnings Estimates, Raises Sales Forecast

Well, cereal giant Kellogg reporting better than expected earnings and revenue for the third quarter as demand for its cereals and snacks stayed strong in North America, the company did warn that its profit margins in the fourth quarter would not improve as much as anticipated. And currently we do see the stock down close to 9% on the day. Well the company did raise its full year outlooks and it expects net sales to grow about 10% in 2022 from its previous guidance of 7 to 8%. And joining me now is steve cahill Ain ceo of Kellogg company steve. Thanks so much for joining me this afternoon. I know your company posting some better than expected results despite of course relentless cost pressures and persistent supply chain challenges. What drove revenue? Thanks for having me Kristen Well what drove revenue is you know, the brand strength really. So across our geography, ease and categories we saw growth robustly everywhere. Starting with cereal in north America where the recovery from a fire and strike last year was ahead of pace was terrific. We saw double digit growth in our snacking business outside the US and emerging markets. We saw, you know, plus twenties and our asia region and very, very strong growth in latin America. You look at our big brands like Pringles Cheez it pop tarts, rice Krispies treats, we're talking about, you know, high single and double digit growth. So it was robust growth, It was very healthy growth because it was across categories brands. Geography, what's the expectation for the current quarter steve can that momentum continue now into the end of the year? It can kristen and that's what, you know, when we gave guidance, we took our top line guidance up based on the momentum that we're seeing and we see that continue into the fourth quarter. We also talked about our bottom line improving. You know, the market's reaction is a little a little puzzling, you know, we did say that margins would not improve, you know, quite as much as we anticipated, but it was very marginal difference and our cash margins, you know, the the dollar margin is actually growing. So the company is set to have an incredibly strong year and lots of momentum going into 2023 based on the strength of the brands across categories Geography, these um you know, including emerging markets and developed markets as steve a lot of americans turning to their budgets, digging deeper and deeper into savings to get by in this current inflationary environment and clearly inflation has persisted. How has that impacted your company and what are the costs that consumers can expect to pay for your items going forward. And so we have seen very pervasive and persistent inflation as everybody has and we've been able to cover that with a combination of productivity, but especially revenue growth management, you know, and pricing to make sure that we're covering those input costs and we're in a good position to, you know, continue that into now next year because we also do see persistent inflation continuing even on the on the back of what has been a very very challenging year Now. Our brands and our categories have responded incredibly well elasticity is have been very low and incredibly low historically. Low, unprecedentedly low. And we see that continuing as well. And part of that is if you think about take all of our brands Pringles a very affordable luxury cheese at a very affordable luxury, a bowl of our cereal with a cup of milk and even in addition of fruit is still less than a dollar. So although inflation is raging, our overall affordability is something that we keep, you know, we keep on top of very very much is a global firm steve we're entering the winter months, precious ongoing invasion of Ukraine continuing impacting the continent of europe. Even though obviously that is out of the U. S. Is control at this point. How are factors like that global economic conditions, even china zero tolerance policy for instance when it comes to Covid expected to impact your company ahead. Well, it's increased uncertainty around the world. We have a very small business in china but we have a large business in europe and we're definitely seeing the consumer under pressure in europe but we're seeing it effect really outside of our categories and more discretionary and high end purchase purchases inside our categories. We continue to do very well. We lost all of the Russian business. We stopped shipping Pringles into Russia. So that was a hit for us in the third quarter. But we're able to really replace all that Pringles volume in the rest of europe and in Asia and in essence for Pringles we're making, excuse me, we're selling everything that we can make. So despite these very significant macroeconomic headwinds, we're fortunate to be in categories that are very resilient and we're especially fortunate to have the best brands in those categories and they've responded incredibly well to the pricing that we've needed to take in the market. And I know you and I have talked about this before but the company Kellogg expected to separate into three different businesses, cereal business, the snack business, the plant based foods business as well. What is the status of those separations? So very much on track. We talked about finishing by the end of next year, spending the businesses off those two businesses off by the end of next year. We're very much on track. In fact, a little bit ahead of track. We named the north american cereal company management team. Ceo of the business. Gary Pill Nick along with his leadership team combined, they have 165 years of Kellogg experience so they'll be very well placed to lead that cereal business going forward and when you look at the underlying momentum of our businesses, there's no distraction even as we're doing all this work. You know, the momentum in the business is actually growing any new products or flavors Steve that consumers can expect in the year ahead from your brands. We do, we've got a very exciting fourth quarter innovation. Things that we come with every year are famous elf on the shelf cereal, we're bringing Kellogg's Cinnabon back, so some exciting licenses around serial Archie's that puff continues to grow incredibly well, entirely incremental to the portfolio, a number of new flavors of Pringles coming out, which are very exciting. So the innovation pipeline remains full and in the next year we've got even more exciting plans. So I'd say our innovation is as successful as it's ever been at the Kellogg company and we're again looking forward to 2023 unveiling in the first quarter. A lot of new exciting entrance as well. I'm sure consumers are excited about that steve, we'll leave it on that note that steve cahill Ain Ceo of Kellogg company