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Kellogg Company

of 21

November 1, 2016

Kellogg Company 2016 THIRD QUARTER

FINANCIAL RESULTS November 1, 2016

Agenda

November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS

Overview John Bryant, Chairman & Chief Executive Officer

Financials Ron Dissinger, Chief Financial Officer

North America Paul Norman, President Kellogg North America

Europe Chris Hood, President Kellogg Europe

Latin America Maria Fernanda Mejia, President Kellogg Latin America

Asia Pacific Amit Banati, President Kellogg Asia Pacific

Summary John Bryant, Chairman & Chief Executive Officer

Q&A

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Kellogg Company

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November 1, 2016

Forward-Looking Statements

This presentation contains, or incorporates by reference, “forward-looking statements” with projections concerning, among other things, the Company’s global growth and efficiency program (Project K), the integration of acquired businesses, the Company’s strategy, zero-based budgeting, and the Company’s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, charges, rates of return, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, workforce reductions, savings, and competitive pressures. Forward-looking statements include predictions of future results or activities and may contain the words “expects,” “believes,” “should,” “will,” “anticipates,” “projects,” “estimates,” “implies,” “can,” or words or phrases of similar meaning.

The Company’s actual results or activities may differ materially from these predictions. The Company’s future results could also be affected by a variety of factors, including the ability to implement Project K as planned, whether the expected amount of costs associated with Project K will differ from forecasts, whether the Company will be able to realize the anticipated benefits from Project K in the amounts and times expected, the ability to realize the anticipated benefits and synergies from the acquisitions in the amounts and at the times expected, the impact of competitive conditions; the effectiveness of pricing, advertising, and promotional programs; the success of innovation, renovation and new product introductions; the recoverability of the carrying value of goodwill and other intangibles; the success of productivity improvements and business transitions; commodity and energy prices; labor costs; disruptions or inefficiencies in supply chain; the availability of and interest rates on short-term and long-term financing; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; changes in consumer behavior and preferences; the effect of U.S. and foreign economic conditions on items such as interest rates, statutory tax rates, currency conversion and availability; legal and regulatory factors including changes in food safety, advertising and labeling laws and regulations; the ultimate impact of product recalls; business disruption or other losses from war, terrorist acts or political unrest; and other items. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to update them publicly.

Non-GAAP Financial Measures. This presentation includes non‐GAAP financial measures. Please refer to the Appendices for a reconciliation of these non‐GAAP financial measures to the most directly comparable GAAP financial measures. Management believes that the use of such non-GAAP measures assists investors in understanding the underlying operating performance of the company and its segments.

November 1, 2016 KELLOGG COMPANY | Q3 2016 EARNINGS 3

Q3 Update – Key Messages

*On a currency-neutral comparable basis


Results: Ahead of expectations on margins and tax rate

Progress: Tangible progress against 2020 Growth Plan and 2016 priorities

Outlook: Sequential improvement in Q4 and in 2017

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Strategic Priorities


2020 Growth Plan

5

Progress – One Year After “Day at K”

*On a currency-neutral comparable basis


November, 2015 November, 2016

• Stabilize Core 4 RTEC Markets

• Pringles Expansion

• Emerging Markets

• Sales Capabilities

• Productivity & Savings

• Progress in 3 of 4 core markets

• Pringles growth in all Regions

• Emerging Markets growth, JVs growth, acquisitions

• Revenue Growth Management, High Frequency Stores, Specialty Channels

• Project K, ZBB, new Marketing Model; improved OP margins

Be a Global Snacking

Powerhouse

Double Our Emerging

Market Engine

Win Where the Shopper

Shops

6

Win in Breakfast

Fuel for Growth

Kellogg Company

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November 1, 2016

Summary of Financial Results

* Please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure.

Change Versus Prior Year


Net Sales

Reported (2.2)% (4.5)%

Currency-Neutral Comparable * (1.0)% 4.8%

Currency-Neutral Comparable

x-Venezuela * (1.6)% (1.6)%

Operating Profit

Reported 22.9% 14.8%

Earnings Per Share

Reported 41.4% 14.7%

Comparable * 12.9% 2.9% Currency-Neutral Comparable* 17.6% 21.1%

Currency-Neutral Comparable * 6.8% 17.9%


x-Venezuela * 5.0% 3.9%

Year to Date Q3

7

Net Sales Components

Third Quarter 2016


YTD: (1.3)% 6.1% 0.2% (9.5)% Excluding VZ (1.2) (0.4) 0.3 (1.6)

(year-over-year, % change)

a) Other includes Project K, acquisitions, divestitures, and shipping day differences.

(a)

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November 1, 2016

Gross Profit Margin *



Currency-Neutral, Comparable Basis, Excluding Venezuela, Gross Profit as % of Net Sales*

+ Productivity, Project K, ZBB efficiencies,

- Adverse mix, transactional FX, investment in food

- Lower production volume

9

Operating Profit Margin*


+ Up 90 bp ex-Venezuela in Q3

+ Productivity, Project K, ZBB efficiencies

+ Improvement in all Regions

+ On-track to post improvement for year


Currency-Neutral, Comparable Basis, Excluding Venezuela, Operating Profit as % of Net Sales*

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November 1, 2016

Cash Flow *

For Cash Flow, please refer to appendices for reconciliation of non-GAAP measures to the most directly comparable GAAP measure.


* “Cash Flow” is Operating Cash Flow After Capital Expenditure; Year to Date through Q3 2016. “Core Working Capital” is an internal Kellogg metric defined as last 12 months’ average trade receivables and inventory, less 12 months’ average trade payables, divided by last 12 months’ net sales.

$ in Millions, Year to Date Through Q3

+ 2016 includes $(97) million from bond tender

+ Continued reduction in core working capital* as % of sales

+ On-track to achieve $1.1 billion cash flow* for the full year

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2016 Guidance

(a) 2016 guidance for currency-neutral comparable net sales and operating profit excludes the impact of acquisitions, dispositions, currency translation, differences in the number of shipping days, mark-to-market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, VIE deconsolidation, and other items that could affect comparability.

(b) 2016 guidance for comparable EPS excludes the impact of differences in the number of shipping days, mark-to-market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, and other items that could affect comparability. Does include the impact of prior acquisitions and investment in JVs. Currency-neutral comparable EPS also excludes the impact of currency translation.


EPS(b)


Operating Profit(a)


Net Sales(a)


~ 4%

+15-17%

$4.16 - $4.23

~ (1)%

+4-6%

• 2H improvement less than expected • Still expecting sequential improvement

in Q4

• Still expecting high end of the range • Better margin expansion offsets lower

sales

Previous: Flat Previous: 4-6%

Previous: 4-6%

• Increased guidance range • Q3’s tax favorability more than offsets

impact of curbed Q4 share buybacks (for acquisition)

• Currency impact is $0.01 less negative than previous estimate

Previous: $4.11-$4.18

Previous: 15-17%


Excluding Venezuela

Including Venezuela

EPS(b)

Comparable

$3.64 - $3.71 Previous: $3.58-$3.65

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2016 Guidance – Other Items

(a) 2016 guidance excludes the impact of currency translation, differences in the number of shipping days, mark-to-market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, VIE deconsolidation, and other items that could affect comparability. Please refer to appendices for reconciliation of non-GAAP measures to most directly comparable GAAP measure.


$ in Millions, Except Per-Share Data

• Currency Translation – Venezuela $(0.41)/sh. No change

• Currency Translation – Others $(0.11)/sh. $0.01 better than previous guidance

• Interest Expense ~$400 No change; includes $150 from bond tender

• Comparable Tax Rate(a) ~25% Previously 27%

• Share Buybacks $450-550 Previously $700-750; curbed in Q4

for Brazil acquisition

• Up-Front Costs (post-tax) $(0.40)-(0.50) No change; pre-tax $(0.56)-(0.71)

• Integration Costs (post-tax) ~$(0.03) High end of previous $(0.02)-(0.03) range,

due to Brazil acquisition; pre-tax ~$(0.04)

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2017 Preliminary Outlook


Currency-neutral comparable performance,* excluding Venezuela, year-over-year change

Net Sales

Operating Profit

~ flat

+ HSD

2017

OP Margin: 16-17%

* Guidance is on a currency-neutral comparable basis, which means it excludes the impact of acquisitions, dispositions, currency translation, mark-to-market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, and other items that could affect comparability. These targets also exclude Venezuela.

• Prudent outlook on volume

• Price realization through Revenue Growth Management

• Ongoing productivity initiatives, savings from Project K, savings from Zero-Based Budgeting

• Meaningful progress toward 2018 OP margin goal

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Regional Targets Through 2018 *


Change in Net Sales and Operating Profit Margin, excluding Venezuela, from 2015 through 2018

* Guidance given on a currency-neutral comparable basis, which means it excludes the impact of acquisitions, dispositions, currency translation, mark-to-market adjustments, integration costs, costs related to Project K, Venezuela remeasurement, and other items that could affect comparability. This guidance also excludes Venezuela.

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North America

Europe

Latin America

Asia Pacific

~ Flat

~ Flat

Low SD

Low SD

+ 400-450 bp

+ 300-350 bp

+ 100-200 bp

+ 100-200 bps

Net Sales * Operating Margin *

Total ~ Flat ~18% OP Margin

Financials – One Year Later

* Guidance given on a currency-neutral comparable basis.



• 2016: +1-3% Net Sales, +4-6% Operating Profit, +6-8% EPS (all incl.

Venezuela)

• Operating profit margin of 17-

18% by 2020

• Deliver targets for base productivity, Project K, and ZBB

• Make selective acquisitions/investments in areas of natural/organic, emerging markets, global snacks

• Hitting high end of Operating Profit and EPS ranges, but short on Net Sales excluding Venezuela

• Operating profit margin of ~18% through 2018

• Raised targets for ZBB; delivering targets for base productivity and Project K

• Growth in Egypt acquisitions and JV/investment in Nigeria; acquisition of Pure Organic (U.S.), and pending acquisition in Brazil

Grow Sales and Share OP Margin Expansion

Top-Quartile TSR

Grow Sales and Share OP Margin Expansion

Top-Quartile TSR

Fuel for Growth


Powerhouse

Double Our Emerging Market

Engine

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Kellogg Company

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November 1, 2016

North America


Paul Norman President, Kellogg North America

2015

Net Sales $9.1 billion

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North America – One Year Later



• Stabilize Cereal

• Revitalize Snacks

• Transform Kashi & Frozen

• Drive Fuel for Growth

• “Core 6” RTEC brands’ share gain YTD

• YTD consumption growth for “Big 3” crackers, Rice Krispies Treats, and Pringles; +DD in on-the-go offerings

• Transformations taking longer than anticipated

• Expansion in gross margin and operating profit margin *

Fuel for Growth

Win in Breakfast


Powerhouse

Win in Breakfast

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* Refers to currency-neutral comparable basis.

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November 1, 2016

U.S. Morning Foods – 2016 Results & Outlook


Q3

• Share gains in Cereal, led by “Core 6”

• Continued Pop-Tarts growth

• Trade-inventory reduction

• OP margin expansion led by ZBB and Project K

Q3 YTD

Net Sales * (4)% (2)%

Op. Profit * +6% +12%

OP Margin * +190 bp +270 bp


Q4: Strong operating profit growth, sequential improvement in net sales

Source: Nielsen

Sequential Improvement in Consumption % vs. YAG, Kellogg (excl. Kashi), 13-week Periods

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Currency-Neutral Comparable Basis

U.S. Morning Foods – 2017 Priorities


• Sequential improvement in net sales, strong operating profit margin expansion *

• Food That Rocks – investing in on-trend food

• Brands That Matter – focusing investment on our most important brands

• Shopping Experiences that Inspire –

leveraging new capabilities to win in store

• Boost Margins – Project K, ZBB, and Revenue Growth Management

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U.S. Snacks – 2016 Results & Outlook


Q3

• Growth in focus brands and single-serve offerings

• Continued share gains in Crackers, led by Big 3

• Weight management offerings still in decline

• OP margin expansion, driven by Project K, ZBB

Q3 YTD

Net Sales * 0% (2)%

Op. Profit * +12% +8%



Q4: Strong operating profit growth, sequential improvement in net sales

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U.S. Snacks – 2017 Priorities


• Return net sales to growth; continued operating profit margin expansion *

• Continue to drive core brands

• Accelerate single-serve expansion

• Restage Special K and Nutri-Grain

• Expand Revenue Growth Management

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U.S. Specialty Channels – 2016 Results & Outlook


Q3

Q3 YTD

Net Sales * +1% +2%

Op. Profit * +8% +8%



• Growth in 3 core channels

• Held or gained share in most channel/categories

• Gaining new category captaincies

• Strong operating profit margin expansion

Q4: Steady sales and operating profit growth

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U.S. Specialty Channels – 2017 Priorities


• Steady net sales growth, continued operating profit margin expansion *

• Sustain growth in core channels and categories

• Expand reach into emerging channels

• Continue Revenue Growth Management

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North America Other – 2016 Results & Outlook


Q3

• Canada cost and pricing impact of transactional FX

• Eggo syrup carriers returned to growth

• Extended transitions: Kashi portfolio, Morningstar Farms packaging, SKU prioritization in frozen handhelds

Q3 YTD

Net Sales * (6)% (5)%

Op. Profit * (13)% (13)%

OP Margin * (100) bp (120) bp


Q4: Good operating profit growth on moderating sales declines

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North America Other – 2017 Priorities


• Return to top-line growth, improve operating profit margin *

• Grow Kashi cereal, Eggo

• Stabilize Canada, Morningstar Farms

• Transform Kashi snacks

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November 1, 2016

Europe


Chris Hood President, Kellogg Europe

2015


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Europe – One Year Later



• Stabilize cereal

• Grow Pringles

• Develop Wholesome Snacks

• Emerging Markets: Triple Arabia, Double Russia by 2020

• Expand in other channels

• Deliver Project K savings, launch ZBB

• Stabilized 5 of 6 geographic clusters; U.K. soft

• Strong Pringles growth YTD

• Wholesome Snacks growing YTD

• Strong growth in acquired Egypt businesses, Russia up strongly YTD

• Expanding in e-commerce

• Higher operating profit margin * Fuel for Growth


Powerhouse

Win in Breakfast


Engine


Shops

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November 1, 2016

Europe – 2016 Results & Outlook


• Softness in the U.K.

• Outside U.K., broad-based growth and sequential share improvement

• Continued Pringles expansion

• Strong operating-margin improvement

Q3 YTD

Net Sales * (1)% (1)%




Q4: Sales flat to down, operating profit up strongly

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Q3

Europe – 2017 Priorities


• Sequential improvement in sales, increase operating profit margin *

• Stabilize U.K. cereal

• Continue Pringles expansion

• Roll out Revenue Growth Management

• Deliver Project K and ZBB savings

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November 1, 2016

Latin America


Maria Fernanda Mejia President, Kellogg Latin America

2015


Note: Region pie chart based on 2016, to more appropriately represent remeasured Venezuela currency.

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Latin America – One Year Later



• Lead category growth

• Drive market expansion

• Win where shoppers shop

• Make supply chain a competitive advantage

• Cereal & Snacks share up in core markets • Special K innovation exceeding expectations

• Building Masterbrand, up strongly YTD • Scaling up Brazil with Parati acquisition

• Excelling at Retail Execution • Increasing HFS Distribution & Coverage

• Driving network utilization • Delivering Efficiency Programs

Win in Breakfast

Be a Global Snacking Powerhouse


Engine


Shops

Enable the Growth

Fuel for Growth

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Latin America – Building Scale & Capabilities


Pending Acquisition of

Opportunity for Kellogg:

• Scale Brazil, strengthen Mercosur

• Expand Supply Chain Network

• Increase HFS distribution

• Further Geo-expansion in LA

• ~ $190 million NSV

• Key Player in Cookies & Crackers

• Strong brands

• Strength in South region

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Latin America – 2016 Results & Outlook


• Strengthening Cereal leadership in core markets

• Driving Snacks momentum

• Expanding productivity programs

• Regional economic slowdown, adverse FX

Q3

Q3 YTD

Net Sales * +2% (1)%

Op. Profit * +31% (3)%

OP Margin * +300 bp (30) bp

Excl. Venezuela

Innovation

Commercial Programs


Q4: Sales up low single-digit, operating profit up strongly

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Latin America – 2017 Priorities


• Deliver low single-digit net sales growth, improve operating-profit margins *

• Accelerate Profitable Growth, focusing on: ‒ Mexico, Cereal Consumption & Snacks ‒ Winning in HFS

• Integrate Parati

• Execute Revenue Growth Management

• Step-change Supply Chain optimization

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Innovation

Commercial Programs

Packaging Transformation and HFS


Asia Pacific


Amit Banati President, Kellogg Asia Pacific

2015


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Snacks

Breakfast

Australia/ New

Zealand

Asia

Sub-Saharan Africa

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Asia Pacific – One Year Later



• Balancing the portfolio

• Stabilize ANZ

• Double Snacks

• Double Asia, Triple India

• Scale Up Africa

• Shift toward Emerging Markets and Snacks

• Cereal share back up to flat in ANZ

• Strong Pringles growth

• Growth in Asia

• Growth in Nigeria JV/investment


Engine


Win in Breakfast


Engine


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Asia Pacific – 2016 Results & Outlook


Q3

Q3 YTD

Net Sales * +1% +2%



• Australia stabilizing

• Pringles momentum and expansion

• Emerging-markets growth

• Joint ventures performing well

Q4: Sequential acceleration in net sales growth

Renovation & Innovation

in ANZ

Pringles Expansion

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Growing Penetration

in Asia

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November 1, 2016

Asia Pacific – Unconsolidated Ventures


Unconsolidated Joint Ventures and Investment Stakes

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Strong DD Growth

Strong DD Growth

Asia Pacific – 2017 Priorities


• Continued net sales growth, and improved operating profit margins *

• Australia – hold cereal share, turn around snacks

• Emerging markets and snacks growth

• Strong growth in the joint ventures

• Stepped up focus on margin – ZBB, RGM

Revitalizing On-Trend Be Natural brand

Innovation in Cereal

Expanding Wholesome

Snacks

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Pringles Expansion


http://www.multi-pro.com/index.html

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCMf8gJ7J2MYCFcF8kgod48YBqA&url=http://www.saverscart.com/index.php?route%3Dproduct/product%26product_id%3D1172&ei=Tu2jVcedE8H5yQTjjYfACg&psig=AFQjCNGQj0O0Z8EWhE_01TSD_k8plcG41Q&ust=1436892851735281

Kellogg Company

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November 1, 2016

Summary


Good progress on 2020 Growth Plan priorities

Sequential sales improvement

Unprecedented earnings visibility

Confidence in 2018 profit margin goals

41

* Guidance is on a currency-neutral comparable basis, excluding Venezuela

November 1, 2016

Kellogg Company THIRD QUARTER 2016 FINANCIAL RESULTS

Q&A

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