Everybody Loves Cereal!
Kellogg
Raul Mendez
Lindsey Wilson College
11/2/2015

On my honor as a student, I have neither given nor received any unauthorized aid on this assignment/exam.
Introduction
The majority of the people do not comprehend how important the breakfast in our lives is. Research shows that 93% of the population in the United States eat or drink something for breakfast, and 51% of this people prefers cereal, this is mainly because health factors.
Kellogg's was founded as the Battle Creek Toasted Corn Flake Company on February 19, 1906, by Will Keith Kellogg as a consequence of his effort with his brother John Harvey Kellogg at the Sanitarium Battle Creek following practices established on Adventist Seventh Day Christian denomination and he also believed in the remunerations of a vegetarian diet and exercise.
John Harvey Kellogg thought that masturbation was something really bad for the people, Therefore, Kellogg wanted to combat masturbation by a simple method: the simple and healthy food. And, he claimed, that was able to overpower the instincts of man's primary, as well as a healthy lifestyle. On the opposing, he believed that other foods such as meats it augmented.
So, during his stay in Battle Creek Sanitarium in Michigan, he decided to devise a kind of breakfast inadequate by sexual impulses cereal granules with oats and corn. Later, he teamed with his brother Will and both decided to put sugar to the recipe and then create one of the most famous cereals with his name.
The company produced and distributed with great success toasted corn flakes (cornflakes) of Kellogg Company and Kellogg was renamed in 1922. From 1969-1977, Kellogg's acquired several small companies including Salad Foods , Fearn International, Mrs. Smith's Pie, Eggo and Pure Packed Foods, however, was later criticized for failing to diversify even more like General Mills and Quaker Oats did. In March 2001, Kellogg made its largest acquisition, the Keebler Company. Over the years it has also moved to acquire Morningstar Farms, and Kashi divisions or subsidiaries. Kellogg also owns Bear nudity, natural touch, Cheez-It, Murray, Austin, Famous Amos, Garden burger (acquired 2007) and marks the plantations.
In February 2012, this giant Kellogg bought the brand power of potatoes Pringles to Procter and Gamble for $ 2,695 million.
Some of their main products are convenience foods, such as cookies, savory snacks, crackers, fruit-flavored snacks, toaster pastries, cereal bars, frozen waffles and vegetable foods.
Their most important customers actually are mainly retail stores as Wal-Mart or Kroger. Kellogg have plants to manufacture in 20 countries and they market their products in more than 180 Countries all around the world, and now they count with 29,790 employees.
Competition
Kellogg Company is in an endless combat for the #1 spot in the US and international cereal market with its highest rival, General Mills. Another big competitor for Kellogg is the huge firm Nestle, they have the biggest market share of cereals in South America, being over General Mills and Kellogg, but in Europe and in the United States Kellogg is the main supplier of cereal.
Here is a small graph about the market share in 2014 and the main suppliers in the US.

KELLOGG CO. RATIOS:

Profitability Ratios

| 2013(%) | 2014(%) | Gross Profit Margin | 41.26 | 34.73 | Operating Profit Margin | 19.18 | 7.02 | Net Profit Margin | 12.22 | 4.33 | Return on Total Assets | 11.79 | 4.13 | Net Return on Total Assets | 9.86 | 3.93 | Return on Invested Capital | 18.57 | 7.54 | Return on Equity | 60.60 | 19.96 | Earnings per share | $4.94 | $1.75 |

Liquidity Ratios

| 2013(%) | 2014(%) | Current Ratio | 0.85 | 0.77 | Working Capital | $-568.00 MIL | $-1,024.00 MIL |

Leverage Ratios

KEY RATIOS | 2013(%) | 2014(%) | Total debt-to-assets | 0.37 | 0.38 | Long-term debt-to-capital | 0.46 | 0.52 | Debt-to-equity ratio | 1.79 | 2.13 | Times-interest-earned | 12.09 | 4.95 |

Activity Ratios

KEY RATIOS | 2013(%) | 2014(%) | Days of inventory | 54.88 | 48.46 | Inventory turnover | 6.65 | 7.53 | Average collection period | 29 days | 30 days |

Other important measures of financial performance

KEY TERMS | 2013(%) | 2014(%) | Dividend yield on common stock | 2.96 | 2.84 | Price-earning ratio | 23.16 | 13.88 | Dividend payout ratio | 67.90 | 38.80 | Internal cash flow | $1,807 MIL | $1,793 MIL | Free cash flow | $1,170 MIL | $1,211 MIL |

SWOT Analysis After the research in the information of the company Kellogg, here is the analysis about their performance in the market. Strengths | Weakness | Opportunities | Threats | Advertising with great impact on young consumers | The rise of the cost for the main manufacture products | Greater publicity in social networks | Competition with similar products at lower prices | Financial performance during several years | Changing expectations among Investors | Extension of products | Higher raw material costs | International recognized | Products with high sugar content that raises concerns in public health | People are looking to eat more healthy | Consumer now prefers tastier cereal | The only large very high fiber brand in the market | Awareness of the brand is declining | Creation of manufacturing firms in other countries | The quantity of competitors in the snacks market | Corporate social responsibility | It has stopped innovating new products | Baby-Boomer Market | Concern for health and good nutrition |

Based on the information above, their main problem is the quantity of competitors in the cereal and snacks market, now there are a great quantity of products on the retail stores that can be a great competence to Kellogg. Another big problem is that the people in our generation is really concerned about the health and now they are trying to avoid products with high quantities of sugar because disease like diabetes, this will cause that for example the snacks that are the less healthier, need a change in their products to make it a healthy product so people will buy it.

Recommendations After the great research on the firm Kellogg on their financial statements and ratios, my recommendations for the firm to have a better performance are listed here:

* Develop an advertising campaign on the Internet in digital media to promote healthy foods to young people, so with this they recover the market for young people in the snacks market. * Through social networks create partnerships with an influential personality where highlight the nutritional value of the product, so people that is looking for a healthy product can understand what is the main goal of Kellogg. * They need to recruit more Baby-Boomers so their advertisement focus now more on the young people because the 86% percent of the people that buys Kellogg is because the tradition and not because the innovation on the new products. * Focus their advertisement in Brand Loyalty. * Find new raw material with similar taste, because the cost of this products are being too expensive for the size of the production of Kellogg. * Focus on the social requirements about the healthy food and the low sugar products, in order to have more participation on the market in South America. * Improve their quantity of products in Asia, because the people from that continent do not recognize the brand when they listen to the name, therefore is a big place to marker their snacks in order to introduce healthier food to cities like Shanghai or Tokyo.

Conclusion After all the research of Kellogg, the company is in a great spot now on their business-life, but they have some big problems that they need to solve in order to be successful on the next 10 or 20 years. The recommendations I did are based on their financial ratios and the explanations of why they lost or won money compared to the last year, and also based on the comments of the people in the social networks and diverse articles on the internet.