Kellogg demand causes cereal shortage

Brian Sozzi discusses how high cereal demand has led to a shortage in the supply of some popular cereals.

Video Transcript

JULIE HYMAN: Sugary cereals are in short supply. It sounds like a tongue twister, as I say it, but it's something we talked a little bit about yesterday. Brian Sozzi, why are these things? I mean, we know that almost everything is in short supply. Why specifically for these cereals?

BRIAN SOZZI: Some day two coverage here, Julie and Myles. So we were talking about the supply shortage in Fruit Loops that Myles brought up coming off of Kellogg's earnings. And right after the show, I talked to Kellogg's CEO Steve Cahillane. And I asked, where's the Fruit Loops? If I go down the aisle, am I going to be able to get my Toucan Sam? And he said, yes, Brian, you will be able to get your Toucan Sam. But maybe you won't be able to buy that second box because the supply is still very short out there.

And what it boils down to, Kellogg's is still dealing with a crush of demand or the crush of demand that they felt last year at the height of the pandemic, where everybody went and stocked up their cupboards. So that put a lot of stress, I think, on their manufacturing processes. You know, in addition to this-- in addition to Fruit Loops, also in this production line for Kellogg's is Apple Jacks and Corn Pops. Now these are some of the top three cereals in the entire supermarket. So I think it's just a matter of Kellogg's just adding more production.

Now Cahillane did tell me that in the second half of the year, this limited supply of Fruit Loops, Apple Jacks, and Corn Pops will be less of an issue. They expect it to be back in full supply, which is good because once they are back in full supply, they can go back to offering promotions to cereal fans, such as me and Myles. Julie, I know maybe you're not so big on the sugary cereals. But they have not been able to come out and give really great coupon deals on cereal. Because when that happens, they sell out of the stuff. So they pulled back on promotions. So, very interesting stuff here.

I did also obviously ask him about inflation. He was hesitant to say we have raised prices on inflation. They kind of call it revenue management, which is another way of thinking maybe they take a couple of pieces of cereal outside of the box. Maybe they use a different-- put a little more air inside the box. Anyway, that's the lowdown in the cereal aisle.

JULIE HYMAN: You know, it's interesting. There was a great sort of deep dive earlier in the week from Bloomberg about the difficulty in making more chips. And one of the reasons behind the chips shortage is just the incredible complexity involved in making chips in this sort of hermetically sealed environment and nanotechnology. One doesn't imagine you have some of the same problems with cereal manufacturing. You would think that that is an easier process, and so, therefore, easier maybe to expand production there.

All right, we're going to take a quick break. When we come back, we'll be talking more about that jobs report, as well as we talked about some earnings from here. We're going to go to Europe and talk about some big earnings reports there as well.