The Pringles and Cheez-It maker outperformed Wall Street expectations but faced headwinds from a decline in volumes in its most recent quarter.

Kellanova’s ‘stronger commercial plans are taking hold’ after raising prices, CEO says

Courtesy of Kellanova

Dive Brief:

  • Kellanova organic sales rose 5.4% from the prior year in its most recent quarter after the snacking company increased prices in North America by 4.8%. CEO Steve Cahillane said on its earnings call the company’s “stronger commercial plans are taking hold,” and that it is progressing ahead of schedule in improving its profitability.
  • The earnings news came as Reuters reported activist hedge fund TOMS Capital Investment Management had taken a “significant” stake in the Cheez-It and Pringles manufacturer, according to anonymous sources. Cahillane chose not to comment on the reported investment in an interview with CNBC.
  • While sales increased, volumes declined 4.7% in North America in the first three months of 2024 from the same period a year ago, which the company attributed “industry-wide volume softness.”

Dive Insight:

The CEO said Kellanova is looking for ways to grow revenue, such as by changing the size of some of its products. Cahillane was quick to note this did not mean shrinkflation.

“[The goal is] making sure that you can hold your margin and hit a price point, and sometimes that means a smaller size,” Cahillane said.

The potential involvement from the activist firm could significantly impact how the company operates, especially as Kellanova establishes itself as a standalone snacking company.

Last Thursday, CNBC’s David Faber said the hedge fund could now be one of the five biggest shareholders in Kellanova, according to Seeking Alpha. The size of the stake is not currently known. TOMS Capital Investment previously worked to enact changes at CPG giant Colgate-Palmolive.

Other large food companies have faced pressure from activist investors. This has led them to undergo significant operational changes to appease the powerful stakeholders.

Nestlé overhauled its portfolio and reduced its stake in cosmetics giant L’Oréal after Daniel Loeb acquired a 1.25% share in the Switzerland-based CPG giant in 2017.

Private-label food maker Treehouse Foods sold off its meals business after Jana Partners made a roughly 9.2% investment in the company in 2022. And Danone ousted its CEO and remade its board after investment firm Artisan Partners took a 3% stake in the dairy and bottled water company.

In an emailed statement, Kellanova spokesperson Kris Bahner declined to comment, saying the company does not disclose details about conversations with investors.

TOMS Capital Investment did not respond to a request for comment at press time.

  • Kellanova bites into sweet snacks with Pop-Tarts Crunchy Poppers By Chris Casey • April 5, 2024
  • Kellogg embarks on new future, finalizing split into two businesses By Chris Casey • Oct. 2, 2023

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