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Kellogg Gives Some Of Its Cereals A Makeover


Anjali Cordeiro

CNN Money

June 12, 2008

NEW YORK -(Dow Jones)- Kellogg Co. (K) has given household names like Froot Loops, Rice Krispies and Apple Jacks a makeover.

The packaged-food company has modified decades-old recipes for many of its best-known cereals in a bid to make them healthier. The Battle Creek, Mich., company began to roll out the first lot of newly formulated cereals to retailers last week, and consumers in the U.S. will begin to see them on grocery store shelves over the next month.

In modifying its products, Kellogg joins a raft of other food companies in the U.S. that are pushing to make their products healthier or are changing the way they market to children. Changing the makeup of household favorites that are produced in mass quantities can be a massive undertaking, but Kellogg's efforts highlight just how far companies are willing to go to shore up their sales as consumers demand healthier foods.

"We have a lot of time and effort invested in this," said Kellogg Chief Executive David Mackay. In the long term, he says, the company believes the investment will have "a substantial payback."

Kellogg won't say how much the entire process will cost. The company had 2007 sales of about $12 billion, and cereal accounts for roughly half of its sales globally.

Kellogg cereals such as Froot Loops, Corn Pops, Cocoa Krispies and Apple Jacks in the U.S. have now been reformulated to bring the level of sugar per serving to 12 grams or less. The sodium level has been cut in Rice Krispies. Kellogg says some products will now have lower calorie counts. In some cases, grains and flavors have been added to the reformulated cereals to keep them tasting the same.

Kellogg's changes come about a year after the company announced that it had set itself new nutritional standards for products that it markets to children. At that time, the company said it would try to make many of its products healthier to meet those standards. But Kellogg also said that in cases where its researchers weren't able to match a product's existing taste, it would leave the recipes alone and simply stop marketing such products to children under 12.

Giving products and marketing a healthy twist isn't new. Kellogg competitor General Mills Inc. (GIS) in 2005 reformulated all its "Big G" cereals to contain at least 8 grams to 16 grams of whole grains per serving. General Mills says its Big G children's cereals are at or below 12 grams of sugar per serving and it has reduced the sodium in some varieties of Hamburger Helper.

The food and beverage industry has been particularly under fire for marketing sugary and high-calorie foods to youngsters. Several food companies - including Kraft Foods Inc. (KFT), the largest U.S. food maker by revenue - have put controls on how they advertise to children.

Kellogg is expected to report on the progress it has made on products marketed to children later Thursday. The company expects that by the end of 2008, about 70% of its products marketed to children will meet the nutritional criteria it has set, up from 50% in mid-2007.

To be sure, companies run the risk of pushing away loyal consumers when they tinker with tried-and-true formulas. But Kellogg says that its labs have managed to keep the reformulated cereal tasting just as good.

"We've conducted consumer research," says Mackay of the new products. "They taste great."

Kellogg often sells different versions of its products in various markets around the world. The company said products currently marketed to children under 12 will be reformulated appropriately in each of those markets.

There was one major product that Kellogg researchers weren't able to change without affecting the taste: Pop Tarts. The company says it has decided to leave the recipe untouched and will no longer be marketing them to children under 12 starting next year.




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