Pringles maker Kellogg pushes product launches to second half as virus raises costs

(Reuters) - Kellogg Co K.N said on Thursday it would push product launches to the second half of 2020, as the breakfast cereal maker invests into additional warehouse space and logistics to meet higher demand brought on by coronavirus-led stockpiling.

FILE PHOTO: Kellogg's cereal is shown on display during a preview of a new Walmart Super Center prior to its opening in Compton, California, U.S., January 10, 2017. REUTERS/Mike Blake

Restrictions on movement put in place to arrest the spread of the pandemic have boosted sales for packaged food makers, including Kellogg, Hershey Co HSY.N and Mondelez International Inc MDLZ.O, as consumers stock up on snacks, baking products and cereals.

While demand has risen, companies including Kellogg have had to spend more on bonuses, transportation, safety equipment and technology that facilitates working from home.

The increase in costs has forced the Pop-Tarts maker to delay the first wave of its launch of Incogmeato meat-alternative products to later this year from the first quarter, at a time when food producers including Maple Leaf Foods Inc MFI.TO have pointed to higher demand for plant-based meat products.

“We’ve shifted investment out of the first half, given the current situation, and into the second half. And for now, we remain focused on supplying the market with food,” Chief Executive Officer Steven Cahillane said on a post earnings call.

During the first quarter, which ended March 28, Kellogg beat Wall Street expectations for sales and profit, benefiting from a spike in demand for packaged food items in March, but the company expects sales to moderate in the coming quarters.

Shares of the company rose nearly 4% as it also reaffirmed its forecast for the year.

“Investors will find the reiteration of FY20 guidance as positive given the recent wave of withdrawals across the industry,” Wells Fargo analyst John Baumgartner said.

Overall organic sales, which exclude acquisitions, divestitures and foreign exchange impact, rose 8% in the quarter as sales for cereals in North America turned positive for the first time in at least five quarters. Organic sales for frozen foods and snacks also grew.

Kellogg’s quarterly net sales dropped 3.1% to $3.41 billion, hurt by the sale of its Keebler cookie business and some other assets to Nutella maker Ferrero SpA, but beat analysts estimate of $3.39 billion.

Excluding items, the maker of Frosted Flakes earned 99 cents per share for the quarter, beating market expectations of 95 cents, according to IBES data from Refinitiv.

Reporting by Praveen Paramasivam in Bengaluru; Editing by Devika Syamnath and Vinay Dwivedi