Big cereal makers find themselves with a glut of products
July 27, 2004
BY STEVE MATTHEWS BLOOMBERG
Kellogg Co. and General Mills Inc. are among food manufacturers that may be stuck with too many products aimed at dieters as the number of U.S. consumers on low-carbohydrate diets probably has peaked.
U.S. food and beverage makers introduced 1,863 products or packages making low-carbohydrate claims this year, according to Marketing Intelligence, a research firm.
That's created "a bit of a glut of low-carb products in the marketplace and inventories are extremely high," Kellogg Co. Chief Executive Officer Carlos Gutierrez said on a conference call with investors.
About 10 percent of U.S. adults were on low-carb diets in the second quarter, down from 12 percent in the first, according to a survey of 2,500 people in late June commissioned by New York- based Morgan Stanley analyst Bill Pecoriello. Kellogg, General Mills, Krispy Kreme Doughnuts Inc., PepsiCo Inc. and Anheuser-Busch Cos. are among companies that blame low-carb diets for struggling sales of cookies, doughnuts, potato chips and beer.
"These companies spent a lot of money on new products and reformulations," said Peter Sorrentino, who manages $2.7 billion for Bartlett & Co. in Cincinnati. "In the end it was just a fad. People's tastes are formed over a lifetime, and they don't change on a dime."
Shares of Battle Creek-based Kellogg rose 52 cents to $40.75 on the New York Stock Exchange. The company reported second-quarter net income rose 16 percent to $237.4 million, or 57 cents a share.
"While we are clearly seeing that the low-carb trend, or fad, has peaked and it looks like it is taking a bit of a dive in the supermarkets, we have yet to see the recovery of those categories that were impacted by low-carb," Gutierrez said. "I would hope we see that in the future."
PepsiCo CEO Steve Reinemund, on an investor call two weeks ago, said fewer people may be following the Atkins diet, which advocates shedding pounds by avoiding carbohydrates. The dieting has hurt sales of Doritos and Tostitos snacks, made by PepsiCo's Frito-Lay subsidiary.
"Diet fads will come and go and perhaps the peak of the Atkins diet is behind us," Reinemund said. While consumers want healthier products, "they also want great taste," he said.
Among the new products, Kellogg introduced Frosted Flakes and Froot Loops with less sugar and a low-carbohydrate version of Special K cereal.
Anheuser-Busch started selling a low-carb beer, Michelob Ultra, and Unilever introduced Carb Options in January with such products as lower-carb versions of its Alfredo sauce and Lipton iced tea.
Consumers are focused on dieting as obesity in the U.S. increases. The percentage of U.S. adults categorized as obese - measured by body mass index, or a ratio of weight to height - rose to 20.9 percent in 2001 from 12 percent in 1991, according to the U.S. Centers for Disease Control and Prevention.
Kellogg, meanwhile, still reported improved profits during the second quarter of $237.4 million compared with $203.9 million during the same quarter last year .
Sales rose 6 percent to $2.39 billion in the April-June quarter, from the $2.25 billion reported during the same three months of 2003. Kellogg's performance during the quarter, which ended June 26, exceeded expectations despite significant increases in investment for future growth, Gutierrez said.
"Our sales growth remained very strong as our business momentum continued, and we also continued to make significant investments in future growth," he said in a statement. "It is particularly gratifying that we were able to achieve this excellent performance while absorbing increased commodity and benefit costs."
Net earnings for the first half of this year were $457.2 million, or $1.10 per share, compared with $367.8 million, or 90 cents per share, in 2003. Sales rose 9 percent to $4.78 billion from the $4.39 billion last year.
Kellogg North America reported net sales growth of 5 percent, led by a 7 percent increase in sales of retail snacks. North American cereal sales increased 2 percent.
"In the U.S., we continue to increase our (cereal) share," Gutierrez said during a teleconference. Although cookies continue to be a difficult category with too little innovation and brand-building, new products and promotional programs led to a modest increase in cookie sales during the quarter, he said.
Kellogg, which has 25,000 employees worldwide, had 2003 sales of nearly $9 billion. Its brands include Rice Krispies, Froot Loops and Frosted Flakes cereals and Keebler cookies and crackers, Pop-Tarts toaster pastries and Eggo frozen waffles.
Nothing will ever replace the sensible, controlled well-balanced diet. A lifetime of thought process has to be changed along with that. It seems it can be a daily struggle, along the same lines as an addiction withdrawal.
Cooking for four No big chore, Cooking for two Hard to do.
What bugged me was that so many of the "low carb" products weren't concerned with fat content. I do look for products that are really high in fiber, whole grain and so on, but I am just as concerned with fat content. I wouldn't be able to function on a really low carb life style. Everything I've read that points out the side effects of a low carb diet sounds too much like PMS symptoms!!! EEEEEEK!!! I deal with that too much naturally without choosing a diet that would make me even more weak and moody!!! LOL!!!
quote:...Now if I could just convince my mom and stepdad to rethink the whole carb thing...neither is losing much because they still don't watch their total intakes.
WebMD has an (May 7, 2004) article regarding "calorie denial".
"The Slim-Fast researchers found that, among low-carb dieters:
Almost half -- 46% -- believe they can lose weight just by cutting carbs without cutting calories.
More than half -- 52% -- believe that they can lose weight and also keep it off long term by cutting carbs but not cutting calories.
One-third -- 34% -- believe that they do not need to control portion size.
More than half -- 55% -- do not worry about getting all the essential nutrients they need in their diets."
quote:Originally posted by Coaster Girl: It certainly fizzled much sooner than I expected it to. Of course, I'm not complaining. I'm just hoping that I can continue to find the whole grains and whole wheat pastas that have been a staple in our diet. Having them in the supermarkets has been incredibly convenient, I hate driving to the bigger (more populated) areas of the Akron suburbs just to hit the natural foods type stores.
Laura
The reason I have been ok with others doing low carb is that there are more whole grain options available. My local pizza place now does my regular veggie pizza only with WW crust.
I'm not surprised. And I'll be watching for sales on these items. They certainly aren't going to kill us, but healthy and balanced is still the best way to keep yourself lean and in great health.
Cathy
It's never too late to get it right.
Posts: 3473 | Location: Central USA | Registered: March 11, 2004
It certainly fizzled much sooner than I expected it to. Of course, I'm not complaining. I'm just hoping that I can continue to find the whole grains and whole wheat pastas that have been a staple in our diet. Having them in the supermarkets has been incredibly convenient, I hate driving to the bigger (more populated) areas of the Akron suburbs just to hit the natural foods type stores.
Now if I could just convince my mom and stepdad to rethink the whole carb thing...neither is losing much because they still don't watch their total intakes.
Laura
Life is like a roller coaster, with lots of ups and downs, but the curves, spirals, loops and corkscrews are what make life interesting.
I would have bought the lower sugar Frosted Flakes and Fruit Loops (my DH still eats them), not because of lower carbs, but because of lower sugar. I never even saw them in the Supermarkets here in the ATL area though.
Dawn
"Success is not the result of spontaneous combustion. You have to set yourself on fire." anonymous
Posts: 4303 | Location: Indianapolis, IN | Registered: March 15, 2004
Companies will often donate huge gluts of failed product to drug programs, prisons or food banks. I friend of mine runs a company which moves products like these low carb cereals to institutions that can use them. There are going to be a lot of people eating low carb cereal for the next 6 months who have NEVER considered going a low carb diet.
Ding, Dong Low Carb is dead (or dying out!)
Posts: 8674 | Location: Silicon Valley, CA | Registered: March 17, 2004
