Kellogg Company Report

Kellogg Company

Company Profile

Publication Date: 8 Sep 2010

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Kellogg Company

TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts...............................................................................................................4

Business Description...........................................................................................5

History...................................................................................................................6

Key Employees.....................................................................................................8

Key Employee Biographies................................................................................10

Major Products and Services............................................................................18Revenue Analysis...............................................................................................19

SWOT Analysis...................................................................................................20

Top Competitors.................................................................................................26

Company View.....................................................................................................27

Locations and Subsidiaries...............................................................................31


Kellogg CompanyTABLE OF CONTENTS

COMPANY OVERVIEW

Kellogg Company (Kellogg) is an American multinational producer of breakfast foods, snack foods,cookies, and crackers. The company also manufactures and markets ready-to-eat cereals andconvenience foods such as toaster pastries, cereal bars, fruit snacks, frozen waffles and veggiefoods. The company is headquartered in Battle Creek, Michigan and employs 30,900 people.

The company recorded revenues of $12,575 million during the financial year ended December 2009(FY2009), a decrease of 1.9% compared with 2008. The decline was driven by a negative impactfrom foreign currency translation and an extra shipping week in 2008. The operating profit of thecompany was $2,001 million in FY2009, an increase of 2.5% over 2008. The net profit was $1,212million in FY2009, an increase of 5.6% over 2008.

KEY FACTS

Kellogg CompanyHead OfficeOne Kellogg SquareBattle CreekMichigan 49016 3599USA1 269 961 2000Phone

1 269 961 2871Fax

http://www.kelloggcompany.comWeb Address12,575.0Revenue / turnover

(USD Mn)DecemberFinancial Year End30,900EmployeesKNew York Stock

Exchange Ticker


Kellogg CompanyCompany Overview

BUSINESS DESCRIPTION

Kellogg Company (Kellogg) along with its subsidiaries is engaged in the manufacture and marketingof ready-to-eat cereals and convenience foods such as cookies, crackers, toaster pastries, cerealbars, frozen waffles and meat alternatives. These products are manufactured by the company in 18countries and marketed in more than 180 countries worldwide. The companys brands includeKelloggs, Keebler, Pop-Tarts, Eggo, Cheez-It, All-Bran, Mini-Wheats, Nutri-Grain, Rice Krispies,Special K, Chips Deluxe, Famous Amos, Sandies, Austin, Club, Murray, Kashi, Bear Naked,Morningstar Farm, Gardenburger and Stretch Island.

Kellogg operates through four geographic segments: North America, Europe, Latin America, andAsia Pacific.

The companys cereal products are marketed under the Kellogg's brand, and are sold primarily tothe grocery trade through direct sales force.The company uses broker and distribution arrangementsfor certain products in less-developed market areas. The company markets cookies, crackers, andother convenience foods, under brands such as Kellogg's, Keebler, Cheez-It, Murray, Austin andFamous Amos, to supermarkets in the US through a direct store-door (DSD) delivery system. Kelloggalso offers Special K2O flavored water and flavored protein water mixes.

The company's trademarks include logos and depictions of certain animated characters in conjunctionwith its products, including Snap!Crackle!Pop! for Cocoa Krispies and Rice Krispies cereals andRice Krispies Treats convenience foods; Tony the Tiger for Kellogg's Frosted Flakes, Zucaritas,Sucrilhos and Frosties cereals and convenience foods; Ernie Keebler for cookies, convenience foodsand other products; the Hollow Tree logo for certain convenience foods; Toucan Sam for FrootLoops; Dig 'Em for Smacks; Coco the Monkey for Coco Pops; Cornelius for Kellogg's Corn Flakes;Melvin the elephant for certain cereal and convenience foods; Chocos the Bear, Kobi the Bear andSammy the Seal for certain cereal products.

The company's research to support and expand the use of its existing products and to develop newfood products are carried out from the W. K. Kellogg Institute for Food and Nutrition Research inBattle Creek, Michigan, and at other locations around the world.


Kellogg CompanyBusiness Description

HISTORY

Kellogg Company (Kellogg) was founded in 1906 as the Battle Creek Toasted Corn Flakes Company.The company changed its name to Kellogg Company (Kellogg) in 1922 after it began making cerealsother than cornflakes.

In 1964, Kellogg began to diversify with the introduction of the Pop-Tart and the acquisition of SaladaFoods, which introduced tea and desserts to its product line. Kellogg then acquired Eggo waffles inthe 1970s, along with Fearn International, makers of soups, sauces, and other foods. In 1976, Kelloggacquired Mrs Smith's Pie Company and Pure Packed Foods in 1977. During the same time, thecompany began a restructuring program with the formation of the US Convenience Foods Division.Kellogg also began production of a new cereal line in conjunction with ConAgra, under the HealthyChoice label.

The company's operations expanded into Australia, the UK, Asia and Latin America during 1997and 1998. In 2000, the company added natural cereal and convenience food maker Kashi to its UScereal division. In 2001, the company acquired Keebler Foods, engaged in the production of a broadline of cookie and cracker products and a number of other consumer food products such as Cheez-Itand Carr's.

Kellogg formed a multi-year global relationship with Disney in 2002. In the same year, the companyentered into a strategic alliance with Roskam Baking.The company relocated its US Snacks businessunit from Elmhurst, Illinois to Battle Creek, Michigan in 2004. Kellogg acquired Kraft's fruit snacksoperation during 2005.

During 2006, Kellogg extended its Special K product line into the diet and nutrition sections of groceryand drug stores with the launch of three protein-fortified products. These were the first products tocome from the company's new health and wellness division. In the same year, the company introducedKellogg's Crunchy Nut sweet and salty granola bars.

Kellogg entered the fast-growing trail-mix granola bar category with the launch of new Nutri-Grainfruit and nut bars, in 2007. In the same year, the company acquired Wholesome & Hearty FoodsCompany, the US manufacturer of vegetarian foods marketed under the Gardenburger brand.

In 2008, the company acquired The United Bakers Group, one of Russia's largest cracker, biscuitand breakfast cereal producers. During the same year, one of Kellogg's majority-owned subsidiariesacquired substantially all of the assets of Zhenghang Food Company (Navigable Foods), amanufacturer of cookies and crackers in the north and northeastern regions of China.

Kellogg, in 2008, acquired the assets of IndyBake Products and Brownie Products, a privately heldcontract manufacturing business that produces cracker, cookie and frozen dough products. In thesame year, the company acquired Specialty Cereals, a privately owned manufacturer of naturalready-to-eat cereals based in Sydney, Australia.


Kellogg CompanyHistory

In January 2009, Kellogg voluntary recalled certain Austin and Keebler branded peanut buttersandwich crackers and select snack-size packs of Famous Amos peanut butter cookies and KeeblerSoft Batch Homestyle peanut butter cookies, as they were contaminated with Salmonella. Later inMarch 2009, the company also recalled Keebler Soft Batch Homestyle Chocolate Chunk Cookies,Oatmeal Raisin Cookies, and Special K Protein Meal Bar Honey Almond variety.

Kellogg's Special K brand introduced its first weight-management protein shake in May 2009. In thefollowing month, the company enhanced the nutrition credentials by adding essential fibre to popularready-to-eat cereals in Canada and the US.

In June 2010, Kellogg implemented a voluntary recall of certain breakfast cereals including Kellogg'sApple Jacks, Fruit Loops, Corn Pops and Honey Smacks due to an uncharacteristic off-flavor andsmell from the liner in the package.The company introduced the new Kellogg's FiberPlus AntioxidantsCereals in July 2010.


Kellogg CompanyHistory

KEY EMPLOYEES

CompensationBoardJob TitleName11419447 USDExecutive BoardPresident and Chief Executive

OfficerA. D. David Mackay

Executive BoardExecutive Vice President and ChiefOperating Officer

John A. Bryant

Non Executive BoardChairmanJames M. Jenness

224389 USDNon Executive BoardDirectorBenjamin S. Carson254389 USDNon Executive BoardDirectorJohn T. Dillon

242389 USDNon Executive BoardDirectorGordon Gund

234889 USDNon Executive BoardDirectorDorothy A. Johnson

227389 USDNon Executive BoardDirectorAnn McLaughlin Korologos

233889 USDNon Executive BoardDirectorSterling Speirn

251389 USDNon Executive BoardDirectorJohn L. Zabriskie

236889 USDNon Executive BoardDirectorDonald R. Knauss

233889 USDNon Executive BoardDirectorRobert A. Steele

237739 USDNon Executive BoardDirectorRogelio M. Rebolledo

Senior ManagementChief Financial OfficerRonald L Dissinger

Senior ManagementSenior Vice President, Global PublicPolicy and External Relations; andChief Sustainability Officer

Celeste A. Clark

4275174 USDSenior ManagementSenior Vice President, Kellogg andPresident, Kellogg North America

Bradford J. Davidson

4096450 USDSenior ManagementSenior Vice President, Kellogg;Executive Vice President, Kellogg

Timothy P. Mobsby

International; and President, KelloggEurope

Senior ManagementSenior Vice President, Kellogg; andPresident, Kellogg SpecialtyChannels

David J. Pfanzelter

Senior ManagementSenior Vice President, GeneralCounsel, Corporate Developmentand Secretary

Gary H. Pilnick

3390589 USDSenior ManagementSenior Vice President, Kellogg andPresident, Kellogg International

Paul T. Norman

Senior ManagementSenior Vice President, Kellogg; andPresident, US Morning Foods

Juan Pablo Villalobos

Senior ManagementVice President, Research, Qualityand Technology

Margaret Bath


Kellogg CompanyKey Employees

CompensationBoardJob TitleNameSenior ManagementVice President and Global Chief

Marketing OfficerMark R. Baynes


Kellogg CompanyKey Employees

KEY EMPLOYEE BIOGRAPHIES

A. D. David Mackay

Board: Executive BoardJob Title: President and Chief Executive OfficerSince: 2006Age: 54

Mr. Mackay has been the President and Chief Executive Officer at Kellogg since 2006. He has beenthe President of the company since 2003. Mr. Mackay joined Kellogg Australia as Group ProductManager in 1985. He became Category Director, ready-to-eat cereals in 1987. He returned toAustralia in 1991 as Marketing and Sales Director, Kellogg Australia. In 1992, Mr. Mackay left Kelloggand became the Managing Director of Sara Lee Bakery in Australia. He returned to Kellogg in 1998as Managing Director, Kellogg Australia and was promoted to Managing Director, the UK and Republicof Ireland later in 1998. Mr. Mackay was promoted to Senior Vice President, Kellogg and President,Kellogg US in 2000. He became Executive Vice President, Kellogg. He was named President andChief Operating Officer of Kellogg in 2003. Mr. Mackay is also Director of Fortune Brands, GroceryManufacturers of America, The Consumer Goods Forum and the Kalamazoo Institute of Arts.

John A. Bryant

Board: Executive BoardJob Title: Executive Vice President and Chief Operating OfficerSince: 2010Age: 44

Mr. Bryant has been the Executive Vice President, Chief Operating Officer, and a member of theBoard of Director at Kellogg since 2010. He has been the Executive Vice President at the companysince 2002 and Chief Operating Officer since 2008. He joined Kellogg in 1998. Mr. Bryant servedas Vice President, Kellogg North America strategy development/business understanding and, in1998, he was named Vice President, Financial Planning, and Cereal. In 2000, Mr. Bryant was namedthe Senior Vice President and Chief Financial Officer, Kellogg US. He became Senior Vice Presidentand Chief Financial Officer of Kellogg Company in 2002. In the same year, he was promoted toExecutive Vice President of Kellogg in addition to his role as Chief Financial Officer. Before joiningKellogg, Mr. Bryant held leadership positions with Deloitte & Touche, Marakon and A.T. Kearney.

James M. Jenness

Board: Non Executive BoardJob Title: ChairmanSince: 2005


Kellogg CompanyKey Employee Biographies

Age: 63

Mr. Jenness has been the Chairman at Kellogg since 2005. He served as Chief Executive Officerof the company until 2006. Before this role, Mr. Jenness served as Chief Executive Officer ofIntegrated Merchandising Systems. Prior to joining Integrated Merchandising Systems, he servedas Vice Chairman and Chief Operating Officer of Leo Burnett Company. Mr. Jenness is alsoCo-Trustee of the WK Kellogg Foundation Trust. He is a Director of Kimberly-Clark Corporation,Children's Memorial Hospital and the Mercy Home for Boys and Girls.

Benjamin S. CarsonBoard: Non Executive BoardJob Title: DirectorSince: 1997Age: 58

Dr. Carson has been a Director at Kellogg since 1997. He is also a Director of pediatric neurosurgeryat The Johns Hopkins Medical Institutions. Dr. Carson is also a Professor of oncology, pediatrics,neurological surgery and plastic surgery at The Johns Hopkins Medical Institutions. He also servesas a Director at Costco Wholesale Corporation, the Academy of Achievement and is an EmeritusFellow of the Yale Corporation, the governing body of Yale University. Dr. Carson is the Presidentand co-founder of the Carsons Scholars Fund.

John T. Dillon

Board: Non Executive BoardJob Title: DirectorSince: 2000Age: 71

Mr. Dillon has been a Director at Kellogg since 2000. Previously, he served as the Chairman andChief Executive Officer of International Paper Company. Mr. Dillon is also a Director of Caterpillarand E.I. duPont de Nemours & Co. He served as Chairman of the Business Roundtable and theAmerican Forest and Paper Association and as the Chairman of the Board of governors of theNational Council for Air and Stream Improvement.

Gordon Gund




Mr. Gund has been a Director at Kellogg since 1986. He is the Chairman and Chief Executive Officerof Gund Investment Corporation. Mr. Gund is the Chairman and co-founder of the Foundation FightingBlindness.

Dorothy A. Johnson


Ms. Johnson has been a Director at Kellogg since 1998. She is the President of Ahlburg Company.Ms. Johnson is a former Director of National City Bank Corporation, the Corporation for Nationaland Community Service, Council on Foundations, Foundation Center, Independent Sector, theNational Charities Information Bureau, the National Center on Family Philanthropy, Indiana Centeron Philanthropy and the Presbyterian Foundation.

Ann McLaughlin Korologos


Ms. Korologos has been a Director at Kellogg since 1989. Previously, she served as a Senior Advisorto Benedetto, Gartland & Company. Currently, Ms. Korologos also serves on the Boards of AMRCorporation (the parent company of American Airlines); Host Hotels and Resorts, Harman InternationalIndustries and Vulcan Materials Company.

Sterling Speirn


Mr. Speirn has been a Director at Kellogg since 2007. He is the President and Chief Executive Officerof the WK Kellogg Foundation. Mr. Speirn was previously the President of Peninsula CommunityFoundation. He was also Founder and Chairman of the Center for Venture Philanthropy. He is aformer Chairman of Northern California Grantmakers and served on the Advisory Council of theGlobal Philanthropy Forum. Mr. Speirn is Co-Creator and former Board member of the Raising AReader take-home book bag program.

John L. Zabriskie




Dr. Zabriskie has been a Director of Kellogg since 1995. He is the President of Lansing BrownInvestments. From 1997 to 1999, Dr. Zabriskie served as the Chairman and Chief Executive Officerof NEN Life Science Products. Previously, he was the Chairman, President and Chief ExecutiveOfficer of Pharmacia & Upjohn, Executive Vice President of Merck & Co. Dr. Zabriskie is also aDirector of Array Biopharma, Area Discovery, PureTech Ventures and Protein Forest.

Donald R. Knauss


Mr. Knauss has been a Director at Kellogg since 2007. He also serves as the Chairman and ChiefExecutive Officer of The Clorox Company since 2006. Prior to joining The Clorox Company, Mr.Knauss spent 12 years with The Coca-Cola Company in a variety of general management anddivision president roles. Prior to that, he held various positions in marketing and sales with PepsiCoand Procter & Gamble, and served as an officer in the US Marine Corps.

Robert A. Steele


Mr. Steele has been a Director at Kellogg since 2007. He also serves as the Vice Chairman, GlobalHealth and Well-Being at Procter & Gamble since 2007. Mr. Steele was Group President - GlobalHousehold Care at Procter & Gamble from 2006 to 2007 and Group President - North America from2004 through 2006. Prior to that, he was President, North America from 2000 through 2004.

Rogelio M. Rebolledo

Board: Non Executive BoardJob Title: DirectorSince: 2008

Mr. Rebolledo is currently a Director at Kellogg. Previously, he served as the Chairman of the PepsiBottling Group, Mexico. Mr. Rebolledo also served as the company's President and Chief Executive



Officer from 2004-2006. Prior to joining the Pepsi bottling business in Mexico in 2004, he held anumber of key positions during his 27-year tenure with PepsiCo.

Ronald L Dissinger

Board: Senior ManagementJob Title: Chief Financial OfficerSince: 2010Age: 52

Mr. Dissinger has been the Chief Financial Officer at Kellogg since 2010. He joined Kellogg in 1987as a Supervisor in general accounting for the Mrs. Smith's subsidiary and was promoted to manager,cost accounting in 1990.

Celeste A. Clark

Board: Senior ManagementJob Title: Senior Vice President, Global Public Policy and External Relations; and Chief SustainabilityOfficerSince: 2010Age: 56

Dr. Clark has been Senior Vice President of Global Public Policy and External Relations and ChiefSustainability Officer at Kellogg since 2010. She joined the company in 1977 as a Nutritionist. Dr.Clark also serves on the Boards of Auto Club Group and AAA Michigan. She also serves on theScientific Advisory Board of Mead Johnson Nutritionals.

Bradford J. Davidson

Board: Senior ManagementJob Title: Senior Vice President, Kellogg and President, Kellogg North AmericaSince: 2008Age: 49

Mr. Davidson has been the Senior Vice President of Kellogg and President of Kellogg North Americasince 2008. He joined Kellogg Canada as a Sales Representative in 1984. He held numerouspositions in Canada, including Manager of trade promotions, Account Executive, Brand Manager,area Sales Manager, Director of customer marketing and category management, and Director ofWestern Canada. Mr. Davidson moved to Kellogg US in 1997 as Director of trade marketing. Helater was promoted to Vice President, channel sales and marketing and then to Vice President,national teams sales and marketing. In 2000, he was promoted to Senior Vice President, sales forthe Morning Foods Division, Kellogg US, and to Executive Vice President and Chief Customer Officerof Morning Foods Division for Kellogg US in 2002.



Timothy P. Mobsby

Board: Senior ManagementJob Title: Senior Vice President, Kellogg; Executive Vice President, Kellogg International; andPresident, Kellogg EuropeSince: 2000Age: 54

Mr. Mobsby has been the Senior Vice President of Kellogg; Executive Vice President at KelloggInternational; and President of Kellogg Europe since 2000. He joined the company in 1982 in theUK. From 1988 to mid 1990, he worked in the cereal marketing group of Kellogg US. From 1990 to1993, Mr. Mobsby was President and Director General of Kellogg France & Benelux. He wassubsequently appointed Vice President of marketing, innovation and trade strategy for KelloggEurope based in Manchester, England.

David J. Pfanzelter

Board: Senior ManagementJob Title: Senior Vice President, Kellogg; and President, Kellogg Specialty ChannelsSince: 2004Age: 57

Mr. Pfanzelter has been the Senior Vice President of Kellogg and President of Kellogg SpecialtyChannels since 2004. He began his foodservice career in 1975 with Oscar Mayer Foods Corporation.In 1998, he joined the Keebler Foods Company as Vice President and General Manager of thefoodservice division and was also a Corporate Officer. Following the acquisition of Keebler in 2001,Mr. Pfanzelter was named President of Kellogg's Food Away From Home. He was promoted toKellogg's Vice President in 2003.

Gary H. Pilnick

Board: Senior ManagementJob Title: Senior Vice President, General Counsel, Corporate Development and SecretarySince: 2003Age: 45

Mr. Pilnick has been the Senior Vice President, General Counsel and Secretary at Kellogg since2003. He joined the company in 2000 as Vice President, Deputy General Counsel and AssistantSecretary. Prior to joining the company, Mr. Pilnick was affiliated with the Chicago law firm of Jennerand Block from 1989 to 1995. He served as Vice President and Chief Corporate Counsel for SpecialtyFoods Corporation from 1995 to 1997. Mr. Pilnick became Vice President and Chief Counsel of SaraLee Branded Apparel, North and South America in 1999.

Paul T. Norman



Board: Senior ManagementJob Title: Senior Vice President, Kellogg and President, Kellogg InternationalSince: 2008Age: 45

Mr. Norman has been the Senior Vice President at Kellogg and President at Kellogg Internationalsince 2008. He joined Kellogg's UK sales organization in 1987. Mr. Norman was promoted to Directorof Marketing for Kellogg de Mexico in 1997; to Vice President of Marketing for Kellogg US in 1999;and to President of Kellogg Canada in 2000. He was promoted to Managing Director of UK/Republicof Ireland in 2002. He was promoted to Kellogg Vice President in 2004.

Juan Pablo Villalobos

Board: Senior ManagementJob Title: Senior Vice President, Kellogg; and President, US Morning FoodsSince: 2008Age: 44

Mr. Villalobos has been Senior Vice President, Kellogg; President, US Morning Foods since 2008.He joined Kellogg de Mexico in 1991 as Brand Manager, Marketing and was promoted to GroupBrand Manager in 1992. Mr. Villalobos became Marketing Director of Kellogg Brazil in 1993 andGeneral Manager of Kellogg Chile in 1994. Mr. Villalobos was promoted to General Manager ofKellogg Colombia in 1995 and to Convenience Foods Director of Kellogg de Mexico and LatinAmerica in 1997. Later, he became General Manager of Kellogg de Mexico and Vice President ofKellogg Latin America in 1999.

Margaret Bath

Board: Senior ManagementJob Title: Vice President, Research, Quality and TechnologySince: 2004Age: 46

Ms. Bath has been the Vice President of Research, Quality and Technology at Kellogg since 2004.She joined Kellogg as Director, Global Product Development in 2000. Prior to joining the company,Ms. Bath was employed by Frito Lay in Plano, Texas. She is a Board member of the AmericanAssociation of Cereal Chemists.

Mark R. Baynes

Board: Senior ManagementJob Title: Vice President and Global Chief Marketing OfficerSince: 2008Age: 49



Mr. Baynes has been the Vice President and Global Chief Marketing Officer at Kellogg since 2008.He joined the company in the UK in 1990 as Senior Brand Manager.



MAJOR PRODUCTS AND SERVICES

Kellogg Company (Kellogg) is the global producer and marketer of cereal and convenience foods.The company's key products and brands include the following:

Products:

Ready-to-eat cerealsCookies Crackers toaster pastries Cereal barsFrozen waffles Meat alternatives

Brands:

Kellogg's Keebler Pop-Tarts Eggo Cheez-It ClubNutri-GrainRice Krispies All-Bran Special K Mini-Wheats Chips Deluxe Sandies Morningstar FarmsFamous AmosKashi


Kellogg CompanyMajor Products and Services

REVENUE ANALYSIS

The company recorded revenues of $12,575 million during the financial year ended December 2009(FY2009), a decrease of 1.9% compared with 2008. For FY2009, North America, the company'slargest geographic market, accounted for 67.7% of the total revenues.

Kellogg operates through four geographic segments: North America, Europe, Latin America, andAsia Pacific.

Revenue by geography*

North America, Kellogg's largest geographical market, accounted for 67.7% of the total revenues inFY2009. Revenues from North America reached $8,510 million in 2009, an increase of 0.6% over2008.

Europe accounted for 18.8% of the total revenues in FY2009. Revenues from Europe reached $2,361million in 2009, a decrease of 9.9% compared with 2008.

Latin America accounted for 7.7% of the total revenues in FY2009. Revenues from Latin Americareached $963 million in 2009, a decrease of 6.5% compared with 2008.

Asia Pacific accounted for 5.9% of the total revenues in FY2009. Revenues from Asia Pacific reached$741 million in 2009, an increase of 3.5% over 2008.

* Percentages rounded off.


Kellogg CompanyRevenue Analysis

SWOT ANALYSIS

Kellogg is the worlds leading producer of cereal and one of the leading producers of conveniencefoods. The company markets more than 1,500 products in over 180 countries. A leading marketposition provides Kellogg with significant bargaining power as well as stabilizes the company'sfinancial growth. However, a weak economic outlook for the important markets of Kellogg would putpressure on its top line and bottom line growth.

WeaknessesStrengths

Dependence on few customers for majorportion of revenues

Leading market position built on strongbrands aided with robust advertising spend

Product recalls hampering brand imageStrong product innovation createssustainable growthStrong results in tough economic and macroenvironment enhances investor's confidence

ThreatsOpportunities

Stringent regulationsEmerging health consciousness would drivethe demand of the company's products Soft consumer spending in the mature

markets of US and EuropeCost saving and efficiency programs toenhance profitability Intense competition and changing global

retail scenarioGrowing global breakfast cereals market

Strengths

Leading market position built on strong brands aided with robust advertising spend

With 2009 sales of $12,575 million, Kellogg is the worlds leading producer of cereal and of theleading producers of convenience foods. The company markets more than 1,500 products in over180 countries. It offers its products under a large portfolio of well recognized brands includingKelloggs, Keebler, Special K, Pop-Tarts, Eggo, Cheez-It, Nutri-Grain, Rice Krispies, Mothers,Morningstar Farms, Murray Sugar Free, Townhouse, All-Bran, Frosted Mini-Wheats, Club, Kashi,Bear Naked, among others. Some top brands have even become synonymous with the category.Kellogg has a strong focus on strengthening its brands through advertising and consumer promotion.Advertising investment of nearly $1.1 billion in 2009 continued its consistent and strong investmentinto building its brands. At approximately 9% of net sales, this investment is significantly above thanmost of its peers in the packaged foods industry. In 2009, Kellogg took advantage of the significantmedia deflation. Rather than cutting back on advertising spending, the company invested even


Kellogg CompanySWOT Analysis

moreover $1 billion in advertisingresulting in more consumer impressions and a greater impactfrom each dollar spent.

A leading market position provides Kellogg with significant bargaining power as well as stabilizesthe company's financial growth. Further, the company's strong brand strength supports the innovationprocess, in launching new products and enhancing the revenue stream. Kellogg has leveraged itshigh brand recognition to increase customer loyalty and compete effectively with regional players invarious markets.

Strong product innovation creates sustainable growth

Kellogg consistently develops products that are differentiated in the marketplace and respond to thechanging tastes and lifestyle needs of consumers around the globe.The company drives developmentand visibility of a robust pipeline of new products. In 2009, Kellogg completed the expansion of itsprimary research and development engine, the W.K. Kellogg Institute for Food and Nutrition Research.Further, the company invests in an open innovation program which enables Kellogg to benefit fromexternal research from around the world to supplement its internal development capabilities. Amongits many innovations in 2009, Kellogg extended its largest brand, Special K, even further by introducingSpecial K crackers, chocolatey pretzel bars, and fruit crisps, as well as new flavors of Special Kcereal around the world including cinnamon pecan, blueberry, chocolatey flakes, fruit & nut clusters,and low-fat granola. The company also renovated many of its existing brands. Recent renovationsfocused on reducing sugar, sodium and fats. Kellogg also focuses on enhancing the nutritional valueand benefits of the food products that it offers. For example, in 2009 the company added fiber toFroot Loops and Apple Jacks in the US as well as Froot Loops and Corn Pops in Canada.

Strong focus on innovation and new product launches would enable Kellogg to expand its presenceand strengthen the depth of its portfolio. This would in turn translate into increasing revenues andprofitability.

Strong results in tough economic and macro environment enhances investor's confidence

Despite the backdrop of a difficult economic environment and a tough competitive landscape, 2009was a profitable year for Kellogg. Total shareowner return on Kellogg shares for FY2009 was 22%,ahead of the S&P Packaged Foods & Meats Index total return of 16%. Five-year cumulative annualreturn of Kellogg shares (35%) significantly outperformed both the Packaged Foods & Meats Index(13%) and the S&P 500 Index (2%). In addition, Kellogg generated $3.16 Earnings per Share, a13% increase on a currency-neutral basis. Also, the company generated record cash flow of nearly$1.3 billion. This enabled Kellogg to fulfill its commitment of returning cash to shareowners byincreasing the dividend by 10% and returning nearly three-quarters of a billion dollars throughdividends and share repurchases. Robust performance indicates financial soundness of the companyand enhances investor's confidence in Kellogg.

Weaknesses



Dependence on few customers for major portion of revenues

Kellogg has a concentrated customer base.The companys sales are largely dependent on Wal-MartStores and its affiliates. For instance, Wal-Mart accounted for approximately 21% of Kellogg'sconsolidated net sales in FY2009. During the same period, the companys top five customers,collectively, including Wal-Mart, accounted for approximately 34% of its consolidated net sales andapproximately 44% of US net sales. Moreover, approximately 17% of the company's consolidatedreceivables balance and 26% of its US receivables balance comprised of amounts owed by Wal-Martand its affiliates as on January 2010. As the retail grocery trade continues to consolidate and massmarketers become larger, Kellogg's large retail customers may seek to use their position to improvetheir profitability through lower pricing. Overdependence on large retail customers could negativelyimpact the company's profitability and volume growth.

Product recalls hampering brand image

Kellogg has been registering increasing instance of product recalls recently. For instance, in January2009, Kellogg recalled certain Austin and Keebler branded peanut butter sandwich, crackers andselect snack-size packs of Famous Amos peanut butter cookies and Keebler Soft Batch Homestylepeanut butter cookies. Products were recalled due to the potential to be contaminated with Salmonella,an organism which can cause serious and sometimes fatal infections in young children, frail or elderlypeople, and others with weakened immune systems. In the following month, the company recalledKeebler Soft Batch Homestyle Chocolate Chunk Cookies, Oatmeal Raisin Cookies and Special KProtein Meal Bar Honey Almond variety only. This voluntary recall was a part of a larger productrecall by Peanut Corporation's, one of Kellogg's peanut paste suppliers for crackers. Most recentlyin June 2010, Kellogg implemented a voluntary recall of certain breakfast cereals including Kellogg'sApple Jacks, Fruit Loops, Corn Pops and Honey Smacks due to an uncharacteristic off-flavor andsmell from the liner in the package. Recurrent product recalls could affect the brand image of thecompany, which would lead to low customer loyalty and brand equity.

Opportunities

Emerging health consciousness would drive the demand of the company's products

Over the past few years, there has been a newfound emphasis on healthier eating. With a changinglifestyle, people are becoming more aware of the negative effects of unhealthy eating habits. Thisis leading to a higher demand for low carbohydrate and low calorie foods worldwide. Accordingly,food items containing trans-fat are losing market share to low calorie, low fat, natural and organicproducts. According to industry reports, the sales for organic food grew by 15.8% in 2008.The growthrates exceeded the growth witnessed by conventional food products. Global demand for organicfoods is expected to grow by 46% for a period of at least five years starting 2009. Kellogg'sready-to-eat cereal brands are well positioned to meet the demands developing from the growinghealth and wellness trends. The companys largest brand Special K, a low-fat cereal, continues togrow globally at nearly double-digit rates and triple-digit in India. And, although only recently launchedin South Korea, Special K is already a top cereal brand in the country. Furthermore, as the cereal



category continues to be on trend with demographic shifts around the world, Kelloggs strong portfolioof adult cereals is well positioned, meeting the needs of aging baby boomers seeking foods that aidthem with weight management and digestive health. The companys portfolio of brands catering tothe emerging health conscious consumers would fuel its profitability and strengthen its presence inthe future.

Cost saving and efficiency programs to enhance profitability

In order to cope up with the challenging operating environment, Kellogg has set a goal of $1 billionin annual cost savings by the end of 2011. Supporting the cost challenge is K-Lean, the companysongoing initiative to drive continuous annual improvement. Lean principles ensure that Kelloggssupply chain culture continues to foster improvement, drive waste reduction, create incrementalcapacity, optimize manufacturing operations, and uphold exemplary quality and safety standards.Kellogg began the implementation of Lean principles in its North American cereal operations in 2008.In 2009, the company expanded K-Lean globally throughout its manufacturing network, and followedwith a broad implementation encompassing the supply chain support systems. Cost saving andefficiency programs in 2009 provided substantial progress and the company now expects to exceed$1 billion in savings over this three year period. These initiatives will not only give Kellogg excellentfinancial visibility but also positively enhance its flexibility.

Growing global breakfast cereals market

The global breakfast cereals market has demonstrated steady growth over a long period of time.According to Datamonitor estimates, the global breakfast cereals market generated total revenuesof $24.5 billion in 2008, representing a compound annual growth rate (CAGR) of 3.3% for the periodspanning 2004-2008. Ready-to-eat cereal sales proved the most important for the global breakfastcereal market in 2008, generating total revenues of $21.5 billion, equivalent to 87.8% of the market'soverall value.The performance of the market is forecast to follow a similar pattern, with an anticipatedCAGR of 3.2% for the five-year period 2008-2013, which is expected to lead the market to a valueof $28.7 billion by the end of 2013. Kellogg is the worlds leading producer of cereal. The companyis thus well positioned to exploit the growing breakfast cereals market and enhance its top line andprofitability.

Threats

Stringent regulations

As a specialist in cereal and convenience foods, the company's operations are subject to extensiveregulation by the US Department of Agriculture, the US Food and Drug Administration and otherstate and local authorities that oversee food safety standards and the processing, packaging, storage,distribution, advertising and labeling of the company's products. Kellogg's manufacturing facilitiesand products are subject to constant inspection by federal, state and local authorities. Some of theacts like Clean Water Act, Clean Air Act, Solid Waste Disposal Act (as amended by the Resource



Conservation and Recovery Act), Comprehensive Environmental Response, Compensation andLiability Act, Emergency Planning Community Right-to-Know Act, Safe Drinking Water Act, ToxicSubstances Control Act, and the Federal Insecticide, Fungicide, and Rodenticide Act, and relatedstate and local laws and regulations, Claims or enforcement proceedings could affect the company.Additionally, the company is routinely subject to new or modified laws, regulations, and accountingstandards. The company's failure or inability to comply with such requirements could subject thecompany to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminalsanctions, which may impact the business of the organization.

Soft consumer spending in the mature markets of US and Europe

As a company dependent upon consumer discretionary spending, Kellogg will face a challengingFY2010. All major western countries including the US, the UK, Germany, France, Italy, Spain, Japanand Australia are still reeling under the affect of recession. For instance, the recent debt crisis ofGreece has the potential to contaminate the entire European economy. With Portugal and Spainalso showing contagion effects, the eminent threat of another downfall in Europe is gaining grounds.Another economic turmoil and reduced consumer wealth may result in consumers becoming unwillingor unable to purchase the company's products, with clear implications for turnover and profitability.In the US, the consumer confidence is down being hit by both a property slump and rising prices offood and fuel. Although consumer spending is seeing some positive growth, Americans seem cautiousand are not willing to increase spending, one of the reasons why the pace of the recovery is estimatedto be more subdued than in the past. High unemployment which is estimated to reach 10% in 2010,sluggish wage gains and credit crunch are all expected to keep consumers relatively cautious. Aweak economic outlook for the important markets of Kellogg would put pressure on its top line andbottom line growth.

Intense competition and changing global retail scenario

Kellogg faces intense competition across its product lines and also in both domestic and internationalmarkets. Some of its competitors like Sara Lee, Kraft Foods and PepsiCo have substantial financial,marketing and other principal factors of competition include new product introductions, productquality, taste, nutritional value, price, and promotion. For instance, PepsiCo's Quaker Oats is perceivedto offer healthier and more nutritious cereals than Kellogg.

Furthermore, the companys products are sold in a marketplace which is experiencing an increasedtrade concentration and the growing presence of large-format retailers and discounters. With thegrowing trend toward retail trade consolidation, the company is increasingly dependent on keyretailers. Some of these retailers have a greater bargaining strength than Kellogg. They may usethis leverage to demand higher trade discounts, allowances or slotting fees, which could lead toreduced sales or profitability. Kellogg may also be negatively affected by changes in the policies ofits retail trade customers, such as inventory de-stocking, limitations on access to shelf space, delistingof products and other conditions.



Changes in the policies of its retail trade customers and increasing dependence on key retailers indeveloped markets may adversely affect its business. Increasing competition from multinationalmanufacturers and private labels on the other hand could adversely affect the company's margins.



TOP COMPETITORS

The following companies are the major competitors of Kellogg Company

Associated British Foods plcConAgra Foods, Inc.General Mills, Inc.McKee Foods CorporationNestle S.A.PepsiCo, Inc.Sara Lee CorporationInterstate Bakeries Corp.Hain Celestial Group, Inc., TheRalcorp Holdings, Inc.Kraft Foods, Inc.Cereal Partners Worldwide


Kellogg CompanyTop Competitors

COMPANY VIEW

A joint statement by David Mackay, President and Chief Executive Officer, and Jim Jenness, Chairmanof the board of Kellogg is given below. The statement has been taken from the company's 2009annual report.

In 2009, we delivered strong, high-quality results while continuing to build an even stronger KelloggCompany for the future.

Thanks to the hard work and passion of our 31,000 Kellogg employees around the world, the strengthof Kellogg was demonstrated again in 2009 with another year of sustainable and dependableperformance. By any measure, this was one of the most challenging operating environments indecades. However, we are pleased that despite the backdrop of a difficult economic environmentand a tough competitive landscape, 2009 was a very good year for Kellogg.We once again deliveredhigh quality results while building an even stronger company.

Kellogg grew internal net sales, operating profit and earnings per share at, or above, our long-termannual targets.

We posted 3 percent growth in Internal Net Sales, driven by a particularly strong year in cereal anda solid year in snacks.

We delivered a 10 percent improvement in Internal Operating Profit, reflecting the success of ourcost savings and productivity initiatives.

We generated $3.16 Earnings per Share, a 13 percent increase on a currency-neutral basis.

We generated record cash flow of nearly $1.3 billion. We fulfilled our commitment of returning cashto shareowners by increasing our dividend by 10 percent and returning nearly three-quarters of abillion dollars through dividends and share repurchases.

Instead of viewing the economic climate as a roadblockwe see it as an opportunity. We intend toemerge from this economic crisis as an even stronger, more focused, more effective organization.

Throughout 2009, we invested in our strengthsbuilding our brands in our core categories, spendingeffectively on brand-building advertising and marketing, innovating and renovating our products tomeet our consumers changing needs, and identifying and implementing efficiencies and cost savingsthroughout our organization. This investment lays the groundwork for continued sustainable anddependable performance now and well into the future.

Our well-known and trusted brands are the strength of Kellogg. As a focused, branded food company,we provide a balanced portfolio of brands that reaches consumers around the world. The key to our


Kellogg CompanyCompany View

success is in the way we strengthen our brands to keep them relevant, resonant and powerful withconsumers. Consumers demand variety and convenience, and, now more than ever, value.Consumers are trading into our core categoriessuch as cerealin markets like the United Statesand the United Kingdom, and they recognize that Kellogg brands deliver on those needs.

We operate in two of the strongest categories in the food industrycereal and snacksas well asfrozen foods. Our strategy is to expand our cereal and snack business throughout the world andgrow our frozen foods business in North America. Through leveraging the power of our brands andour proven ability to execute, we are intent on expanding our share in these categories.

The ready-to-eat cereal category is robust and growing on a global basis. Its strong appeal toconsumers continues even during this weak economy, as consumers seek greater value in additionto taste and convenience. Our cereal portfolio continues to perform well, not only in the U.S., butaround the globe in Mexico, Australia, Canada and other core markets. In the U.S. we continue todrive growth and advertising support behind our top eight brands plus Kashi.

The cereal category continues to be on trend with demographic shifts around the world. Our strongportfolio of adult cereals is well positioned, meeting the needs of aging baby boomers seeking foodsthat aid them with weight management and digestive health.

Our goal is to be consumers top choice within these categories and also the leader in categorygrowth. To accomplish this, we must develop new products to satisfy the consumer. The strengthof Kellogg lies in our world-class innovation capabilities. Our innovation process begins and endswith the consumer. Our product development capabilities both in innovation (developing newproducts) and renovation (improving existing products) are critical to our continued success. Wecontinue to invest in projects that expand our capabilities, focus our development efforts onstrengthening our core brands and the equity behind them, and maintain a balanced portfolio of foodofferings across our categories, markets, and brands.

In 2009, we completed the expansion of our W.K. Kellogg Institute for Food and Nutrition Research,our world class R&D facility where we develop and renovate products to meet our consumerschanging needs and tastes.The open atmosphere of this facility fosters collaboration among diverseteam members, converging the strengths of varying talents and knowledge bases. Our pilot plantand super-kitchen improvements allow for rapid prototyping and multiple, simultaneous prototypingstreams, both of which are critical to quickly launching successful innovation into the marketplace.

Continued investment in our open innovation program enables us to benefit from outside researchfrom around the world to supplement our internal development capabilities. We are seeing positiveresults in our three areas of focustechnology, strategic alliances with world-class research partners,and our online Great Ideas portal.

We have strengthened our core brands through innovation of new products and flavors. Among ourmany innovations in 2009, we extended our largest brand, Special K, even further by introducingSpecial K crackers, chocolatey pretzel bars, and fruit crisps, as well as new flavors of Special K



cereal around the world including cinnamon pecan, blueberry, chocolatey flakes, fruit & nut clusters,and low-fat granola.

We also strengthened our brands through renovation. Applying new ideas to adjust the ingredientsand nutrients in our existing foods, keeps our successful brands relevant with consumers today andin the future, thereby protecting these equities going forward. Recent renovations focused on reducingsugar, sodium and fats. Were also enhancing the nutritional value and benefits our foods offer. Forexample, in 2009 we added fiber to Froot Loops and Apple Jacks in the United States as well asFroot Loops and Corn Pops in Canada.

The strength of Kellogg is our long history of heavily investing in advertising and marketing to supportour new and established brands. In 2009, we took advantage of the significant media deflation in anumber of our markets. Rather than cutting back on advertising spending, we invested evenmoreover $1 billion in advertising resulting in more consumer impressions and a greater impactfrom each dollar spent.

To optimize our brand building, we consolidated our advertising agencies, market researchers andother vendors to create greater scale across the globe, improving the effectiveness of our advertising.We realigned our brands and marketing strategies by geographic regions to create even moreadvantages from scale.

Soon after we consolidated our market research, we realized the benefit.We completed a broad-basedmarket research study in all of our major ready-to-eat cereal markets. Our global research foundthat adult females across a variety of cultures share the same concerns and needs when it concernshealth and weight management. So when we had early successes in the United Kingdom with aSpecial K marketing campaign Moments of Truth, we were able to roll it out across a variety ofmarkets that were culturally very different. We had great results Special K continues to growglobally at nearly double-digit ratestriple-digit in India. And, although only recently launched inSouth Korea, Special K is already a top cereal brand in that country.

We continue to embrace digital marketing, investing heavily in digital capabilities, online campaignsand partnerships with experts in the space. In 2009, we partnered with leaders in the digital industry,such as Facebook for social media and Microsoft for technology architecture. We began investingin new technology infrastructures within Kellogg, increasing our ability to implement successfulprograms from one area of the world to another with ease and speed.

The strength of Kellogg is our employees.

The guiding principles of our K Values provide a positive and strong foundation for everyone in theKellogg organization. Around the world, our employees are committed to excellence, focused onachieving our goals and eager to embrace new challenges. The experience, ideas, and ingenuityof the employees throughout Kellogg Company have generated a multi-year pipeline of cost-savingsinitiatives and efficiency improvements. In 2009, the entire Kellogg organization was challenged todeliver $1 billion in annual cost savings by the end of 2011. Our employees rose to the challenge,and we are currently on track to exceed that goal. We dramatically increased our investment in



productivity and cost-saving initiatives during 2009 to a level equivalent to 26 cents of earnings pershare, which is 12 cents above our strong 2008 level, while continuing to meet or exceed our long-termperformance goals. We are investing the savings from these initiatives back into the business,providing fuel for future growth.

Supporting the $1 billion cost challenge is K-Lean, our ongoing initiative to drive continuous annualimprovement. Lean principles ensure that our supply chain culture continues to foster improvement,drive waste reduction, create incremental capacity, optimize manufacturing operations, and upholdexemplary quality and safety standardsall while enhancing our focus on consumer and customersatisfaction.

We began the implementation of Lean principles in our North American cereal operations in 2008.In 2009, we expanded K-Lean globally throughout our manufacturing network, and followed with abroad implementation encompassing our supply chain support systems. We will eventually leveragethese concepts across the entire Company.

We see Lean as a culture-changing process that will take us to new levels of cross-functionalcollaboration and continuous improvement. Our long-term approach to making our business moreefficient and effective rather than simply cutting functional costs will benefit us for years to come.Already in 2009, cost and capacity improvement activities combined with top-line growth helped toexpand gross margins.

As we enter 2010, we anticipate that the operating environment will remain challenging for Kellogg,our retailers and our consumers. However, we will maintain our focus on consumers, anticipatingtheir changing needs and tastes and keeping our products relevant. We will continue to investaggressively to support our brands. Our implementation of productivity and cost savings initiativesin 2009 has given us excellent financial visibility into our 2010 financial performance. By settingrealistic financial targets, we will make decisions based on the long-term benefit to our Companyand to our shareowners. We could not achieve success without our consumers, our partners, ouremployees, and, especially, our shareowners.

Thank you for your continued confidence and support. We will continue to execute our sustainablegrowth model and focused business strategy to deliver sustainable and dependable performancethatis the strength of Kellogg.



LOCATIONS AND SUBSIDIARIESHead OfficeKellogg CompanyOne Kellogg SquareBattle CreekMichigan 49016 3599USAP:1 269 961 2000F:1 269 961 2871http://www.kelloggcompany.com

Other Locations and Subsidiaries

Keebler FoodsKellogg MexicoBattle CreekKm 1 Canetera al CampoMoichiganI 49016 1986MilitarUSAQueretaro 76200

MEX

Kellogg Brasil & CiaKelloggAv Das Nacoes Unidas 12995Calle 3 Esq 8 Parque IndustrialSao Paulo 04578 000PilarBRABS.AS. 1629

ARG

Kellogg OsterreichKellogg De ColombiaHandelskai 388/5/Top 533CL 17 NO. 68A 75Vienna 1020Santa Fe De BogotaAUTCOL

Nordisk Kellogg'sKellogg's BeneluxStationsparken 24 st.Belgicastraat 72600 Glostrup1930 ZaventemDNKBEL

Kellogg's Produits AlimentairesNordisk Kellogg's FinlandR Lon BlumLars Sonckin kaari 16Rosny Sous Bois 93110Espoo 02600FRAFIN


Kellogg CompanyLocations and Subsidiaries

Kellogg Company of IrelandKellogg (Deutschland)9 Saint Johns CtAuf Der Muggenburg 30Swords Road28217 BremenDublinDEUIRL

Kellogg's (UK)Kellogg EspanaTalbot RoadC/ Licoristas 2ManchesterPol. Ind. De VallsM16 0PUValls Tarragona 43800GBRESP


Kellogg CompanyLocations and Subsidiaries

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