Kellogg

Have you ever heard of Tony The Tiger? What about the big rooster on the front of the cornflake box? These all are attributed to one Will Kellogg. He first worked as a broom salesman then he begin to work with his brother Dr. John H Kellogg. Then he invented a cornflake, which was one of his best ideas ever. In 1895 vegetarianism was coming into society. Will Kellogg wanted to make nuts and grains appealing to people so they would accommodate the vegetarians. So he worked with wheat and eventually he formed wheat flakes. His small town of Battle Creek was going through a stage where it was known as “ The Health food City” This idea was soon lost and he came up with the idea of corn flakes. His new ideas and factories brought new employment opportunities to the small town of Battle Creek. Kellogg’s ideas gave the American economy a new type of health food, which provided more jobs in manufacturing and advertising. The impacts of cornflakes may not be significant, but it changed how people eat their breakfast. Life in America changed when Kellogg invented cornflakes. When he invented cornflakes, wheat flakes were a thing of the past.

Now, cereal was healthy and it tasted good. Business in America was changed with cornflakes because now Kellogg was an entrepreneur and was part of an oligopoly, but with differation. There were always wheat flake companies, but he changed it by making cornflakes instead. Not only did he change breakfast, Kellogg advertised his product with cartoon characters and created a bold legend that says “None genuine without this signature- W.K. Kellogg.” Not only did he advance in breakfast food he made many advancements in advertisement. The W.K. Kellogg Company and he achieved great financial success with his line of breakfast foods. He also revolutionized the world’s breakfast and eating habits. Kellogg pioneered in advertising campaigns to promote a product. This has changed the American way of life forever. Although, Will Kellogg did not succeeded with his first type of cereal and he had competition with forty-two other wheat flake manufactures including Charles Post he invented a new product and it is a multimillion dollar company.

Objective: Our goal in composing a financial statement is to construct the most comprehensive, thorough document possible, in order to attract investors and to confirm that we have taken the time to explore as many potential issues for your business as may arise. Summary of findings: Our level of cereal marketing investment early in 1998 was not sufficient in the face of extremely competitive market conditions. This situation hurt our volume performance for much of the year and, combined with other issues in markets around the world, led to a decline in both sales and earnings. Nonetheless, we continue to have the utmost confidence in the future of our grain-based businesses, and we are fully committed to return to both top-line and bottom-line growth.

Market Research Description of firm and its management: Kellogg’s products are manufactured in 20 countries on 6 Continents and distributed in more than 160 countries. Mr. Langbo has been employed by the Kellogg’s Company since 1956. He was named President and Chief Operating Officer in 1990 and became Chairman of the Board and Chief Executive Officer in 1992. In June of 1998, Mr. Carlos M. Gutierrez was named President and Chief Operating Officer. The competitive environment: The Company has experienced intense competition for sales of all of its principal products in its major markets, both domestically and internationally. The Company’s products compete with advertised and branded products of a similar nature as well as unadvertised and private label products, which are typically distributed at lower prices, and generally with other food products with different characteristics. Principal methods and factors for competition include new product introductions, product quality, composition, and nutritional value, price, advertising and promotion. Economic climate and outlook: Although our 1998 business results were below our performance expectation, it was a year in which we put in place key elements of a stronger foundation for future growth. This included investments in new product development and a complete overhaul of our corporate headquarters and North American organizational structure. Should suitable investment opportunities of working capital needs arise that would require additional financing; management believes that the Company’s strong credit rating, balance sheet and earnings history provide a base for obtaining additional financial resources at competitive rates and terms. Based on the expectation of cereal volume growth, and strong results from product innovation and the continued global rollout of convenience foods, management believes the Company is well positioned to deliver sales and earnings growth for the full year of 2000. Litigation: The Company is not a party to any pending legal proceedings, which, if decided adversely, would be material to the Company on a consolidated basis, nor is any of the Company’s properties or subsidiaries subject to any such proceedings.

Financial Forecasts Financial overview: Kellogg Company manufactures and markets ready-to-eat cereal and other grain-based convenience food products, including toaster pastries, frozen waffles, cereal bars, and bagels throughout the world. Principal markets for these products include the United States and Great Britain. Operations are managed via four major geographic areas, North America, Europe, Asia-Pacific and Latin America-which is the basis of the Company’s reportable operating segment information. The Company leads the global ready-to-eat cereal category with an estimated 38% annualized share of worldwide volume. Additionally, the Company is the North American market leader in the toaster pastry, cereal/granola bar, frozen waffle and per-packaged bagel categories. During 1998, the Company realized declines in earnings per share both with and without unusual items. The Company experienced significant competitive pressure combined with category softness in its major ready-to-eat cereal markets, to which it responded by accelerating investment in long-term growth strategies, in clouding product development, technology and efficiency initiatives. Short-term liquidity: Net cash provided by operating activities was $719.7 million during 1998, compared to $879.8 million in 1997, with the decrease due principally to lower earnings and unfavorable working capital movements. The ratio of current assets to current liabilities was .9 at December 31, 1998 and 1997.

Capital structure and long-term solvency: Long-term debt consists primarily of fixed rate issuances of U.S. and Euro Dollar Notes, including $900 million due in 2001, $500 million due in 2004, and $200 million due in 2005. The amount due in 2001 includes $400 million in Notes, which provide an option to holders to extend the obligation. For an additional four years at a predetermined interest rate of 5.63% plus the Company’s then-current credit spread. The increase in operating margin for the quarter primarily reflects manufacturing efficiencies in the U.S. business and reduced overhead spending as a result of streamlining initiatives in North American and corporate operations. The year-to-date operating margin was flat versus the prior year as increased spending on promotional activities offset the benefits discussed above. This level of spending is consistent with management’s strategy to drive growth through increased marketing investment in the Company’s established cereal markets, as well as supporting the accelerated introduction of new convenience food products around the world. Market measures: The Company is exposed to certain market risks, which exist as a part of its ongoing business operations and uses derivative financial and commodity instruments, where appropriate, to manage these risks. The Company, as a matter for policy, does not engage in trading or speculative transaction. Investment potential: We are pleased to report that the Kellogg Company dividend rose in 1998 for the 42nd consecutive year, with an increase of 5 cents per share to $.92. In 1999 Kellogg’s is well positioned to deliver double-digit earnings per share growth (excluding restructuring and disposition-related charges).

We also continued our program of purchasing Kellogg share, with 1998 purchases totaling $239.7 million. It is currently offering 80,000 new stock options. Outlook, Summary, and Conclusions Outlook for performance, earnings projection: The Company’s streamlining initiatives will continue throughout 1999. The aforementioned overhead activity analysis will be extended to Europe and Latin America during the first half of 1999. Management believes these initiatives will result in the elimination of several hundred-employee positions, requiring separation benefit costs to be incurred. Since the number of employees affected, their job functions, and their locations have not yet been identified. The costs that may have resulted are not known yet. Investment potential: We are pleased to report that the Kellogg Company dividend rose in 1998 for the 42nd consecutive year, with an increase of 5 cents per share to $.92. We also continued our program of purchasing Kellogg share, with 1998 purchases totaling $239.7 million. Credit assessment: counter parties on derivative financial and commodity contracts expose The Company to credit loss in the event of nonperformance. This credit loss is limited to the cost for replacing these contracts at current market rates. Management believes that the probability of such loss is remote. Summary and conclusion: The seeking out, training, and retention of a diverse, highly talented workforce is central to Kellogg Company’s commitment to be a results-oriented organization ready for the challenges for the future and focused on creating value for you, our shareowners.

Kellogg Company is one of the United States’ leading cereals and nutrition supplier in the region. The company that began in 1906 by William Keith Kellogg has over the century expanded its market through the provision of various goods and services. The company has its headquarters in Battle Creek, Michigan, the United States. The business mainly deals in ready to eat cereals and convenience foodstuffs. Its main brands include the cookies, crackers, toaster pastries, bites, and cereal bars that are mainly traded under various merchandises such as the Keebler Kellogg, Pringles, and Murray among others. The company operates within 21 countries worldwide with its brands sold in over 130 nations. Under the current CEO, the company has been able to explore new markets and strategies that are aimed at expanding Kellogg. The company has been successful in their store that is yielding great income. The company has also indicated excellent growth through the 30 hours per week of work.

Over the years, the company thrived in a very demanding and competitive environment from other companies that are in the consumer food industry such as the Quaker Oats and general mills. The company’s mission is to be an international enterprise committed to establishing a long-lasting increase in volume and revenue as well as improving its global leadership position through the provision of nutritious superior value food products. The company’s mission and vision are deeply sourced in its corporate goals of expanding the growth and its marketing strategies to serve the wants of the target customers. Therefore, the company operates on the vision ‘To Be the Food Company of Choice’. The enterprise has its products as the consumer’s first choice in the market. When we consider about customer perspective, wal mart stress would be our largest and main customer in the united states so that it accounted approximately 20% of total sales from the year of 2017. Normally, the agents of the Kellogg company sell their product through their brokers and distributors and in general, they are sold to eliminate customers from points of sale, restaurants and other host companies.

By using the Morningstar website, it can be clearly indicated that the director board of the Kellogg company has been consisted with eleven members. And these eleven directors help to operate the decision of Kellogg company. As of now these people are: Steven A. Cahillane, Chairman of the Board, Chief Executive Officer and President; James M. Jenness, Director; Donald R. Knauss, Lead Independent Director; and rest of the directors served as a independent directors of the Kellogg company as a names of Richard W. Dreiling, Carter A. Cast, Stephanie A. Burns, Carolyn M. Tastad, Cynthia H. Milligan, La June Montgomery Tabron, Mary A. Laschinger, G. Zachary Gund. A company’s internal environment entails the organizational leadership structure, management styles, several marketing brands, information systems, life cycles management, and individual behavior. If we look at Kellogg company employees’ chart, we can be seen that there is some fluctuation over time.

When we consider today’s Kellogg company market, it currently operates in 21 countries and marketed in more than 180 countries in worldwide. And there are more than 33,000 employees working under the Kellogg company by growing relationship with the business. By looking at this chart, we can be clearly seen that there is a dramatic growth of workforce. The year between 2000 and 2002, they have achieved nearly 10,000 employees. And also, according to the chart, it shows that they had approximately 38,000 employees in 2016 but when it comes to 2017, it shows downward up to 33,000 employees. Currently, the company has got 22 senior administrators, 46 immediate level main members. Therefore, the company has got senior management leaders who are given the standard of power in their capacity with the task of managing teamwork, plan for the opportunities and establish their employees to do the tasks as usual. The company also makes use of the 360-degree scores cared sheet where the workers are ranked by supervisors and employee documents. In fact, 98% of Kellogg’s employees are compensated on the basis of the performance framework (Kellogg, 2018). Through each department’s objective, the business is able to pass across important values and objectives through the departmental goals and job outlines. Kellogg is celebrated for its organizational values or the ‘k- values’ which include integrity, accountability, humility and passion, simplicity and result. Kellogg also began a program for the values award, a yearly award for the employee personally who fully apply the ‘k-‘values to work. The Kellogg company has done their research and development and research is being conducted at the W.K. Kellogg institute for food and Nutrition research in battle creek, Michigan and around the world. As their last 10K reports indicates, they have spent approximately $148 million in 2017, $182 million in 2016 and $193 million in 2015 for the research and development.

The company’s 4 P’s of the marketing mix involves proper management of the products, promotion, prices, and place that are crucial to its success. The product marketing mix is crucial to Kellogg since the company battles strongly with other consumer e-commerce organizations. The firm began with two main products but currently deals in various new products. The company has also been expanding in its goods and services offered to its customers. Working towards its vision, Kellogg aims at producing nutritious goods to the consumers. This component is significant for Kellogg since it acts as a third-party model, where the main supply of revenue is the price charged on the sellers. The company usually reduces the cost of its products through various pacts given to its consumers on its online platform. This is the core element of Kellogg marketing strategy as the business depends greatly on customer satisfaction. The suppliers of Kellogg have created and established various ones for quick and accurate delivery of goods. The company works directly with the external deliveries and for a long time has partnered with its suppliers such as the DSC-logistics of Chicago.

The company uses various media platforms to advertise its online accessible brands. Through its community engagement and sponsorship, the firm is able to market its products and brands via its support for sports and charity. The organization also uses the annual reports, and social media like Facebook and twitter to link to its customers. The company has the market frontrunner in the American Market as well as the international space such as the United Kingdom’s cereals. It has six segments which were established over the years due to the wide-ranging research and development. Some of the company’s corresponding brands are; the tasty faster for cornflakes and the crunchy nuts, the mum approved such as the Rice Krispies and shredded. These branches contain a representation of the market differentiation base under which new brands are developed and innovated. The market research in the United Kingdom and France has demonstrated to be successful leading to the increase in sales in some of its brands such as the Apricot, the United States Kellogg market.

Kellogg Company is among the greatest sponsor of the community programs such as the swimming programs, physical fitness, and community work both locally and internationally. For instance, in the United Kingdom, through the organizations of several varieties of the community programs, the company has been able to support the physical education and sponsoring the voluntary society groups physical workout; for example, St. Johns center in Old Trafford and the Charity Contain You, that provides breakfast needs of school kids through a breakfast club. Some of the physical body fitness teams such as Sustains are beneficiaries of Kellogg. Kellogg is as well a major sponsor of the UK swimming through the Armature Swimming Association award program giving out more than 1.8 million awards each year to the swimmers. This has also been one of the most successful branding links since more than 12 million Citizens in the UK are registered into the scheme. One of the top suppliers to the company is the DSC-logistics of Chicago which is a supply chain management firm whose headquarters are in Des Plaines, Illinois. The company appeared in the Battle Creek Michigan, the Kellogg Company Annual Diversity Recognition event and was awarded a ‘diamond club’, a platform that identifies the various supplier companies that Kellogg spends more than 25 million or more per year. The partnership which began over 3 decades ago in 1988, DCS has remained a strong partner of Kellogg in the supply chain. The supply chain for the company has also included the Special Kellogg program for over 20 years referred to as the Kellogg special diversity program for women-owned business. The company has also merged with several companies such as the $1 billion mergers with the Diamond Foods, Keebler and Rebar which is a way of gaining popularity and having profit increased margins.

The company has over the past year made public some of the important transformations to its business in the North American region. These strategies are believed to help the organization grow in regard to sales. The growth strategies include the restructuring of the regions management structure and exploring the sales of its new cookies and fruits. It also discussed the new strategy to venture into e-commerce and an integrated business capacity planning. The company also planned to begin to abandon the direct store delivery chain in its quarter 2 and quarter 4 of the year. Suing a company could be bad for the products and market operation. However, the Kellogg Company has in the past year undergone a series of lawsuits from sugar certification accusations to honey smacks and toxic sugar levels in its promotion of cereals.

When we regard about the business segments of the Kellogg company, they have managed with ten operating segments which operational group based on geographic location or product groups. There are some factors into consideration whether to equate, distribute and regulate these business segments together. Those factors are economic sectors, products, manufacturing processes, varieties or customers. Those segments consist of U.S. Morning Foods, U.S. Snacks, U.S. Specialty, North America Other, Europe, Latin America, Asia Pacific. According to Williams (1992), under the five Porters strategic analysis, the availability of substitutes is one of the major analyses of the company strategy. The substitutes are determined by the price of a substitute, changing prices and the presence of substitutes as well as the change in preference. In the Kellogg Company, the existence of close substitutes is a threat and, therefore, it has to identify the entrance of new products such as the Cereal bars, the taste of the consumers is also shifting to other new arrivals. Hence due to the slow response to diversification and price competition, it has led to some to the decline of the company sales like in 2017. In summary, the consumer industry in the US is facing a lot of competition from the new entrants into the market. However, Kellogg has managed to remain on top of its operation through various strategies of competition. The company is having various products that are made by branding to ensure value to the customers. The firm over the century has remained competitive in regard to quality and customer satisfaction.

Company History

Kellogg Company was formed when production of Kellogg’s Corn Flakes about a century ago. The company was started by W.K. Kellogg’s, with only 44 employees in Battle Creek, Michigan in 1906. The worldwide expansion of the company began in 1914, and by 1938, it had plants in England and Australia. Today, Kellogg Company employs more than 26,000 people, manufactures in 17 countries and sells its products in more than 180 countries.

Enterprise Organization

Kellogg has a huge network of global manufacturing and marketing unit. The company manages this by dividing its operations into two segments – United States and International. The International segment is further divided into Europe, Latin America, Canada, Australia, and Asia.

Competitive Positions

The company faces competition for sales of all of its principal products in its major markets, both domestically and internationally. The Company’s products compete with advertised and branded products of a similar nature as well as unadvertised and private label products, which are distributed at lower prices, and also with other food products with different characteristics. Principal factors for competition include new product introductions, product quality, composition, and nutritional value, price, advertising and promotion.

International Strategies

The main focus of company’s international strategies lies in the following areas: Leadership in product innovation, to present new products to customers; Maintaining its global brand position, by marketing activities focusing on brand recognition; Offering brand-differentiated prices; ; Continuing to reduce costs of production; finding newer markets for expansion, by stressing on high-quality nutritional convenience foods

Competitive Strategies

• The company has an excellent marketing team which has used varied channels for sales and promotion of its products. These include: Mass Advertising – popular characters like Tony the TigerTM and Snap Crackle PopTM, on TV; Direct Promotions: Coupons; Trade Promotions:  In-store displays, Samples;
• Personal Selling: Prime-account reps, Area reps; Penetration – Chain stores, Independent wholesalers; Sales Channel – Brand equity; Logistics – Finished goods warehouse centers or independent warehouses

SWOT Analysis

• Strengths – 42% of the cereal market (almost three times than any competitors), strongest brand recognition (use different characters for different products), health conscious brand
• Weakness – Pricing is not competitive, narrower product range (decrease in US market share), difficulty in adapting to newer markets,
• Opportunities – Exploring newer markets, better pricing, diversifying product range
• Threats – Similar companies like General Mills, Quaker Oats, Kraft foods etc. for branding, and imitation and private-labelled brands for pricing. Both have already affected its market share

Strategic Issues before the company

Kellogg’s is still the market leader in cereal-based products. However, of late its market share and branding image is slowly eroding due to the emergence of newer companies having wider product range and / or cheaper pricings. To counter this, Kellogg’s plans to increase its product R;D cost, diversify its markets and lower the production costs. These strategies are sound, but the company is facing challenges in having customers who have now wider range of selection of products, and are reluctant to spend more money just on the perception of good quality. The company needs to address to the pricing issue very seriously to overcome the threat due to these changing environment conditions.

References

1. Becker A., Modi A., Gentinne T., Sebastian N., Goal of Kellogg
2. http://homepages.wmich.edu/~t1gentin/pro5.doc
3. Kellogg, About Us, History, www.kellogg.com
4. Kellogg Company – Food business review online, Key Facts ; Competitors
5. http://www.food-business-review.com/companyprofile.asp?guid=5FB4FD4C-4040-442B-9D47-47F7E6667FD9;alpha=k
6. Kellogg Company – Products, www.kelloggcompany.com

Summary
Kellogg’s company was started in 1906 by Will Keith Kellogg. The company started with only 44 employees in Battle Creek, Michigan. Today the company manufactures in 18 countries and sells their products over 180 countries. Kellogg’s was the first company to introduce cereals. With great innovations and marketing Kellogg’s still remains the leader in the cereal producing and convenience food producing company. The company maintains a levels where its gives great importance to health, nutrition and quality.

            The company expanded very quickly as the business started therefore the growth had given rise to a very good global business for the company.  The main strength of the company is it has very skilled people in it, as it is known for its baking; they have the best baking being done in their premises. It is a well known company (brand) and with its introduction of new products it has an edge over the revivals. The company pays attention to towards matters relating to environment and charity event. The main weakness of the company is that due to their diversification the company has to consider the demands of each country. And the gearing of the company is high, but as it has the ability to repay them. They have many substitutes present in the market therefore to maintain a level the need to focus on the demands of the consumers.

Company’s description
The Kellogg’s is well known for providing healthy and easy to have breakfast in no time. Its products consists of cereals, cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, veggie foods and a lot more. Since 1959 Kellogg’s has been trading in the New York Stock exchange under the ticker symbol of K. Audit is carried out by a team of very skilled members which include John T. Dillon (chairman of the committee), Donald R. Knauss, Rogelio M. Rebolledo, Robert A. Steele and John L. Zabriskie.

Industry attributes
Retailers can affect the demand of the products of the company. As retailers are introducing private label brands into the market it has become a threat to Kellogg’s demand. The company has to keep in mind the quality of their product and reduce their prices to attract back the lost customers. Therefore economic uncertainty and the prices can affect the demand of the company’s products. As the technology advances, Kellogg’s adopts it to enhance its system. They have the best information system but at time bests can default even. Therefore Kellogg’s has a very competitive market and to achieve its goals it has to have a low price and a better quality product than its competitors.

Profitability
The sales of the company as compared to last year have decreased on international level but on internal level there is an increase of 3%. While in 2008 both international and internal sakes were higher than that of the previous year (2007). The decrease in the net sales could be due to the changes in foreign currencies and extra shipping cost in the year 2008. Although the company has decreased its international sales but its internal sales is within a profitable region.  Operating profit in internal has shown an increase of about 10% which exceed its long term annual growth target. The diluted EPS has also shown an increase of 13% while the EPS has grown to an increase of 6%. The company had an attractive dividend yield. Therefore it can be said that Kellogg’s growth has been profitable and has provided good returns to its shareholders. One of the reasons of lower gross margin was the acquisition taken place in the company. Inflation has also played a role in the rise of the prices of the commodities, fuels and etc. Due to the decline in the gross profit margin the cost reduction and increased prices have tried to offset its effect.

Operating activities- Accounts receivables
End of                       End of            Percent                                              2008                 2009              Change

(Values are in million $)

Sales/Service Revenue                                   12,822             12,575             -2%

Gross Accounts Receivable                           876                  951                  8.5%

Allowance for Bad Debt                               10                    9                      -10%

Net Accounts Receivable                              1,100               1,093               -0.6 %( Foster, 24)

As the sales revenue of the company has decreased by 2% the allowance for the bad debts have also decreased to 10%. The gross accounts receivables shows an increase in of 8.5% while the net accounts receivables shows a decrease of about 0.6%, that is because of the decrease in the other receivables of the company. The company has shown positive results as there is a decrease in bad debts allowance when the sales are decreased and even when the company’s other receivables are less in year 2009 the company has a decrease in net receivable which is almost negligible.

Operating activities- Inventory
End of                       End of            Percent

2008               2009              Change

(Values in million $)

Cost of Goods Sold                                      7,455               7,184               -4%

Merchandise Inventory                                 897                  910                  1.4%

The cost of goods sold has decreased as the sales have decreased but the inventory has increased it can be due to the increase in the prices of the commodities and the inflation.

Operating cash flows
The net cash provided by the operating activities show an increasing trend over the years of time from 2009. Even after the payments of interest and principal amount the company has a positive cash flow which it can use in other activities even. There was an increase in the cash flows in 2009 and 2007 while in 2008 there was a decrease but as it has a good opening balance the decrease was off settled by the opening balance, hence giving positive cash flows in all three years (Foster, 85).

Growth
Both current and non-current assets show that company has grown and acquired further property, which would help it to increase the production. The cash and cash equivalents have also increased. But as the sales have decreased the accounts receivables have also decreased in 2009 compared to 2008, therefore it has an effect on the total assets. There is a decrease in the investing activities; this decrease is due to no acquisition made in the year 2009. Only property has been bought in 2009, while 2008 the company made few acquisitions and bought property even which shows a better trend in the growth of the company. The dividend per share has been increasing throughout the three years with the increase in the income therefore its payout ratio has also increased which clearly tells that company has being growing. The growth has led to increase in the profitability as the income of years has also increased with the increase in cash and cash equivalents.

Capital structure
As the company is publically listed a part of it is financed through equity. The other part financed through long and short term debts. The company has a high gearing due to the long term loans. The equity to debt ratio has increased from 2008 by 6% in 2009. This is due to the increase in the long term debts. Increasing the gearing could have several consequences on the company; it can have problems in further rising finance through debt method due to its credit rating. It could give a disadvantage in competing with different companies. But the company’s timely payments of interest and principal of short term and long term debts makes the company to have a good credit rating which is why it can gear up a little more and still be on the safe side. As said above even high gearing increases financial risk but these risks are controllable as the company makes its payment on time. Even after a high gearing Kellogg’s produces good profits which are then distributed to the share holders in the form of dividends. Comparatively the company has been profitable; its return on equity ratio has also increased during the years. Therefore with a controlled amount of risk the company is producing good results which are a great help in the growth of the company (Foster, 42).

Asset structure
Both current and non-current assets of the company have increased from the previous year 2008. This is due to the purchase and acquisition of property to expand its business. Most of the expansion is financed through debt method therefore there is increase in the liabilities even. The cost associated with the exit and disposals in 2009 were $65 million and $ 27 million in the year 2008. The gross profit margin decreased by 2% in 2008 while in 2009 it increased. The operating margin has been consistent throughout these three years with negligible changes. The company has a goodwill which has also increased compared to 2008 in 2009; this could be due to the acquisitions and purchases made.

Other things
Company has pension plans for its employees and to motivate its employees company provides them with shareholding as incentives. The main customer of Kellogg’s is Wal-Mart which is well known to provide you with the best quality products at lower prices.

Learning from financial statement analysis
The financial statement analysis of the Kellogg’s company clearly shows its profitability in the year. Due to better allocation of resources and timely fulfillment of demand Kellogg’s has been the leading brand. Even though with high gearing company manages to pay its shareholders with a respective amount of dividend per year. The payout ratio has increased which shows that the company has been going smoothly in its production and has earned good revenues. Cash flows of the company have been positive throughout the last three years which means the company has inflows even after paying its liabilities. And these retained earnings are used to issue shares to the existing shareholders as well as to the employees as an incentive for their good performance. With acquisitions and purchases Kellogg’s is expanding its business rapidly which is a good sign for the company’s growth and profitability.

Work Cited Page:

Foster, G., Financial Statement Analysis, 2nd Edition, Prentice Hall International, 1986