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HomeMarketingKellogg’s and Heinz owners outline strategies to drive volume growth

Kellogg’s and Heinz owners outline strategies to drive volume growth

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Volume growth is a core goal for many large FMCG businesses this year, including food giants WK Kellogg Co and Kraft Heinz, which have outlined their goal to sell more product.

Both food businesses have reported full-year results this week. Each saw their net sales grow year over year, WK Kellogg by 2.5% and Kraft Heinz by 0.6%. However, both companies sold fewer products during the year.

Kraft Heinz saw its volume/mix decline 5.5 percentage points versus the prior year, while WK Kellogg saw its volumes decrease by 9.8% in 2023.

Both these companies, like many large FMCG businesses, have been growing sales during inflation by making price increases. With the rate of inflation beginning to ease, this would seem to be an unsustainable strategy going forward, meaning the leadership of these businesses now need to grow volume in 2024.

Well-designed promotions really drive category performance.

Gary Pilnick, WK Kellogg

“In 2024, we expect to drive top-line growth, return to positive volumes, expand gross margins and operating margins and continue to reinvest in the business and our iconic brands,” Kraft Heinz CEO Carlos Abrams-Rivera told investors yesterday (15 February).

WK Kellogg’s chief financial officer Dave McKinstray expressed less confidence that it could return to positive volume growth in 2024. The business is forecasting that its net sales growth will be between -1% and 1% in 2024 and that it will see volume declines in the “low single digits”.

While this would be a marked improvement on the 9.8% decline it saw in 2023, it indicates just how difficult a return to volume growth will be this year for consumer goods businesses.

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McKinstray told investors that the volume drops it has seen this year have come as the business has raised the price of its products.

Optimising promotions

For companies like Kellogg’s that have seen volume dips as a result of higher prices, it can be tempting to engage in heavy discounting to bolster volume sales.

CEO Gary Pilnick stressed that promotions have the potential to be a powerful tool.

“Well-designed promotions really drive category performance,” he told investors.

The path of promotions may be attractive for many FMCG businesses looking to drive volumes.

Speaking to Marketing Week last month, Ananda Roy, senior vice-president at advisory business Circana warned FMCG businesses to avoid becoming overly reliant on discounting and promotional activity.

“It does give you a volume boost but it’s bad volume,” he said. “It’s bad volume because the consumers who buy you, are not buying you because they value your brand, they’re buying you because of cheap price, these are not loyal consumers.”

How can brands drive growth in 2024?

Speaking to investors, Kellogg’s Pilnick emphasised that “promotional effectiveness” was a big focus for the company.

“Promotional effectiveness is about designing and executing our promotional activities to drive better returns,” he said, stating that the business’s teams across marketing, sales and supply chain were integrated to meet this goal.

When designing its promotional activity, the company’s focus would be on “really balancing [its] returns against profitability and volume,” Pilnick said.

Promotional effectiveness was outlined as one of Kellogg’s “three main areas” to drive revenue growth in 2024, along with premiumisation and price pack architecture.

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Innovation to drive growth

Kellogg’s identified that its premium segment “performed very well in 2023” and so is looking to capitalise on this trend into this year. It is looking to innovate to build out this premium segment.

Innovation is one way that businesses could look to drive volume growth. Helen Edwards, director at brand consultancy Passionbrand and Marketing Week columnist, advises companies to “throw everything at innovation”.

As it looks to return to volume growth, Kraft Heinz identified innovation as a key driver of this.

“We are expecting volumes to turn positive in the second half in the year because… us continuing to invest in innovation that actually will give us the right tailwinds as we go into the year,” said CEO Abrams-Riviera.

His words echo that of Coca-Cola CEO James Quincey earlier this week, who also told investors that innovation was serving as a “competitive advantage” for the business and driving profit.

In 2023, the lever of price was heavily used by FMCG businesses to drive sales growth.

This year, brands will have to look broader to achieve sales; whether that’s through innovation, premiumisation, or price pack architecture.

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