Market Overview

Will Kellogg's Pringles Thanksgiving Dinner Boost Demand?


With Thanksgiving around the corner, Kellogg Company's K acquired brand Pringles introduced a snack named Pringles Thanksgiving Dinner in eight new flavors.

This new thanksgiving-themed snack is not available for retail sale. To ensure that the latest flavors meet consumer expectations, the snack has been launched as a pilot taste test in limited quantity.

Notably, the buyout of Pringles, the biggest brand of Kellogg, has helped the company offer a more balanced cereal and snacks basket and gain traction in international markets. Pringles ended 2016 with solid mid-single digit growth and the company continues to see strong growth in emerging markets across all categories — cereal, wholesome snacks and Pringles. In fact, Kellogg concluded 2016 with double-digit internal growth in its Mediterranean Middle East business and Russian business.

The latest addition is in line with Kellogg's efforts to diversify its product line. The company has been channeling funds toward product and packaging innovation as well as reformulation of existing products to meet the rapidly changing taste of consumers pertaining to health and wellness. The new flavors are expected to drive demand for wholesome snacks, helping the company gain further traction.

However, despite Pringles' robust Asia-Pacific performance in third-quarter 2017, the overall snacks business in the United States has been weak since 2013 owing to low volumes. Shift in consumer preference toward healthier food options has been particularly hurting the company's sales along with that of food giants like General Mills, Inc. GIS B&G Foods, Inc. BGS and Mondelez International, Inc. MDLZ.

In fact, the wholesome snacks business has been weak in the past few quarters due to lack of effective innovation. Though management is working to revive the business through investments in innovation and better in-store execution, the efforts are yet to show results. In the first nine months of 2017, the U.S. Snacks segment's net sales dropped 3.6% year over year (also organically).

Meanwhile, shares of Kellogg have underperformed its industry so far this year. The company's shares have lost 11.4% when compared with the industry's decline of 8.2%.


Nevertheless, continuous expansion of product line and restructuring initiatives are expected to drive growth and profits for Kellogg.

In fact, earnings estimates for the current year have inched up 1.3% over a month, reflecting analysts's optimism over the stock's prospects.

Kellogg currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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