With $13bn in net sales in 2022, excluding those from cereal brands that are spinning out as WK Kellogg Co, and “good margins and cash flow,” Kellanova has a strong foundation and proven track record for growth with a 7% four year average net sales increase compared to its snack peers’ median growth of 6% in the same period, Cahillane said.
On top of this, the new company will apply “greater focus and a newly refreshed strategy” dubbed “differentiate, drive and deliver,” he added.
He explained this strategy will push Kellanova “to pursue differentiation in everything we do, from prioritizing resources behind our most differentiated brands today, to creating more differentiation for other promising brands in our portfolio. It means differentiating our marketing, both in approach and content. It means differentiating our service to our customers from data and insights to supplying their shelves.”
The new strategy also will focus on “delivering on our commitments to our employees, our commitments to our suppliers, our customers and our communities,” as well as investors, he added.
Driving growth across the portfolio with innovation, ‘world-class marketing’
A fundamental component of Kellanova’s “sharpened” strategy is to invest in building global awareness and reach of its top-selling brands, including Pringles, Cheez-It, Pop-tarts, Eggo and Rice Krispie Treats – all of which the company says grew double digits in 2022.
It plans to do this in part by introducing more small- and multi-pack options to meaningfully increase its penetration in high frequency stores in developed markets and mom and pop shops in developing markets, Cahillane said.
“There is significant upside for our key brands just by catching up to the category in terms of percentage of sales coming from small packs for immediate consumption,” he said, pointing to small pack sales of Pringles, which significantly trail those of the broader salty snack segment in the US, UK, Brazil and Mexico.
“We have also under-index shares in multipacks, whose growth has outpaced our capacity on that format,” he added, noting that Kellanova is already investing in increased capacity.
The brand plans to further “delight” consumers and drive growth through differentiated innovation – a strategy already in place.
“In the past few years, while contending with supply chain disruptions, we sustained a strong pipeline of innovation. These went beyond new flavors and into new platforms – Like Cheez-It SNAP’d and Cheez-It Puffed,” he said, adding: “With supply disruptions finally receding we can accelerate our innovation efforts.”
These will include further renovations, including reducing sugar and sodium, and revamping packaging – such as its fully recyclable Pringles can, he said.
Kellanova will further support innovation with “world-class marketing capabilities” that leverage data “to power insights and personalization of offers and messaging” and “identify buying patterns and consumer affinities to better target our paid media,” Cahillane said.
“These actions are clearly paying off. We have driven a 30% uplift versus business as usual, and our AI optimized creative is driving double digit increases in our video completion rates,” he added.
‘Perfect service & store’
Kellanova will further drive growth by making its products available wherever the consumer is shopping – which increasingly includes convenience stores and ecommerce, according to Cahillane.
He reiterated the company’s plan to leverage smaller pack sizes to access more stores with small footprints and high foot traffic.
“Another rising channel continues to be for us e-commerce,” where Kellanova saw double digit growth through 2022 and into 2023 and which now accounts for more than 7% of sales globally, Cahillane said.
He added that following the spinoff, Kellanova will dedicate more resources to commercial execution, including increased category focus, enhanced shopper analytics and insights, enhanced pre-build capabilities for displays, expanded store-level analytics and incremental feet on the street.
The company predicts these strategies should improve its margins and consistently strong performance, including targeted net sales of 3-5%, operating profit of 5-7%, and earnings per share growth of 7-9%.