Kellogg’s net sales grow in Q2 as Treehouse suffers from decreased demand for private label

USA – American multinational food manufacturing company Kellogg Company has reported a strong second-quarter boosted by increased sales in emerging markets.  

Reported net sales for the quarter were up 2.6% year-on-year to US$3.56 billion, reflecting favorable foreign currency translation. 

Emerging markets were the start performers for Kellogg in Q2 with Kellogg Asia Pacific, Middle East, and Africa delivering the strongest growth in net sales. 

According to the financial release, sales in this region were up 23%  – driving a 24% reported net sales increase.  

Growth was broad-based across the region, with Kellogg’s Multipro business in Nigeria recording a strong performance. 

In Latin America, Kellogg saw a 19% increase in reported net sales, driven by favorable currency translation and 9% organic growth, which was led by snacks. 

Meanwhile, in developed markets, at-home demand for packaged foods remained elevated, with out-of-home channels seeing continued recovery. 

In North America, Kellogg saw a decrease of approximately 7% in reported net sales, following last year’s period of ‘outsized growth’ at the start of the pandemic. 

Kellogg Europe’s, on the other hand, reported a 13% net sales increase bouyed by favourable foreign currency translation and organic growth of 3%. 

Steve Cahillane, Kellogg Company chairman and CEO, said: “On a two-year basis, taking into account the lapping of an unusual 2020, we continued to deliver a balance of strong top-line growth, consumption growth, profitability and cash flow generation.” 

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“We delivered these results amidst a challenging business environment that included pervasive shortages of materials, freight and labour, and accompanying cost inflation. By executing our strategy, we remain on track to deliver our full-year guidance even as these conditions persist.” 

Treehouse underperforms as consumers shun private label 

Unlike Kellogg which enjoyed modest growth, private label packaged foods maker Treehouse Foods experienced lower-than-expected consumer demand for private label brands leading to a 3.7% drop in quarterly net sales. 

The Oakbrook, Illinois-based company saw sales tumble from US$1.04 billion to just US$1 billion as higher levels of disposable income resulting from government stimulus artificially supported a shift in traditional value shoppers’ buying patterns.  

Steven T. Oakland, president and chief executive officer of TreeHouse Foods, during a conference call with analysts said: “As stimulus dollars have periodically boosted income, we have seen a greater propensity for that shopper to trade up.” 

“Households making less than U$100,000 shifted more of their dollars away from private label to brands as a result of the additional income.” 

Oakland however noted that Treehouse was confident that the shift was not sustainable in the long run and expected consumers to soon return to their normal purchasing habits. 

Additionally, Oakland notes that the company gained market share in several categories, including crackers, pretzels, and portable dressings which he expects to pay off once consumers return to more normal shopping patterns.  

Despite optimism about its future outlook, Treehouse has revised its full-year 2021 guidance ranges primarily driven by the second-quarter revenue shortfall, continued uncertainty within the macroeconomic environment and its impact on consumer purchasing behavior, and further escalation in commodity, freight and packaging costs. 

Treehouse Foods now expects its full-year earnings per share from continuing operations to range around US$2 to US$2.50 with net sales falling to between US$4.2 billion to US$4.25 billion. 

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