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    kellogg annual reports 2007 kellogg annual reports 2007 Document Transcript

    • ® Sustainable Dependable Performance TM 2007 ANNUAL REPORT
    • Kellogg Company 2007 Annual Report TM Sustainable Total Shareowner Return Net Sales (million $) Dependable 20% 11,776 19% 18% Performance 10,907 16% 15% 10,177 9,614 Vision To be the food company of choice. 7% 5% 8,811 3% -1% Mission To drive sustainable growth through the power of our people and brands Kellogg S&P Packaged by better serving the needs of our consumers, customers and communities. Foods Index -8% 03 04 05 06 07 03 04 05 06 07 For the seventh consecutive year, Net sales increased again With 2007 sales of nearly $12 billion, Kellogg Company is the world’s leading producer of cereal Kellogg Company’s total return to in 2007, the seventh and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal shareowners exceeded that of the consecutive year of growth. bars, fruit-flavored snacks, frozen waffles, and veggie foods. The Company’s brands include Kellogg’s ®, S&P Packaged Food Index. Keebler ®, Pop-Tarts ®, Eggo ®, Cheez-It ®, Nutri-Grain ®, Rice Krispies ®, Morningstar Farms ®, Famous Amos ®, Special K ®, Stretch Island ®, All-Bran ®, Frosted Mini-Wheats®, Club ® and Kashi ®. Kellogg products Cash Flow (a) (million $) Net Earnings Per Share ($) (diluted) Operating Profit (million $) Dividends ($ per share) are manufactured in 18 countries and marketed in more than 180 countries around the world. 1,868 Table of Contents 1,031 2.76 1.20 1,766 1,750 1.14 957 950 1,681 Letter to Shareowners 2 2.51 924 1.06 2.36 1,544 1.01 1.01 Global Operations 8 2.14 769 Sustainable Dependable Global Brands 14 1.92 Our Nutrition Heritage 15 Our People 16 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 Including over $60 million of Dividends per share have Operating profit increased Earnings per share of $2.76 Environmental Sustainability 18 voluntary pension contributions, increased 19% over the past despite significant cost were 10% higher than 2006. Corporate Social Responsibility 20 cash flow for 2007 remained 3 years. inflation and continued strong at $1.03 billion. reinvestment into our business. Corporate Officers 22 Board of Directors 23 Financial Highlights Manufacturing Locations and Brands 24 2007 Change (dollars in millions, except per share data) 2006 Change 2005 Change Annual Report on Form 10-K $11,776 8% Net sales $10,907 7% $10,177 6% 44.0% -0.2 pts Gross profit as a % of net sales 44.2% -0.7 pts 44.9% - 1,868 6% Operating profit 1,766 1% 1,750 4% 1,103 10% Net earnings 1,004 2% 980 10% Net earnings per share 2.79 10% Basic 2.53 6% 2.38 10% 2.76 10% Diluted 2.51 6% (b) 2.36 10% Cash flow (net cash provided by operating 1,031 8% 957 24% 769 -19% activities, reduced by capital expenditure) (a) $1.20 5% Dividends per share $1.14 8% $1.06 5% (a) Cash flow is defined as net cash provided by operating activities, reduced by capital expenditures. The Company uses this non-GAAP financial measure to focus management and investors on the amount of cash available for debt repayment, dividend distributions, acquisition opportunities and share repurchases. Refer to Management’s Discussion and Analysis within Form 10-K for reconciliation to the comparable GAAP measure. (b) Comparable 2006 earnings per share growth of 11% excludes $65 million ($42 million after tax or $.11 per share) of costs attributable to the Company’s adoption of a new accounting standard that required the expensing of stock options.
    • TM At Kellogg we have an unwavering focus on the long-term health of our business. Letter to Shareowners Thanks to the hard work and passion of Kellogg Kellogg employees achieved these solid results Operating efficiencies. We continued the disciplined Brand building. In 2007 we continued to focus on Company employees around the world, 2007 was despite being faced with the most difficult operating funding of projects that will provide cost efficiencies building our brands through advertising and consumer another year of continued sales growth, strong environment our industry has experienced in many and enhanced productivity into the future. It has promotion. In fact, we spent more than $1 billion on financial results and increased shareowner return. years. World commodity prices for many of our raw become a part of the Kellogg culture for employees advertising this year. We also focused the expertise The growth was broad-based across categories and materials spiked to all-time highs. Fuel and energy throughout all areas of the organization to of our marketing and promotions groups geographies. Here are some highlights: inflation was dramatic, but the cost pressure did not continually assess our supply chain and throughout the world on increasing the • Ex S a les Net shake the solid foundation upon which we have network for potential improvements desirability of our brands and building pan al d rn Gr • Net sales increased 8% to $11.8 billion. built our business – a business model that is simple, in simplicity, effectiveness, cost consumer brand loyalty. Advertising te resilient and designed to deliver sustainable growth. control and quality. Solutions and and consumer promotions build os In • Internal net sales, which excludes the effects of s row Kellogg people rose to meet this year’s challenges system enhancement projects sustainable brands sought by Pr currency exchange rates, increased more than 5%. ofi P r ic e/Mi x • G by delivering compelling innovation, exciting new are initiated at all levels of consumers and selected as t • Incre a s e B r • Internal operating profit increased by 3%. SUSTAINABLE advertising and cost efficiencies around the world. the company, and there is a household mainstays. We 2 3 • Diluted net earnings per share (EPS) grew 10% This dedication to superior execution is characteristic pervasive sense of accountability focused on increasing our GROWTH to $2.76. of Kellogg employees everywhere, and we sincerely for keeping our cost structure presence with more targeted thank each person in our organization for their lean while continuing to produce communications at a lower cost, • Cash flow was over $1 billion, or 9% of net sales. ase commitment to success and their passion for results. We believe this is the right allowing us to invest more in our an • Total shareowner return was 7%. e cr our business. way to run our business day-in, best ideas. d In B ui • The dividend was increased by 7% starting in the day-out, which is why we account ld • ing on third quarter. ati A proven business model. At Kellogg we have an for these up-front investment costs By continuing these significant • D ri ve In n o v unwavering focus on the long-term health of our within our P&L as part of the cost of investments, we are building a • This was our sixth consecutive year of growth in business. While we are realistic about the challenges doing business. This practice avoids the company with a solid future of dependable sales, operating profit and earnings per share. ahead, our performance in 2007 demonstrates the need for large, one-time charges that impair performance and consistent growth. Our • We reinvested in the business through increased strength of our business model and its capacity to earnings quality or obscure actual performance commitment to reinvesting in the business is a core brand building, innovation capability, expansion produce growth, even under difficult conditions. for a particular quarter or year. pillar of our sustainable growth business model. and cost-saving projects, all of which enhance Despite increased inflation, we continue to our future sustainable performance reinvest into our business. visibility. David Mackay (Left) President Chief Executive Officer Jim Jenness (Right) Chairman of the Board
    • We take a global approach to innovation, expanding and adjusting our portfolio to meet consumer needs around the world. TM Letter to Shareowners Realistic targets. Every day, we manage our business A clear and focused strategy. The focal points for expenditures. In 2007 this disciplined financial Innovation. Kellogg drives development and visibility in a way that supports its dependable, sustainable strategy again enabled continued and rigorous building our business have remained constant over of a robust pipeline of new products. In 2007 we performance. Our long-term targets of low single-digit review of costs while, importantly, funding the the past six years: continued our commitment to this key growth driver net sales growth, mid single-digit operating profit investments that will grow and sustain our business. by increasing our innovation. We take a global growth, and high single-digit EPS growth encourage • Grow our cereal business approach to innovation, expanding and adjusting our Flexibility. Our strong cash flow allows us to actively Kellogg people to prioritize their activities and make portfolio to meet consumer needs around the world. • Expand our snacks business good decisions that support the long-term health make decisions based on what is best for sustaining More than 270 new products or adaptations of other • Pursue selected growth opportunities of our business – not simply hit short-term, our business and for building shareowner return. successful products were introduced in 2007 alone unsustainable goals. Realistic targets drive In addition, our cash flow gave us the flexibility and we generated nearly $2 billion, about We remain committed to this the behaviors and decisions that most to repurchase 12.4 million shares of Kellogg 17% of sales, from products launched simple strategy because it et Income ro w N effectively deliver sustainable growth. Company stock, increase the quarterly dividend within the past three years. These • •G works. The effectiveness of Mi It’s the right way to run our business paid to shareowners and acquire companies in key results exceeded our long-term ni m IC 4 5 RO our strategy is proven, and and is responsible management of geographies or product lines that fit with our strategy. target of 15% of net sales from iz e se our results in 2007 and our shareowners’ interests. innovation and helped drive re a Co the momentum with re W I nc another year of improved sales MANAGE which we enter 2008 xibility • orking Capital • Financial vision. Strong cash volume, price and mix for are indicators of its flow generation. The ability to Kellogg Company. continued relevance. FOR CASH generate cash is an essential ial Fle Kellogg people component of a financially healthy Our innovation teams around around the world anc company. As a result of strong the world are focused on have embraced Dis in net earnings, disciplined capital developing value-added and nF c our strategy. ip ai expenditures and sound balance sheet differentiated products that in l int ed Ma Ca management, our cash flow in 2007 provide additional sales and/or p i ta l Expenditure • was over $1 billion, delivering again on improved economics. This focus our Manage for Cash operating principle. continually improves our already-strong Combined with our focused business strategy, portfolio by improving mix and producing our disciplined financial strategy creates a solid higher returns. Strong innovation, backed with platform for sustaining cash flow for years to come. solid marketing support, will drive top-line growth and keep our categories vital. Our commitment to Disciplined expenditure. Following the Manage for investing in innovation and research and development Cash principle keeps Kellogg people around the is another core pillar of our sustainable growth world focused on continually exploring strategies business model. In line with this, we are expanding for decreasing the amount of cash committed to the facilities and capabilities of our state-of-the-art working capital. It is part of the way we manage global research and development center, the W. K. our business every day. Furthermore, we are Kellogg Institute for Food and Nutrition Research. This committed to carefully planning and prioritizing is one way we will continue to drive top-line growth. the amount of cash we spend each year on capital
    • Our business model and our focused strategy served us well in 2007. TM Letter to Shareowners Entering 2008 with momentum. With our success Some of our strategic growth leverage Kellogg Company’s sales, grow operating profit, and continue to reinvest opportunities will show brand-building and innovation and continued investments in 2007, we enter 2008 in our business for future growth. In short, while tremendous potential right expertise, our understanding with confidence. Commodity and energy prices delivering strong growth in 2007, Kellogg people away, while others will take of the biscuit and ready-to-eat are projected to remain high and volatile, and around the world have set the stage for another year time and further investment cereal categories, with UB’s competition in the marketplace will likely intensify. of strong performance in 2008. to grow. Because we manage existing manufacturing, sales The year ahead will no doubt be challenging. our business for long-term and distribution infrastructure However, because our business model works, we are Finally, we thank our shareowners for valuing our performance with realistic to drive continued strong confident in our ability to deliver strong results yet long-term perspective on growth and investment. targets, we have the flexibility growth of this business. We again in 2008. We are confident we will grow net We are steadfast in our commitment to delivering to make strategic investments have stringent criteria for sustainable, dependable performance in the future. that strengthen the health of our assessing growth opportunities, and this investment company. Late in 2007 we made acquisitions relating was selected for its ability to create value in the long 6 7 to Bear Naked Inc., maker of all-natural granola and term and contribute to the sustainable, dependable trail mixes, and Gardenburger brand. growth of Kellogg Company. 2007 summary. Our business model and our Our emerging markets growth strategy moved forward significantly in 2007. We grew our ready-to-eat cereal focused strategy served us well in 2007. Throughout David Mackay Jim Jenness market share in Turkey to 22%. Before our 2006 joint the year, Kellogg people around the world President Chairman of the Board venture with local Turkish food distributor, Ülker, our successfully managed difficult external challenges Chief Executive Officer market share was just 2%. We are actively exploring – unprecedented commodity price increases and other international alternatives and have identified continued tough competition – and delivered another Eastern Europe and Asia as areas where we can year of strong earnings and increased shareowner enter developing markets with immediate scale and value. Each quarter of 2007, Kellogg Company was distribution capabilities. faced with higher input costs, and each quarter we were able to grow our business and increase our Early in 2008 we acquired The United Bakers investment in cost-efficiency projects. We raised Group (UB), one of Russia’s largest cracker, cookie our 2007 annual earnings guidance twice during and breakfast cereal producers. UB’s products, the year and ultimately delivered solid results. This marketed primarily under the Yantar and Lyubyatovo performance speaks to the power of our business brands, are a good strategic fit with the Kellogg model, and we remained focused on it despite the portfolio and expand our presence in international added challenges. In 2007, we continued to reinvest snacks and cereal markets. into our businesses through increased brand building and additional cost-saving projects. We continued to This acquisition is a long-term investment that invest wisely in key growth opportunities in strategic provides Kellogg with a tremendous platform for categories and geographies. Our innovation pipeline growth in a large and fast-growing market. We will continues to be substantial and dynamic.
    • By continuing to focus on nutrition, taste and convenience, Kellogg innovation really resonated with consumers. TM measured category share rising to 2008, we are excited about Keebler Fudge Shoppe Fudge Global Operations the move of Kashi snacks (bars, in 2007. This was driven by Stripes and Chips Deluxe. We innovations such as Sandies Butter cookies, crackers) to the DSD built upon these successes in Pecan Drops and Keebler Dipping distribution system. 2007 by introducing Right Bites North America Delights. Echoing this positive Fudge Shoppe Grasshopper and Ready-to-eat cereal. In 2007 we Mini-Wheats Strawberry and Rice The Pop-Tarts toaster pastry business progress was a strong performance assortment packs. saw sustained growth in our North Krispies Vanilla cereals, added to the from Famous Amos. continues to be strong and retains a American Retail Cereal business. strong sales growth. Additionally, category share above 86%. During Strong performances in our Cracker Plus, measured channel share grew our largest cereal brand in the Club 2007, we launched Pop-Tarts In 2007 innovation drove strong business came from power brands for the full year to 34.1%, making channel, Special K, experienced sales in Wholesome Snacks with the Printed Fun, debuting with Trivial including Club, Town House and this the seventh consecutive year broad growth. performance of Nutri-Grain Fruit & Pursuit and Barbie editions. Cheez-It, which all grew in dollar of share growth in the U.S. retail Nut bars, along with new flavors of This exciting innovation allows sales and measured market share. ready-to-eat cereal category. Snacks. North American Retail Kellogg’s Crunchy Nut Sweet & Salty consumers to enjoy edible printing This performance was aided by Snacks had a very good 2007. Our bars. Special K and Special K Honey on their favorite toaster pastries. innovation in Snack crackers, By continuing to focus on nutrition, business, consisting of cookies, Nut bars were also a huge success. including Club Puffed and Cheez-It taste and convenience, Kellogg crackers, wholesome snacks, Other snacks that performed well Stix. All-Bran has a hit innovation innovation really resonated with fruit-flavored snacks and toaster 8 9 include Kashi snack bars, which Canada had solid performances with All-Bran crackers, a strong All-Bran continues to be one of consumers. Our innovations, pastries, lapped strong 2-year from the popular All-Bran Snack continue to have significant repeat performer rated best snack cracker our strongest global brands, and including Special K Chocolatey growth rates by building on 11% in Bites, Munch’ems, Nutri-Grain, consumer purchases. Fruit Snacks by Women’s Health magazine. we launched All-Bran Strawberry Delight, proved a big success both 2006 and 7% in 2005. We posted and Kellogg’s Crunchy Nut Sweet & were innovative in the natural/ All-Bran continues to grow in Medley cereal in the U.S. in January at breakfast and as an evening 7% internal sales growth to finish organic channel with FruitaBü Salty bars. U.S. popularity. 2008. Kashi had another successful snack. Plus, perennial favorites the year. Smoooshed fruit products and in year and added to its popular line Raisin Bran Crunch cereal and Our Special K brand extended its the grocery channel with Stretch Our Cookie business with Kashi GoLean Heart to Heart Special K cereals responded well We’re able to maintain sustainable global reach with protein water and Island fruit leathers and Yogos fruit was important to our Blueberry cereal and Kashi GoLean to our advertising strategies. growth by building existing brands meal and snack bars, showing that flavored snacks. Fruit Flavored growth, with Honey Almond Crunch cereal, and targeting innovation by utilizing “The Difference Snacks were moved into the DSD which contains DHA omega-3. Rice Krispies, one of our oldest our DSD (Direct Store Delivery) is K” for many system to provide additional sales brands, also experienced a strong distribution system. Recently, the consumers. As opportunities and allow these Throughout the U.S., consumers year, thanks to the introduction of Advantage Group Performance we look forward products to gain shelf presence. are having “milk-sippin’ fun” Rice Krispies with Real Strawberries Monitor rated the Kellogg DSD with new Kellogg’s Cereal Straws and our “Childhood is Calling” system #1 among all snack – launched with Cocoa Krispies and advertising campaign. Great food companies. Froot Loops flavors. innovation continued in kid’s cereals with Froot Loops Smoothie We increased advertising at Canada’s cereal business had a and Corn Pops Peanut Butter, a double-digit rate and had a strong year. New products such as which had new advertising particularly good innovation year Special K Fruit & Yogurt, campaigns. Each of these with portion-controlled packs. In All-Bran Guardian, Frosted innovations lifted base brand 2006 we introduced 100 Calorie sales as well. Right Bites packs in Cheez-It,
    • Europe’s growth was broad-based across countries and categories – driven by strong commercial programs, category-leading product innovations and a double-digit increase in advertising investment. Europe Kellogg Europe turned in another Adult consumption of cereal Our Snacks business in these TM solid year in 2007. In what continues to expand across markets is still young and continues continues to be a challenging the region. Optivita, our heart to expand rapidly, helped by operating environment, overall health cereal, was launched, and increased availability and inclusion sales increased mid single-digits, combined with market leader in major cereal programs. lapping similar growth in 2006. Special K, continued to drive our Europe’s growth was broad-based Global Operations adult business. Performance in France, our second across countries and categories largest European market, was also – driven by strong commercial Southern Europe reported the positive with mid single-digit growth programs, category-leading product strongest growth across the area, in cereal. innovations and a double-digit with high single-digit sales increases Frozen and Specialty Channels. Specialty Channels. Growth in our increase in advertising investment. in both Italy and Spain. With per Solid performance came from Specialty Channels business was capita cereal consumption in Frozen and Specialty Channels, driven by Food Away From Home, Our two most developed markets, these markets below the with sales rising 6% for the year, as well as Convenience and U.K. and Ireland, posted mid levels of Northern Europe, further building on 8% growth in 2006 Drug channels. single-digit growth in cereal and growth potential exists. and 2005. even stronger growth in snacks. Success continued with our We increased our share in a U.K. Frozen. In 2007 sales in our Frozen strategy to leverage key equities ready-to-eat cereal catagory that business grew, driven by a double- for channel relevance. This was to dinner. With our acquisition of continued to show strong growth. digit increase in advertising from clearly illustrated in our successful Gardenburger veggie foods, we We also grew share in the cereal launch of Jump-Starts breakfast kits 2006. Our leading market share will be producing more exciting bar category in both markets. in frozen breakfast products grew for the K-12 school segment. This innovations. 10 11 Programs like our Special K because of strong innovation in convenient breakfast alternative “Drop a Jeans Size” proved very Eggo Blueberry pancakes, Eggo for public schools is designed to With “7 whole grains on a mission,” effective in engaging consumers. waffles and Eggo Stuffed French provide students access to a Kashi continues to provide And there was strong response to Toaster Sticks. In addition, our quality breakfast. additional growth opportunities cereal innovations like Special K healthy waffle segment had solid with its popular frozen line. Kashi Sustain and Coco Pops Creations. growth with the launch of And finally, the success of our waffles are off to a good start, and Special K Mini Breaks snacks were Nutri-Grain Cinnamon waffles and Convenience/Drug business the new frozen entrees and pizzas introduced in the second half of Special K Red Berries waffles. continued from leveraging core have performed above expectations. the year to a strong start, and both equities, such as the introduction We saw a strong response to three Rice Krispies Squares and of single-serve Keebler Soft Batch Our Veggie Food business, under additional entrees and introduced Rice Krispies cereal enjoyed the Morningstar Farms brand, cookies for convenience stores. three new pizza varieties in 2007. tremendous growth, driven by continues to perform well. In This, along with broad wins engaging advertising campaigns. 2007 we added to the popular in the Drug channel through Another strength is our Club Morningstar Farms sausage patties efficient participation in key business, which continued to with the introduction of Breakfast promotion periods such as back successfully build the Kashi brand Starters and Breakfast Bites. Our to school and New Year’s franchise. The launches of Kashi consumers continue to “see veggies resolution, also contributed to frozen entrees and pizzas were key differently” with creative new our continued success. to the brand’s continued success choices like Mushroom Mozzarella in Club. Veggie Bites. Consumers can now enjoy meatless diet choices with our product line from breakfast
    • Our Mexico business has now grown to be our third largest business, behind the U.S. and U.K. TM Global Operations Latin America Asia Pacific Kellogg Latin America continued Colombia, Ecuador and Venezuela We continued to strengthen the Sales in Asia Pacific were about flat and Wholesome Snacks were and while total sales declined, we to grow and showed strong was the result of strong growth relevance of the cereal category for 2007 as a difficult competitive launched in Korea in June 2007. are encouraged by the aggressive performance through 2007. Our in advertising investment and the with investments in innovation of environment in Australia was offset Our consumer programs were strategy we have in place to move popular brands like Special K and Mexico business has now grown rollout of our Snacks portfolio. by strong sales increases across well tested and grounded in strong this business forward in 2008. We Choco Krispis. to be our third largest business, the rest of our Asian business unit. consumer insights. We effectively refocused our media spend and behind the U.S. and U.K. Double- Throughout Latin America, our This year’s growth in Asia was engaged Asian consumers with advertising efforts, and we are With programs like the Special K digit sales growth in Brazil, results were driven by strong driven by our existing Ready-to-eat advertising and innovations built putting emphasis on developing a Challenge, we were able to attract performance of cereal businesses in Korea, South largely off power brands like more sustainable innovation plan. All-Bran and Special K. existing brands like and retain new consumers. We Africa and India, as well as our Australia saw success with healthy Zucaritas (Frosted continue to build the Special K brands such as All-Bran and Whole new Wholesome Snacks business Flakes) and Grain Mini-Wheats cereal. Snacking brand, including ready-to-eat cereal, in Japan and Korea. Our success Kellogg Company’s growth in India All-Bran. as well as snack products such as in these categories is based on our was based on continued brand- brands that performed well include 12 13 Special K Delicia (Bliss) Bar. LCM Shakes, Kellogg’s Crunchy Nut efforts to entice consumers with building investment in our two core brands, Kellogg’s Corn Flakes and bars and the re-launch of Be Natural programs that combine global Chocos. Innovation contributed to We expanded our presence learnings with local expertise. bars, which have quickly gained a in Mexico with the growth of growth with the launch of single- 2.2% share. Our Australian business healthy drinks (All-Bran ready- It was another strong year for Japan serve cereal pouches. is a good one for Kellogg, and we to-drink). Sales for this business and Korea. Our Snacks business are putting steps in place to support were significantly above our enjoyed its first full year in Japan, In Australia, we faced strong a strong future. expectations, driven by excellent competitive headwinds in both consumer response. Ready-to-eat cereal and Snacks,
    • For more than a century, our company has built its success around a portfolio of powerful global brands that continue to be as relevant to Our Nutrition Heritage our consumers’ needs today as when they were first created. For more than 100 years, Kellogg around the world. Products that has built a legacy of leadership in don’t meet the criteria will either health and nutrition. We believe be reformulated or they will not TM that balance − or “calories in, be marketed to children under 12 calories out” − must remain the years of age. The Nutrient Criteria central tenet of achieving weight will also guide future innovation management and a healthy and product development. Over lifestyle. We have a long-standing time, the company will work toward Sustainable Dependable Global Brands commitment to help consumers providing consumers with even successfully manage both sides of more product choices featuring that equation through our products, enhanced nutritional value. To help consumers make informed packaging, promotions, community For more than a century, our ability to adjust to and capitalize areas of global commonality and food decisions, Kellogg rolled out efforts, sponsorships and nutrition- For more information, please visit company has built its success on changing consumer dynamics drive scale to our global brand front-of-pack labeling on ready-to- www.kelloggcompany.com and education initiatives. around a portfolio of powerful and trends, creating new growth initiatives in innovation, promotion eat cereal packages in a number www.kelloggnutrition.com. global brands that continue to opportunities and momentum. and consumer ideas. Recognizing of markets, including Europe, Kellogg offers consumers a wide be as relevant to our consumers’ the differences that are so often Australia, North America, Mexico variety of choices, including Dependable. Through our Global needs today as when they were required at a local level allows and Korea. The easy-to-use front-of- low-fat, low-salt, reduced-calorie, first created. Key to their success Marketing Leadership Team (GMLT), Kellogg Company to execute pack summary gives a snapshot of reduced-sugar, nutrient-enriched has been anchoring our brands we have the ability to ensure the marketing programs effectively. how a food fits into an individual’s and portion-control options. to global needs, continuing to transfer of winning ideas and daily diet and complements existing We continually launch product build the relationship between best practices around the globe. Through a portfolio of powerful nutrition labels. This system was first innovations to meet consumers’ our brands and consumers This allows us to quickly leverage brands, strong marketing leadership launched by Kellogg in Europe and health needs, such as digestive through strong marketing and success across the Kellogg world and a culture focused around the 14 15 Australia, where it has been well health, heart health and shape innovation, and leveraging our and maximize the strength of our power of ideas, we have been able received and adopted by the food management. We have also Global Marketing Network to plans. The GMLT meets to share to create a platform of sustainable, industry and some retailers. reduced or removed trans share ideas and maximize global best practices and insight around dependable growth across the fatty acids from almost all of growth opportunities. our innovation pipeline, in-market Kellogg world. In June 2007, Kellogg announced our products. performance and advertising a global commitment to adjusting Sustainable. Special K, All-Bran campaigns and promotional how and what we market to We believe that educating and Rice Krispies are just three programs that are producing strong children under 12. We established consumers empowers them to brands in our global portfolio that market results. a global nutrient standard (Nutrient make good nutritional choices. illustrate the continuing relevance Criteria) based on a broad review We provide comprehensive Performance. By taking a cue from of Kellogg. The international of scientific and government nutrition information, nutrition popularity of these brands the mantra “Think Globally, Act reports. Kellogg will apply the education and healthy-lifestyle demonstrates Kellogg Company’s Locally,” we are able to look for Nutrient Criteria to all of our messages on millions of packages products marketed to children as well as online. Kellogg Global Nutrient Criteria (per serving) • ≤ 200 calories • ≤ 2 grams of saturated fat • labeled 0 grams of trans fat • ≤ 230 milligrams of sodium • ≤ 12 grams of sugar (as labeled)
    • Our company was founded on a commitment to people and doing business in a responsible manner. This commitment continues to guide us today and serves as the foundation of our efforts to drive sustainable business results. TM Our People Kellogg Company’s focus on allows efficient and accurate our business leaders and employees Our company was founded on a people builds on the investment exchange of the information we are active participants in creating commitment to people and doing in people which our founder, need to do business. a work environment that values business in a responsible manner. W. K. Kellogg, dedicated himself differences in thought, culture, This commitment continues to Culture-Guided Results. Our to more than 100 years ago. experiences and background. guide us today and serves as the culture is the foundation of Our employee affinity groups foundation of our efforts to drive everything we do, and our K Values – Kellogg Multinational Employee sustainable business results. continually remind us that how we Resource Group (K-MERG), Kellogg generate business results is just as African American Resource Group An employer of choice: important as the results themselves. (KAARG), Hispanic Resource Hispanic Business – Kellogg in Top 60 Companies for Hispanics An important part of maintaining Group (HOLA), Women of Kellogg DiversityInc – Kellogg in Top 25 Noteworthy Companies for Diversity an effective culture is gathering (WOK) and Young Professionals (YP) 16 17 LatinaStyle – Kellogg in Top 50 Companies for Latinas feedback from our employees on a – promote cultural and generational regular basis. awareness and provide Black Enterprise – Kellogg in 40 Best Companies for Diversity developmental In 2007 we conducted our third in opportunities and ever before. If Kellogg is to fulfill its future. Our leadership programs a series of culture surveys designed professional vision to be the food company of ensure a deep pool of management to gauge employee perceptions mentoring. choice, we must also strive to be an talent throughout the organization of our work environment, Three important factors make employer of choice. – so that we’re prepared not only advancement opportunities and Kellogg Company great: our for filling key positions in the near ability to do their work. Results people, their passion for excellence Our people programs are designed future, but are creating the next of this survey will help us ensure and their pride in our products. to attract and hire the best people. generation of Kellogg leaders. We that our people have the necessary Kellogg Company’s almost Yet, hiring talented individuals clearly define what is expected from information and opportunities to 26,500 employees are talented isn’t enough. To retain our a Kellogg leader and are focused contribute their best work and and dedicated to helping the employees and make sure they are on building each leader’s ability to build satisfying careers. company achieve its business prepared for current and future engage and develop our employees results. Our Human Resources roles, we’ve implemented programs while driving business results. Kellogg has long emphasized strategy focuses on making certain that help employees navigate the having a diverse and inclusive Creating Synergy and Efficiency. that Kellogg has the strongest onboarding process, build their culture that reflects our consumer possible teams around the world skill sets, identify career growth By sharing ideas and best practices base. The company’s focus on to help us achieve our vision of opportunities, and become effective around the Kellogg world, we’re diversity and inclusion ensures that becoming the food company people managers. able to create synergy among our of choice. business units. We’re looking at Kellogg Leaders, Today and technological solutions to simplify, A Talent Powerhouse. The Tomorrow. Strong, effective standardize and automate many competition for qualified leaders are paramount to Kellogg of our processes, which will ensure individuals is more intense than Company’s success now and in the that our global infrastructure
    • This year we’ve implemented several innovative campaigns to promote the restoration of natural resources. Water Usage. We are also doing annually. For example, 25 million generations of students and teachers pounds of paper packaging have our part to minimize water use. with healthy nutrition options TM been eliminated through a waste Our Queretaro, Mexico, plant and environmental education reduction initiative associated was given the highest award with opportunities. The brand kicked off with bulk material shipping. By a “Recognition to Environmental the partnership with the Fruit Tree taking out the board on Special K Excellence,” which will be Planting Foundation with three bars, we’ve eliminated 4 million awarded to the company from orchard plantings in 2007 and plans pounds of packaging, and liner President Calderon. The plant to fund the planting of 25 to 30 Environmental Sustainability reductions in 2006 eliminated reuses 57 million gallons of orchards by the end of 2008. more than 3 million pounds of water every year. And earlier this plastic packaging. year, washing equipment was We recently formed a cross- redesigned to reduce water use functional Environmental Our Environmental Commitment. Focusing on efficiency We also look to optimize the use by 7 million gallons. Stewardship Council to further Kellogg Company is committed improvements in our operations of materials that are recyclable drive our sustainability efforts. to minimizing the environmental has helped reduce our energy Where We Are Going. In 2007 we and contain significant recycled Beginning in 2008 we are impact of our businesses consumption, thereby reducing our content. In fact, the first box of implemented several innovative committed to providing greater while being socially and GHG emissions. Our energy use Kellogg’s Corn Flakes came off the campaigns to promote the transparency to our shareowners economically responsible. per pound of product produced has line packaged in 100% recycled restoration of natural resources. on the environmental impact of declined by more than 15% during paperboard, and Kellogg has used our business. Although we have At Kellogg we strive to conduct the past 10 years. In Ireland, Kellogg’s Corn Flakes recycled board for most of our many things to be proud of, we and grow our business in a manner “Give the Gift of Trees” campaign products since 1906 – we are one realize we are just beginning that protects the environment and Our Global Logistics team of the largest users of recycled has donated more than this challenging journey toward demonstrates good stewardship aggressively searches for ways to 45,000 trees to the charity Bóthar. paperboard in the U.S. becoming an environmentally of the world’s natural resources. deliver more products with fewer 18 19 To see a rolling ticker that provides sustainable company. We work toward continual vehicles and less energy use. Case- Waste Management. We are regular updates on the number improvement through the size adjustments, use of intermodal Please visit www.kelloggcompany.com of trees donated, please visit www. always looking for ways to improve development of specific programs transport, and product sourcing and reduce greenhouse gas (GHG) kelloggs.ie/whatson/makealifeshine. our waste management programs for more information and that address the environmental choices all contribute to our emissions. The EPA works closely practicing the 3Rs: Reduce, The site also provides more updates on our environmental cost and impact of our activities, saving thousands of gallons of fuel with each company in the program Reuse, Recycle. information about the positive sustainability efforts. products and services. These annually. For example, 8 million to review its GHG Inventory and impact this project will have programs include a commitment truck miles have been eliminated Inventory Management Plan and Our manufacturing facilities on communities in Africa. to use resources efficiently, by making a case-size change for provide guidance in setting a GHG recycle more than 80% of waste minimize waste, and promote several cereal products. In addition, emissions reduction goal. Kellogg generated. At two of our cereal In the U.S., Stretch Island resource conservation. our fleet vehicles automatically shut Company’s primary source of GHG Fruit Co., makers of FruitaBü fruit plants, we implemented a program down after five minutes of idle time. emissions is the use of energy at our that diverts an additional 1,000 snacks, is helping fund the efforts of Energy Improvements and Climate manufacturing facilities and in our tons of waste per year from the Fruit Tree Planting Foundation. Change. In 2006 we implemented Packaging Efficiency. Our transportation fleet. landfills to recycling. Our Bremen, Orchards will be donated to public a global energy-management packaging serves many important Germany, plant sends zero waste to schools in low-income areas program to promote conservation, functions, such as protecting our landfill, and our London, Ontario, throughout the U.S. to provide manage energy use, and investigate products, maintaining freshness and Canada, plant is not far behind, energy savings opportunities, providing a means to communicate with more than 95% of the waste including alternative fuels and to consumers. generated onsite sent for recycling. renewable energy. Using advances in technology, our In the U.S., Kellogg joined the packaging team has proactively Environmental Protection Agency’s minimized packaging, reduced (EPA) Climate Leaders program, liner weight and paperboard a voluntary government-industry quantity by millions of pounds partnership designed to measure Donna Banks Senior Vice President Global Innovation and Chief Environmental Officer
    • TM We partner with organizations to provide funds, food and other resources to help improve people’s lives. ® ® TM Corporate Social Responsibility Opportunities for Minorities and As part of Kellogg’s support partnership with the organization in 2005 as part of its Earn Your Stripes Women. Kellogg values in Mexico, Kellogg Mexico participated in a food collection individuals for their diverse initiative. The national partnership organized by the Mexican backgrounds, cultures and encourages girls ages 8 to 13 to be As a responsible corporate citizen, Kellogg’s Swim Active. An Association of Food Banks (AMBA). experiences. We support more active, eat right and live a Kellogg Company invests in the innovative Kellogg program is The national collection was minorities and women through balanced and healthy lifestyle. communities where we have increasing access to swimming called “X un México sin hambre” organizations and programs that significant operations. We partner facilities for youngsters in the Building Stronger Communities. (For a Mexico without hunger). encourage excellence and provide with organizations to provide United Kingdom. Kellogg’s Swim TM Employees from Kellogg Mexico, opportunities. These include: We strive to make a difference in funds, food and other resources Active, a three-year partnership together with their friends and the communities where we operate. to help improve people’s lives. In between Kellogg and the Amateur NAACP Law Fellows Program. families and Kellogg suppliers, We support organizations that keeping with our company’s more Swimming Association, sets up Through the NAACP Law Fellows collected more than 140,000 work to strengthen communities than 100-year heritage of nutrition projects that provide primary school Program, Kellogg supports summer pounds of food for the Food Bank by addressing economic and leadership, our most important children and their families with in Queretaro. fellowships for students who have social development issues. corporate-giving priority is nutrition easier access to swimming facilities. completed at least one year of law education and physical fitness. 20 21 Joint Aid Management. Kellogg United Way. Kellogg is a long- school to work at the NAACP’s In addition, we support programs America’s Second Harvest. Kellogg time supporter of United Way. is partnering with South Africa- National Legal Department. The that improve opportunities for has an extensive partnership based Joint Aid Management law fellows work with civil rights In 2007 Kellogg pledged a total minorities and women and build with America’s Second Harvest, Company’s donation will help the (JAM) to develop Health Is Vital, a attorneys on issues such as criminal of $4.65 million to campaigns stronger communities. Since the nation’s largest charitable YMCA improve the way it works nutritional intervention program justice, education, housing, voting that will benefit 26 communities. 2003, Kellogg has contributed hunger-relief organization. Each with health seekers and their for people living with HIV/AIDS. rights and environmental justice. In addition, more than 1,500 more than $40 million in cash year Kellogg donates nearly families, and with school-age youth This program will provide a stable volunteers participated in service and $120 million in products $25 million of food products, in YMCA child-care programs. Girls on the Run®. Kellogg supports supply of food to strengthen the projects as part of Days of Caring. to charitable groups around which are distributed through the Girls on the Run in its efforts to United Way recently recognized bodies of those on anti-retroviral the world. organization’s network of more than In addition, 24 YMCAs received treatment, while also increasing the provide experiential learning Kellogg Company with the Spirit 200 food banks and food-rescue grants to provide physical activity effectiveness of the treatment. programs that help enhance of America Corporate Community Nutrition Education and Physical organizations. America’s Second programs for underserved youth self-esteem in young girls. Kellogg’s Investment Summit Award. Fitness. As a company that Harvest recognized Kellogg with the in communities where Kellogg Frosted Flakes launched a three-year produces food products and Group Volunteer Service of the Year operates. The Kellogg’s Opportunity promotes eating well and healthy award in 2007. to Play grants helped fund activities living, our commitment to nutrition from basketball to wall climbing in education and physical fitness The Global FoodBanking 11 U.S. states. Network™. In 2007 Kellogg became includes providing food donations and funds to partner organizations. a founding partner of The Global Action for Healthy Kids. Kellogg Organizations and initiatives we FoodBanking Network. Funds partners with Action for Healthy support include: provided by Kellogg will further Kids to decrease the incidence of support our commitment to hunger- obesity in children by improving YMCA of the USA. Kellogg relief efforts around the world and nutrition and increasing physical Company has contributed funds will particularly assist with food- activity in schools. Kellogg has to support Activate America, the banking development projects in provided grants to help implement YMCA’s response to the nation’s Mexico, Guatemala and mandated wellness policies at growing health crisis. Kellogg South Africa. public schools in 11 U.S. states.
    • Corporate Officers Celeste A. Clark* Gary H. Pilnick* Margaret R. Bath* Senior Vice President Senior Vice President Vice President Global Nutrition and General Counsel Research, Quality and Corporate Affairs and Secretary Technology Corporate Development Bradford J. Davidson* Ronald L. Dissinger Juan Pablo Villalobos* Senior Vice President Vice President President, U.S. Snacks Chief Financial Officer, Senior Vice President Kellogg North America Executive Vice President, Kellogg International Timothy P. Mobsby* Elisabeth Fleuriot President, Kellogg Senior Vice President James M. Jenness* Donna J. Banks* Latin America Vice President Executive Vice President, Managing Director, Chairman of the Board Senior Vice President Kellogg International Kathleen Wilson- France/Benelux/Central Global Innovation and President, Kellogg Eastern Europe/Russia Thompson* A. D. David Mackay* Chief Environmental Europe Officer Senior Vice President President and Board of Directors Michael J. Libbing Chief Executive Officer Global Human (from left to right) Paul T. Norman* Jeffrey M. Boromisa* Vice President Resources Member, Board Senior Vice President Corporate Development of Directors Senior Vice President John T. Dillon Dorothy A. Johnson Ann McLaughlin Korologos A. D. David Mackay President, U.S. Alan R. Andrews Executive Vice President, (A*,C,E,N) (S*,E,M) (C,E,N,S) (E) Morning Foods Gregory D. Peterson John A. Bryant* Kellogg International Vice President Retired Chairman and President, Chairman of Board of Trustees, President and Vice President President, Kellogg Executive Vice President Chief Executive Officer, Ahlburg Company RAND Corporation Corporate Controller Chief Executive Officer, David J. Pfanzelter* Asia Pacific International Paper Company Managing Director, Kellogg Company Chief Financial Officer President Emeritus, Elected 1989 Senior Vice President Kellogg United Kingdom Elected 2000 Council of Michigan Foundations Elected 2005 President, Kellogg 22 23 Ruth E. Bruch* President, Kellogg North America Elected 1998 Gordon Gund Specialty Channels Joel R. Wittenberg Senior Vice President Claudio X. Gonzalez Robert A. Steele (N*,C,E,M) Jeffrey W. Montie* Vice President Chief Information James M. Jenness (M*,C,E,N) (A,M) Chairman and Chief Officer Treasury and Executive Vice President Chairman and (E*) Executive Officer, Vice Chairman- Investor Relations President, Kellogg Chief Executive Officer, Gund Investment Corporation Global Health and Well-Being, Chairman of the Board, International Kimberly-Clark de Mexico Procter and Gamble Kellogg Company Elected 1986 Elected 1990; Retiring Elected 2007 Elected 2000 April 2008 John L. Zabriskie, Ph.D. *Member of Global Leadership Team Donald R. Knauss Benjamin S. Carson, Sr., M.D. (C*,A,E,N) Note: Italicized type denotes subsidiary or other subtitle Sterling K. Speirn (A,M) (M,N,S) Co-Founder and Partner, (M,S) Lansing Brown Investments, L.L.C. Chairman and Professor and Director of President and CEO, Chief Executive Officer, Pediatric Neurosurgery, Elected 1995 W. K. Kellogg Foundation Global Leadership Team, from left to right: Paul Norman, Margaret Bath, Donna Banks, Jeff Montie, Jeff Boromisa, Kathleen Wilson-Thompson, The Clorox Company The Johns Hopkins Medical Jim Jenness, David Mackay, John Bryant, Tim Mobsby, Ruth Bruch, Dave Pfanzelter, Juan Pablo Villalobos, Brad Davidson, Gary Pilnick and Celeste Clark Elected 2007 Institutions Elected 2007 Elected 1997 Committees A = Audit C = Compensation E = Executive M = Consumer Marketing N = Nominating and Governance S = Social Responsibility *Committee Chair
    • Manufacturing Locations Kellogg North America – Brands All-Bran® cereal, bars and snacks, All-Bran™ crackers North America Austin® and Murray® cookies and crackers Values San Jose, California Cheez-It® crackers, snacks and snack spread TM Atlanta, Georgia Club®, Krispy®, Sunshine®, Toasteds®, Town House®, Wheatables®, Zesta® Augusta, Georgia crackers Columbus, Georgia Crunchmania® grain-based snacks Rome, Georgia Our commitment to sustainability and social responsibility led to the adoption of the K Values guidelines a number of years Eggo® waffles, pancakes, French toast, syrup and cereal Chicago, Illinois ago. These values formalize the culture instilled in the organization by Mr. Kellogg and encompass the way we run our Chips Deluxe®, E.L. Fudge®, Famous Amos®, Fudge Shoppe®, Sandies®, Kansas City, Kansas business and build relationships with our customers, our consumers, and our employees. Soft Batch® cookies Florence, Kentucky Stretch Island®, FruitaBü® fruit snacks We Act With Integrity And Show We Are Passionate About Our We Strive For Simplicity Louisville, Kentucky Kashi® cereals, nutrition bars, and frozen entrees; Kashi™ crackers, cookies Respect Business, Our Brands, And Our Food Pikeville, Kentucky • Stop processes, procedures and Keebler® cookies, crackers, pie crusts, ice cream cones Baltimore, Maryland • Demonstrate a commitment to • Show pride in our brands activities that slow us down or do not Battle Creek, Michigan Kellogg’s® cereals, croutons, breading, stuffing products integrity and ethics and heritage add value Grand Rapids, Michigan Apple Jacks®, Bran Buds®, Cinnamon Crunch Crispix®, Cocoa Krispies®, • Show respect for and value all • Promote a positive, energizing, • Work across organizational Wyoming, Michigan Complete®, Corn Pops®, Cracklin’ Oat Bran®, Crispix®, Frosted Mini-Wheats®, individuals for their diverse optimistic and fun environment boundaries/levels and break down Omaha, Nebraska Honey Smacks™, Just Right®, Kellogg’s Corn Flakes®, Kellogg’s Crunch®, Kellogg’s backgrounds, experience, styles, internal barriers Frosted Flakes®, Kellogg’s Raisin Bran®, Kellogg’s Smorz®, Kellogg’s® Low Fat Blue Anchor, New Jersey • Serve our customers and delight our Granola, Mini-Swirlz®, Mueslix®, Pops®, Product 19® cereals approaches and ideas Cary, North Carolina consumers through the quality of our • Deal with people and issues directly Morningstar Farms®, Natural Touch®, Loma Linda®, Worthington® veggie foods Charlotte, North Carolina • Speak positively and supportively products and services and avoid hidden agendas and dairy alternatives Cincinnati, Ohio about team members when apart • Promote and implement creative and • Prize results over form Nutri-Grain® bars and waffles Fremont, Ohio • Listen to others for understanding innovative ideas and solutions Pop-Tarts® toaster pastries and snacks; Go-Tarts® snacks Zanesville, Ohio We Love Success • Assume positive intent • Aggressively promote and protect Lancaster, Pennsylvania Rice Krispies® and Rice Krispies Treats® cereals; Rice Krispies Treats® and our reputation • Achieve results and celebrate when Treats Sheet® snack squares Muncy, Pennsylvania We Are All Accountable we do Memphis, Tennessee Right Bites® cookies and snacks We Have The Humility And Hunger Rossville, Tennessee • Accept personal accountability for • Help people to be their best by Smart Start®, Froot Loops®, Kellogg’s Crunchy Nut™ cereals and bars To Learn Clearfield, Utah our own actions and results providing coaching and feedback Special K® cereals, bars, snacks, protein beverages and protein meal bars Allyn, Washington • Display openness and curiosity to Special K20® protein beverages and protein meal bars • Focus on finding solutions and • Work with others as a team to London, Ontario, Canada learn from anyone, anywhere achieving results, rather than making accomplish results and win Yogos®, Fruit Streamers® fruit-based snacks 24 Belleville, Ontario, Canada excuses or placing blame • Solicit and provide honest feedback • Have a “can-do” attitude and drive to without regard to position Kellogg International – Brands • Actively engage in discussions get the job done and support decisions once they • Personally commit to continuous International • Make people feel valued Kellogg’s® cereals, breading products and cereal bars are made improvement and be willing Botany, Australia and appreciated All-Bran® cereals, bars, snacks and beverage to change Charmhaven, Australia • Involve others in decisions and plans • Make the tough calls Coco Pops®, Coco Rocks®, Crunchy Nut®, Day Dawn®, DayVita®, Kellogg’s Sao Paulo, Brazil that affect them • Admit our mistakes and learn Fruit’n Fibre®, Just Right®, Kellogg’s Extra®, Nutri-Grain®, Optivita® cereals and Bogota, Colombia from them bars • Keep promises and commitments Guayaquil, Ecuador made to others • Never underestimate our competition Be Natural®, Crusli®, Elevenses®, Kuadri Krispis®, LCMs®, Nutri-Grain Twists®, Bremen, Germany NutriDia®, Rice Krispies Squares®, Special K Bliss™ and Sunibrite® bars Manchester, Great Britain • Personally commit to the success Chex®, Choco Big®, Choco Krispis®, Choco Trésor®, Chocos®, Choco Pops®, Wrexham, Great Britain and well-being of teammates Chocolate Wheats™, Corn Frosties®, Corn Pops®, Country Store®, Crispix®, Guatemala City, Guatemala Kellogg’s Crunchy Nut Corn Flakes®, Crusli®, Froot Loops®, Frosties®, Guardian®, • Improve safety and health for Honey Loops®, Kellness®, Miel Pops®, Muslix®, Rice Bubbles®, Ricicles®, Taloja, India employees, and embrace the belief Smacks®, Speedy Loops®, Sucrilhos®, Sultana Bran®, Tiger Power®, Toppas®, Takasaki, Japan that all injuries are preventable Tony’s Turboz®, Vive® and Zucaritas® cereals Linares, Mexico Choco Melvin™ milk supplement Queretaro, Mexico Eggo® waffles Toluca, Mexico Coco Krispies® straws Gorokhorets, Russia All-Bran® crisp snacks Pskov, Russia Kashi® cereals and nutrition bars Severskaya, Krasnodar, Russia Tyumen, Russia K-Time® bars and muffins TM Voronezh, Russia Komplete® cereal and biscuits Vyazma, Russia Pop-Tarts® toaster pastries Springs, South Africa Special K® cereals, bars and snacks Anseong, South Korea Winders® fruit-based snacks Valls, Spain Vector® cereal meal replacement products and energy bars Rayong, Thailand Munch’ems® granola snacks Maracay, Venezuela ®, TM, © 2008 Kellogg NA Co. TM TM
    • 26 ® KELLOGG COMPANY • ONE KELLOGG SQUARE • BATTLE CREEK, MICHIGAN 49016 • TEL (269) 961-2000 • www.kelloggcompany.com