- Kellogg is planning to cover higher input costs due to skyrocketing inflation with higher prices and productivity, CEO Steve Cahillane told CNBC on Thursday.
- “We don’t want prices to get too high, but we’re in an environment where it’s broad-based, it’s across everything, but we’ve been able to cover it. Our pricing performance has been very solid,” he said.
- Cahillane said that price elasticity has been at historic lows, but Kellogg still plans to be cautious about raising prices this year.
Kellogg is planning to raise prices and increase productivity to offset the skyrocketing inflation it’s seeing for input costs, CEO Steve Cahillane told CNBC on Thursday.
“As we enter 2022, we are still seeing double-digit cost inflation,” Cahillane said on “Squawk on the Street”
“We’re going to see the wraparound benefits of the pricing that we took in 2021 into 2022 … but our goal is to cover all of those input costs with pricing and productivity, and we think we’re in very good shape to do that.”
The chief executive’s comments come after Kellogg before the bell reported better-than-expected profit for its fiscal fourth quarter, with earnings per share of 83 cents topping estimates by 4 cents, according to FactSet.
Kellogg shares were up nearly 3% on Thursday afternoon, as investors also reacted to the company issuing a full-year profit growth outlook that exceeded Wall Street’s expectations.
Implementing price hikes last year helped boost the company’s profits and combat the inflationary pressures it was experiencing. Cahillane said customers have been willing to pay up even with higher price tags, but Kellogg still plans to be cautious about marking up prices this year.
“We don’t want prices to get too high, but we’re in an environment where it’s broad-based, it’s across everything, but we’ve been able to cover it. Our pricing performance has been very solid,” he said.
The company’s cereal segment took a hit last quarter due to worker strikes. Cahillane said other parts of the company’s portfolio “more than made up for” cereal’s underperformance last quarter, and he expects the line to recover now that employees are back at work.
“For 2022, what we’re really looking at is the first half of the year, a recovery of our inventory, a recovery of our distribution, a restoration of our commercial plans, which will lead to a back half of the year that sees growing momentum in our cereal business and a real return to normal,” he said.
Cahillane said Kellogg may also make some deals this year, citing the company’s strong financial position.
“We’ve got dried powder to think about additions to the portfolio if they add shareholder value … but we’re very disciplined when it comes to price,” he said.
Source: Business - cnbc.com
