FDA Probes Video of Man Urinating on Kellogg's Factory Line
Kellogg Company K announced on Monday that the U.S. Food and Drug Administration (FDA) has launched a criminal investigation into a video showing a man urinating on a Kellogg factory assembly line.
According to Kellogg, the video was recorded in 2014 at its Memphis, TN factory. The cereal maker became aware of the video posted online on Friday and has launched an internal investigation into the matter. The company believes that any product that might be affected must be well past expiration dates. These products include Rice Krispies Treats, granola clusters used in a couple of products, and a few other puffed rice treats that it no longer manufactures. The individual in the video has not been identified yet.
The news comes at a time when Kellogg is seeing some positive momentum after a tough spell.
Kellogg had been struggling to grow in the couple of years prior to 2015 mainly due to weak performance by its developed market cereals and the U.S. snacks businesses. However, product launches and brand building investments funded by savings from its restructuring program — Project K — led to better-than-expected sales trends in 2015, especially in the U.S. cereals businesses.
In order to improve the sales performance, Kellogg launched campaigns supporting the breakfast occasion. It is also investing in in-store capabilities, product and packaging innovation as well as reformulation of many existing products to drive demand. Specifically, the company redesigned and re-launched Special K as a healthy lifestyle brand in line with the changing consumer trends.
It seems that these activities yielded positive results as cereal trends improved in 2015, especially the performance of the Special K brand. Management expects Special K sales to continue to improve in 2016 backed by product introductions, such as Special K Nourish, which is seeing good early response.
Management seems optimistic that the positive sales momentum will continue in 2016 which, coupled with lower commodity costs and savings from Project K and zero-based budgeting, can improve profits in 2016.
Kellogg has a Zacks Rank #2 (Buy). Other food stocks worth considering are Campbell Soup Company CPB, J&J Snack Foods Corp. JJSF and Pinnacle Foods Inc. PF. While Campbell Soup sports a Zacks Rank #1 (Strong Buy), J&J Snack Foods and Pinnacle Foods have the same Zacks Rank as Kellogg.
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