The move comes as net profits for the cereal major tumbled 24% for its second quarter of 2015 to $223m from $295m the previous year. Net sales were also down 5.1% to $2.5bn for the quarter.
Paul Norman, president of Kellogg North America, said the reformulation decision was part of broader efforts to revitalize the cereal category in the US.
“Over the past nine months, we have made good progress on the agenda we set out and have seen a stabilization of our Kellogg's branded business,” he told analysts in the Q2 earnings call yesterday.
He said the company had followed four critical strategies to return cereal to growth – focus on wellness, invest in products, engage with consumers in new ways and create fun.
“As we look forward, we will continue to renovate our core offerings to give consumers more of what they want in the way of nutritional benefits, such as protein, gluten-free choices, and simpler ingredients.
“…Already in North America, 75% of our cereals are made without artificial colors, and more than half are made without artificial flavors. Further, we have been working to remove artificial colors and flavors across Kellogg's branded cereals and a variety of Kellogg's branded snack bars as well as Eggo frozen foods. Our goal is to complete this transition by the end of 2018,” he said.
Just behind General Mills…
Kellogg’s artificial-free announcement comes less than two months after rival General Mills’ pledge to do the same across its cereals by 2017.
At the time, Jared Koerten, senior food analyst at Euromonitor International, told BakeryandSnacks.com it wouldn’t be before Kellogg followed suit.
“It’s one of those things – if everyone is doing it and you’re the one that’s not, you’ll stand out,” he said.
Koerten said breakfast cereal makers were under increasing pressure to develop artificial-free products, particularly due to a significant younger consumer base.
“Parents are just looking for more natural products, and if you want a chance to compete with these natural and organic brands that are popular with millennials it’s a move you should be seriously considering,” he said.
Special K and Kashi
In the past, Special K and Kashi have been weaker brands for Kellogg – dragging sales down across the board – but Norman said Special K had seen improvements in Q2.
“I'm pleased to say we have seen steady improvement in performance over the past few months…In fact, consumption increased by 2.4% in the latest public data.”
Kashi, however, remained more of a challenge, he said. “I think we were a little ahead on Special K again versus where we were on Kashi.”
While efforts had been made to renovate both brands, he said there had been “a bit of a lag” with Kashi because of extra work needed on products like GoLean, set to be non-GMO project-certified in Q3 2015.
However, he said there was hope for Kashi improvements as well.
“Whilst we have yet to see the kind of turnaround we've seen on Special K, we are seeing distribution losses subside and velocities begin to stabilize. The team is making good progress on renovation and innovation plans, and we expect to see the fruits of these efforts begin to come through in improving trends over the coming months and as we enter 2016.”
John Bryant, CEO and chairman of Kellogg, said Project K – the company’s global cost cutting program launched back in 2013 – would assist in creating funds to reinvest back into Kashi.