The multinational company, known for a variety of cereal and snack brands, experienced the highest stock surge in over a year last week. This trend is in lockstep with a bundle of other food product giants faring well in an otherwise global economic spiral instigated by the COVID-19 strain.
But as the virus spreads, the company has taken unspecified preventive measures to protect the pandemic from hurting Kellogg’s 180-nation manufacturing plants.
“We are taking proactive, precautionary measures to manage business continuity, including plans to help ensure we have sufficient ingredients, packaging, inventory and logistics support,” said Kellogg's spokesperson Kris Bahner.
She added production plans frequently change based on consumer demand, but didn’t elaborate on what the ‘proactive, precautionary measures’ are that the company plans to implement during the COVID-19 outbreak.
Food stockpiling
Meanwhile, Kellogg’s earnings are projected to go up the next two quarters. As of Tuesday, shares were valued at $69. Since March 12, its value has continued to climb.
Kellogg’s and other companies with a wide array of non-perishables – such as Campbell Soup and General Mills – have fared well as quarantine fears push shoppers to load up on long-lasting food products. Such items are typically distributed to grocery stores, which have gulped a share of the global food market due to government-mandated restaurant closures.
“Consumers are stocking up, which is causing a short-run demand boost,” said Dr Jayson Lusk, a food and agriculture economics professor at Purdue University in West Lafayette, Indiana.
“In addition, consumers are shifting food purchases from restaurants to at-home consumption, which is helping companies that mainly sell in grocery type outlets.”
Should COVID-19 spread throughout the workforce later on, labour shortages would spell trouble for Kellogg’s and companies of its ilk, Lusk said.
Projected growth
Weeks before coronavirus was declared a pandemic by the World Health Organization, Kellogg’s projected 1%-2% growth in 2020, hitting lower than analysts expected. Projections included broad growth in Africa, steady growth in Europe, top-line profits in North America, and some headwinds in Latin America following a transition between distributors.
Additionally, the company expected snack sales to leap and cereal sales to dip.
Kellogg’s carries a wide net of brands. Luxembourg-based Ferrero Group acquired a fraction of its brands for $1.3bn in early 2019. Kellogg’s, however, still carries a large chunk of the grocery market with popular multinational products like Pop-Tarts, Rice Krispies and Nutri-Grain.
Without specifying what products are currently wooing consumers and where sales are hot, Bahner said the company has “seen high demand for some of our foods in some areas”.
Coronavirus relief efforts
While undisclosed products are faring well during the pandemic, Kellogg’s has also funnelled some of its resources for coronavirus relief efforts through charity initiatives, gifting $500,000 to Global FoodBanking Network and Feeding America, two organisations committed to feeding poor children in closed districts who rely on school meals. The breakfast cereal giant has also provided smaller hunger relief donations during the outbreak, including a $100,000 gift to an emergency relief fund in Kalamazoo, Michigan.
“We will continue to actively evaluate where additional support is needed,” said Bahner.
Kellogg’s is headquartered in Calhoun County, one of 68 Michigan counties without any confirmed coronavirus cases. There are 272 cases in the state, most of which are in the Detroit Metropolitan Area.
As of press time, the US has reported 5,303 cases and 100 deaths. There are nearly 200,000 cases and more than 7,000 dead from the Chinese-born illness across the globe.
Tyler A. McNeil is an American business journalist based in Troy, New York. He’s written for the Schenectady Daily Gazette, Albany Times Union, CivMix, Southern Saratoga Magazine, and New York Upstate.
