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Kellogg (K) Introduces New Flavor to Revive Cereal Sales

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Kellogg Company K is launching a new flavor of cereal under the Kellogg's Frosted Flakes brand. The latest Kellogg's Chocolate Frosted Flakes has been developed in collaboration with the company’s consumers.

To ensure the latest flavor meets consumer expectations, Kellogg ensured consumer participation in almost every step of the development process of Chocolate Frosted Flakes by “testing how different cocoas interacted with the cereal flake and the milk left at the bottom of the bowl.”

Kellogg’s mainstay U.S. cereal business, which accounts for 40–45% of sales, has been performing poorly since 2012 due to sluggish category growth. Revenues at the U.S. Morning Foods segment, which includes cereals, slipped 6.5% in the first six months of 2017.

Lower demand for cereals due to competitive pressure from other breakfast alternatives, including yogurt, eggs, bread and peanut butter, has been hurting category growth. Moreover, changing consumer preference toward healthier products has hurt sales of Kellogg’s along with that of other food giants like General Mills, Inc. (GIS, B&G Foods, Inc. BGS and Mondelez International, Inc. MDLZ.

The latest addition is expected to boost cereal demand to some extent. The company is making aggressive efforts to improve its product line. It is channeling funds toward product and packaging innovation as well as reformulation of many existing products to meet the rapidly changing taste of consumers pertaining to health and wellness.

This apart, Kellogg’s is focused on its restructuring program (Project K) to drive growth and profitability. The program aims to optimize the supply chain, improve productivity and bring a new global focus on categories. The company also started an aggressive zero-based budgeting program in 2015 in its North American business to generate savings in addition to that from Project K.

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