Quarterly earnings

Kellogg to align with Pringles in warehouse distribution, further fueling US snack sales

Kellogg believes warehouse distribution systems can help grow its US snack business.  Photo: iStock/Monkeybusinessimages

The US food giant, Kellogg, has announced it will shift its entire snack business in North America from direct store delivery (DSD) to warehouse distribution systems to meet consumers’ evolving shopping behaviors. 

The announcement came shortly before the company released its Q4 and full-year 2016 earnings results, which showed Kellogg’s Q4 and full-year net sales decreased by 1.4% and 3.8% due to “adverse currency translation.”

However, Kellogg’s US snacks segment showed growth in net sales (increasing to $767m during Q4) driven by continued growth in core brands, including Cheez-It, Pringles and Rice Krispies Treats, but also by progress toward stabilizing sales and share in wholesome snacks and cookies.

Improving cost-efficiency

Paul Norman, president of Kellogg North America, said the distribution model transition was a “difficult decision,” but one that accelerates a transformation of the US snack business, leading to better growth and profitability ahead, for both the retailer partners and the company.

Following the exit of DSD, Kellogg will invest in the technology of its customers’ and its own warehouse systems, which the company hopes to “result in greater cost-efficiency and freeing up resources to invest in future growth.”

Job loss and DSD centers shutdown

The transition will be executed during Q2 and Q3 of 2017, causing shutdown of previous DSD centers and a reduction in workforce, Kellogg added.

The company said it is providing severance and benefits, as well as offering retention packages for impacted employees.

Despite an anticipated snack sales decline in 2017 primarily due to the transition, Kellogg’s overhead savings are expected to begin to accrue in Q4 of 2017. 

Related News

UK TV actress Kelly Brook unveiled the world's first edible air, commissioned by Kellogg's. Pic: Pringles

Kellogg’s Pringles commissions world’s first edible cloud

Declining Pringles sales in the EU impacted the overall bottom line for Kellogg's Q2 financial results. Pic: ©iStock/eskaylim

Kellogg's Q2 sales weakened by soft US consumption and declining EU Pringles sales

Kellogg will donate more products to Texas as the ongoing need is assessed. Pic: ©iStock/shank_ali

Kellogg donates cereals, cookies and crackers to Hurricane-hit Texans

Pringles has created the LOUD Collection with five new flavor variants. Pic: Kellogg Company

Kellogg’s Pringles launches five new flavors under LOUD collection

Kellogg's contented Breitbart is not aligned with its business values. Pic: Kellogg's

Breitbart denounces Kellogg’s ads-pulling move as ‘un-American’

The case against Kellogg's trans fat-containing cookies has been dismissed by a US judge as preempted by federal law. Pic: ©iStock/urfinguss

Case against Kellogg’s trans-fat cookies crumbles

The Special K manufacturer has announced that Fareed Khan will take over from Ron Dissinger as chief financial officer in February. Pic: ©iStock/abdone

Kellogg Company announces new CFO

The Parati acquisition is Kellogg's largest in Latin America.

Kellogg to acquire controlling stakeholder of Brazil’s Parati for $429m

Kellogg activity included limited-edition Special K packs

Kellogg renews sponsorship of US Olympic Committee for 2018 and 2020 Games

A large percentage of Millennials find cereal inconvenient as it needs to be cleaned up after eating. Pic: ©iStock/lolostock

Kellogg shares drop as it struggles to woo Millennials: Credit Suisse

Kellogg's frosted mini-wheats pumpkin spice cereal is available nationwide for a limited time, while supplies last.

Kellogg extends New York cereal café menu as it aims to tap foodie culture

Brands including Keebler, Special K, Famous Amos and Mother’s are affected

Kellogg’s Special K and Keebler snacks recalled over peanut residue fears

Submit a comment

Your comment has been saved

Post a comment

Please note that any information that you supply is protected by our Privacy and Cookie Policy. Access to all documents and request for further information are available to all users at no costs, In order to provide you with this free service, William Reed Business Media SAS does share your information with companies that have content on this site. When you access a document or request further information from this site, your information maybe shared with the owners of that document or information.