Keebler Acquisition Stretched and Tested Kellogg

The Keebler acquisition stretched and tested Kellogg and made it the company it is today, according to Dave Fusaro's monthly column in Food Processing.

By Dave Fusaro, Editor in Chief

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There is a discipline about Kellogg Co. It's apparent from the company's board room and management offices to the RandD labs to the manufacturing plants. We heard it from all the Kellogg people we talked to and felt it as we walked the halls of company headquarters in Battle Creek, Mich.

This much discipline is ironic, given this is a company personified by whimsical characters, many of whom are on our cover. But beneath the tiger stripes and the elves living in trees is a very careful and deliberate company.

To say Kellogg is conservative is like saying Bill Gates is well-off. The company history is dotted with carefully weighed decisions, incremental advances and tightly run plants. All that says discipline and conservatism but also stability. Evidence of this is the long tenure of many Kellogg employees, especially its management.

Six years ago, when it was apparent Keebler Foods was in play, I was surprised to hear Kellogg was one of the bidders … and the eventual winner of the No. 2 cookie and cracker company. At $4.56 billion, this would have been a blockbuster deal for just about any company. It was even more audacious for Kellogg, which was about 99 percent cereal-based, not known as an acquirer (although it had bought Kashi and Worthington Foods) and very averse to debt.

Today's Kellogg public relations people paint that Keebler acquisition as a no-brainer that went without a hitch. But the Keebler people I knew at the time said it was a questionable combination, and the integration was chaotic (add at least a few grains of salt). I assume the truth lies somewhere in between. But it's apparent the Keebler purchase grew much more than Kellogg's markets and revenues. It stretched company executives to manage a new business with far-flung assets that were considerably different than theirs. It made W. K. Kellogg's cereal company a cereal-and-snacks company. And it challenged every Kellogg employee to find ways of saving money to pay for this large deal.

But they all responded well. Carlos Gutierrez, chairman/CEO at the time, wrote in the 2001 annual report, "We successfully managed through one of the greatest periods of change in our company's history, sacrificing short-term sales and earnings growth in order to lay the foundation for greater value creation in the future."

So, six years later, how's that deal and the integration of Keebler being scored?

We'd ask Gutierrez, but someone in Washington thought highly enough of him to name him secretary of commerce in 2005.

Most of the financial analysts we talk to put Kellogg near the top of their list of admired public companies. Chris Growe, an A.G. Edwards and Sons analyst we call upon often, says our recognition of Kellogg is long overdue. "Kellogg's emergence as a top-tier food company began six years ago, and today's robust growth profile is evidence of the truly strong category exposure and diligent management of this company."

In this issue, we take three looks at Kellogg: a business-oriented overview story, a look at the product development process and a peek into manufacturing.

Kellogg is just our second Processor of the Year. Tyson last December was our first. Our Processor of the Year criteria are:

  • Sound financial performance (including expanding sales and profitability).
  • Innovative product development.
  • Leading manufacturing technology.
  • Managerial excellence.
  • Commitment to quality.
  • Industry leadership and service.

The Processor of the Year process includes input from our staff and our Editorial Advisory Board, as well as online voting by our readers on www.FoodProcessing.com.

From the plant operators and food technologists up through the managers, our congratulations go to the entire Kellogg organization. But take a pointer from your characters on our cover and celebrate a little the fine organization you have.

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