CEO Steve Cahillane shared that Kellogg may boost prices and increase production in order to offset the high inflation rate of its raw costs. They are still seeing double-digit cost inflation as 2022 starts, Cahillane remarked.
Price increase despite profit growth
The warning came as the consumer price index increased by 7.5 percent in January, the fastest increase in 40 years. PepsiCo and Coca-Cola issued similar cautions about growing prices putting pressure on their profits. According to Kellogg’s earnings report on Thursday, soaring freight and ingredient costs, such as wheat, corn, and edible oils, have severely harmed packaged food firms, leaving them with no choice but to raise prices.
However, due to higher prices for popular morning cereals and snacks like Pop-Tarts and Pringles, Kellogg expects to raise profits by 1 to 2% in 2022. They don’t want costs to go too high, but they’re in a situation where it’s all over the place, and they’ve been able to cover it. But, Cahillane shared that their pricing performance has been excellent, Mail Online reported. He added that using price and productivity to cover all of those input expenses, they believe they are well on their way to doing so. On Thursday, Kellogg’s stock jumped around 3% after the firm anticipated full-year earnings growth that beat market estimates, thanks to higher product prices.
Kellogg is looking forward to inventory recovery in 2022
Due to worker strikes in the last quarter, the company’s cereal division suffered a setback. Other sections of the company’s portfolio more than made up for cereal’s underperformance the previous quarter, and now that staff is back at work, Cahillane expects the line to recover.
What they’re looking at for 2022 is a recovery of their inventory, distribution, and promotional plans in the first half of the year, which will lead to the back half of the year with increased momentum in our cereal industry and a valid return to normal, he said.
According to Cahillane, Kellogg may make some deal this year, citing the company’s excellent financial position, CNBC posted.
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