Kellogg Co raised its full-year sales and profit forecasts staking that demand for its cereals and snacks will hold strong even after multiple rounds of price increases.
Kellogg’s joins other major food and beverage companies, including Oreo maker Mondelez International Inc, Coca-Cola Co and PepsiCo Inc, in using its brand power and distribution scale to pass on pass price increases to consumers, while seeing little pushback in demand.
The cereal giant is in the process of a three-way break up of its business, said overall average selling prices rose 15.7% in the third quarter, while volumes fell 2.3%. Sales volumes rose in North America, the company’s biggest market, but fell in overseas regions.
Still, as household budgets, particularly for lower-income consumers, get increasingly pinched due to stubbornly high inflation, analysts warn that Kellogg could start to lose out to cheaper store-brand cereals.
Surging commodity and transportation costs and the impact of a stronger dollar on overseas revenue also led to an 18% fall in the company’s third-quarter operating profit. Kellogg’s shares fell about 1% to $75 before the bell in a weak broader market.
The company now expects annual organic net sales to increase by over 10%, compared with its prior forecast of an increase of 7% to 8%. Kellogg forecast adjusted full-year profit per share to rise over 3% on a currency-neutral basis, compared with a prior outlook of over 2% growth.
The company’s net sales rose 9% to $3.95 billion in the third quarter ended Oct. 1. Analysts had expected revenue of $3.78 billion, according to Refinitiv IBES data.