Processor of the Year: Kellogg — The original health food company

Since then, Kellogg has opened many markets and manufacturing plants, with sales in 180 countries and manufacturing plants in 17 of them. In some cases, Kellogg built the business and operations, and in others the company acquired them.

Latin America has been a star. Sales there grew 11 percent in 2005, exceeding even Kellogg managers’ expectations (Kellogg would not provide specific sales figures for geographic areas or any other segments). Both cereal and snacks grew by double digits. Kellogg has had a plant in Mexico since 1951. As a result of that long tenure there, Kellogg has 71 percent category share in Mexico.

Europe has been challenging. European sales posted internal growth of 2 percent in 2005, which Kellogg officials termed in line with goals. Even more challenging is Asia-Pacific, including India and Australia. Sales crept up 1 percent in 2005. While corn flakes typically are the tip of the spear, and Special K was just introduced in Japan in 2005, Kellogg has adapted to meet local preferences with products such as Brown Rice Flakes and Black Bean Flakes in Korea, for example.

But the overseas ventures also have been the sources of some of the greatest product innovation and brand development. The Special K Challenge, the highly effective diet promotion currently in the U.S., was first researched in the U.K. before its U.S. launch in 2002. All-Bran was invigorated with line extensions that included yogurt and flakes in the U.K., cereal bars in Mexico and a two-week All-Bran Challenge in Mexico. Now All-Bran is the company’s fastest growing global brand, and U.S. brand managers are looking for opportunities to bring the line new success in the U.S.

The future

Don’t look for anything too flashy from this conservative company. “Organizational focus is one of Kellogg Co.’s competitive advantages,” says Jenness. “We operate in only a few categories, and we know them well.”

Financial growth is conservative, as well. “Our long-term internal revenue growth target is for low single-digit growth,” the chairman adds. As a result, the company has never disappointed Wall Street.

But there are signs the company is pushing its Special K brand as the next megabrand. Several successful but safe line extensions, all within the cereal, cereal bar and snack categories, have propelled Special K to global sales estimated at $500 million. More of a stretch, a month ago Kellogg unveiled Special K2O protein waters, protein snack bars and protein meal replacement bars. All will be marketed in the diet and nutrition sections of stores. Special K Chocolatey Delight will be launched in January.  The new cereal is designed to allow weight managers to enjoy a decadent-tasting night-time snack while staying on track with their goals. And the brand is appearing in the U.K. on “personal trainer watches,” which calculate calories burned.

A significant but not surprising managerial change came last month in the midst of writing these stories. David Mackay, a 21-year veteran of the company (except for six years at Sara Lee) was elevated from chief operating officer to CEO, a title Jenness has held since his election as chairman in 2005.

“David’s promotion to our CEO is great — great for our company and great for our shareowners,” says Jenness. “This move locks in and further builds visibility for our strong management continuity.  It ensures we stay 100 percent committed to our overarching sustainability performance driver, managing the business with realistic goals and leveraging our focus strategy and operating principles. It also ensures continued appreciation for and belief in the legacy of our founder, Mr. Kellogg. Our Kellogg folks around the world see David’s promotion as a positive, natural, well-deserved succession.”