Kellogg earnings show breakfast troubles

Kellogg Co., maker of breakfast brands such as Cocoa Krispies cereal and Eggo waffles, said its U.S. morning foods unit suffered a 3.3% sales decline in the second quarter.

Overall North American sales were up 3.3% to $2.4 billion, while the American snacks division soared 8%. But growth in the cereal category “was disappointing,” Chief Executive John Bryant told analysts during a conference call Thursday.

Brands such as Special K, Raisin Bran and Frosted Flakes performed well, but the adult cereal segment was weak, Bryant said.

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“Sales growth has been slower than we anticipated in developed markets, particularly the U.S.,” he said.

The Battle Creek, Mich. company has faced not only pressure from General Mills, which makes Lucky Charms and Cheerios, but also competition from fast food outlets such as McDonald’s and Taco Bell.

The quick-service restaurant industry is ramping up its efforts to offer convenient breakfast meals to increasingly on-the-go Americans.

Kellogg, which acquired the Pringles chips brand last year, said its net revenue increased 6.9% to $3.7 billion, which fell under Wall Street’s expectations. Net income rose to $352 million, or 96 cents, from $324 million, or 90 cents a year earlier.

The company plans to increase its advertising spending in the third quarter. In early afternoon trading in New York, Kellogg stock was down 1.5%, or 96 cents, to $65.28 a share.

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