Kellogg CEO Says the Stock Is “Cheap” and a “Fantastic Bargain”

Steve Cahillane is on a mission. Ever since he became CEO of Kellogg (K) a year ago, he’s been telling employees and investors that he’s going to get the 113-year cereal company growing again. Sales at the Battle Creek, Michigan maker of Special K, Pringles, Rice Krispies Treats, and Pop-Tarts, have been declining for the past five years. In 2018, revenues finally stabilized and Cahillane is hopeful.

“We’ll never do a victory lap,” he says, “but we’re on the right trajectory. And in 2019 we’ve stated that this will be the year that this company grows again.”

Like many Big Food companies, Kellogg’s has been starving for sales as consumers turn away from packaged foods, favoring organic, fresher, and healthier alternatives. But despite the changes on the grocery shelf, Kellogg’s is still ranked on the Fortune 500 list of the largest companies in America with revenues of nearly $13 billion.

As Cahillane aims for bigger revenue numbers, he has been trying to get Kellogg to think outside of the cereal box. He is expanding, for example, the distribution of the RXBAR protein bar business Kellogg’s purchased in 2017. He’s also reformulating the recipes for many existing brands to include simpler, more natural ingredients and removing artificial coloring.

“Turning around a stubborn, declining net sales trend with mature brands is one of the most difficult things to accomplish,” confesses Cahillane.

Many investors are feeling the same way and have bailed on Kellogg’s shares. But Cahillane is still a proud cheerleader for Kellogg and the stock. “Kellogg is I think a fantastic bargain. The stock is cheap. It’s a 4 percent dividend yield,” he says. “And we’re going to grow again.”

Watch the video above for more from my interview with Cahillane.