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Kellogg's Cereals Deliver Healthy Sales

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Kellogg today (Thursday) reported that first quarter net earnings rose 2 percent to $321 million, up from $315 million last year. The company attributed much of the growth to its North American cereal sales, which rose 6 percent during the quarter.

Frosted Mini-Wheat Little Bites, Special K Blueberry and Jumbo Rice Krispies were among the best performing brands, CEO David Mackay said during today's earnings call. The category, which is susceptible to private label, saw sales accelerate in “the back half of last year,” he said. “Cereal remains a great value. It’s relatively nutritious and convenient.”

Kellogg, Battle Creek, Mich., raised prices on its cereals earlier this year, but volume still increased by 1 percent. Mackay said cereal prices would be higher in the first quarter compared to the rest of the year.

Kellogg spent $270 million advertising its cereal brands in the U.S. last year, excluding online, per Nielsen. As a comparison, General Mills—one of Kellogg's biggest rivals in the category—spent $257 million marketing its cereals last year. In an earnings call last month, General Mills CEO Ken Powell said cereals, particularly household names such as Fiber One and Honey and Multi-Grain Cheerios, are growing at “double-digit rates.” The company said it would up ad spending in the category this year.

Addressing the question on how Kellogg is minimizing private label's influence in its cereals business, Mackay said the company is focused on "driving a strong value message" to consumers, and that value would remain a key theme in ads.

Cereals aside, Kellogg said brands like Pop-Tarts saw “mid single digit internal net sales growth.” Cookies grew by low-single digits, including “solid performance” from brands like Sandies. Meanwhile, snacks increased by mid-single digits. New Fiber Plus antioxidant chewy bars are “off to a good start,” Mackay said.

Mackay added that consumer demand for meal solutions also resulted in favorable sales gains for frozen brands like Morningstar Farm and Kashi.