Milling & Baking News - February 8, 2005 - 15

F I N A N C I A L

R E S U L T S

Kellogg net earnings climb
13% in 2004; sales up 9%
BATTLE CREEK, MICH. - Net income
of Kellogg Co. in the year ended Jan. 1
totaled $890.6 million, equal to $2.16 per
share on the common stock, up 13% from
$787.1 million, or $1.93 per share, in 2003.
Net sales aggregated $9,613.9 million in
2004, up 9% from $8,811.5 million in 2003.

"2004 was another excellent year for
our company," said James M. Jenness,
Kellogg chairman and chief executive
officer. "We remained focused on innovation and brand building, we added
excitement to our categories, and we
improved mix. Importantly, we did all

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- Ten Steps in Formulating a Healthy Product - Jennifer Berry - Ocean Nutrition Canada
- New Technology and Food Safety/Food Protection - Dr. Richard. Dempster - AIB
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- Managing for Whole Grain Production - Robert Meyer - Roman Meal Milling
- Supercritical Fluid Extrusion of Leavened Dough -Normell Jhoe de Mesa & Dr. Syed S.H. Rizvi
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- Hispanic Product Production - Luis Navarro - American Ingredients Co.
- Adaptive Vision Systems - Andrew Scott - Dipix Technologies Inc.
- Empowering Employees through SPC - Larry Keller - Weston/Stroehmann Bakeries
- Process Controls and Enzyme Technology - Mark Weidkamp - BakeWATCH Group
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- Health and the Mass Market Consumer - Bruce Peterson - Vice President Perishables Wal-Mart Inc.
- Innovation Meets Demand - Two perspectives - John Rader - President and CEO - So-Cal Bakeries
Janice Anderson - Vice President of Marketing Flowers Bakeries

- The Future of Grains - Don Brown Vice President of Sales- ConAgra Foods, Inc.
- Delivering Health in Unconventional Ways - Using Probiotics and Enhanced Yeast James Kopp - Vice President - Lallemand Advanced Baking Solutions

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16 / Milling & Baking News, February 8, 2005

this while making significant investment
in our future growth."
Kellogg North America sales rose 7%
in 2004 from 2003, 12% in the fourth
quarter alone. Retail cereal internal sales
increased by 2% in 2004 after surging 6%
in 2003. The gain in 2004 marked the fifth
consecutive year of category share gains
in the ready-to-eat cereal category.
During a Jan. 31 conference call, A.D.
David Mackay, Kellogg president and
chief operating officer, said the company
chalked up a 40-basis-point market share
gain in 2004 following a 20-basis-point
gain in 2003.
"We increased our share in the readyto-eat cereal category and in the natural
segment through the introduction of
new products," Mr. Mackay said. "Remember that the natural channel is a
growing channel. So we are very pleased
with this result."
Also in the health and wellness category were successful introductions of
Smart Start Soy Protein and varieties
of Frosted Flakes and Froot Loops with
one-third less sugar.
Mr. Mackay also noted positive
contributions in 2004 from new products introduced in 2003: Fruit Harvest,
Smorz, Special K Vanilla Almond and a
maple and brown sugar version of Mini
Wheats. Kashi Heart to Heart cereal also
fell into this category.
"For 2005, we have strong plans for innovation and brand building and expect
good growth for the full year, even from
the high base we've set during the last
few years," Mr. Mackay said.
Retail snacks internal sales growth
was 8% in 2004 and 10% in the fourth
quarter. "This excellent full-year growth
resulted from increased sales of toaster
pastries, crackers and wholesome
snacks," Kellogg said. The company also
enjoyed good growth in its away-fromhome business and its Eggo segment.
Commenting on the snacks business,
Mr. Mackay said the company was particularly pleased with results given that
several snack business categories have
been very challenging.
"It is notable that growth actually accelerated throughout the year as a result
of new products and D.S.D. (direct store
delivery) execution," Mr. Mackay said.
The Pop Tarts toaster pastry business
enjoyed double-digit growth for the
fourth quarter and all of 2004. The brand
ended the year with an 84% market share,
a four-point gain from the year before.
Cracker sales grew at a mid-single-digit rate in the fourth quarter and year, bolstered by strong sales of Cheez-It crackers
and new varieties of Cheez-It Twisterz,
Club crackers and graham crackers.
Further innovation in Twisterz, Club
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Milling & Baking News - February 8, 2005

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