Cereal-maker Kellogg’s has seen its sales dip for the seventh-straight quarter as demand for processed foods continues to weaken, but its third-quarter profit rose 42 percent.
Although sales were fell 2.3 percent to $3.25 billion, cost-cutting measures and lower production costs helped produce better-than-expected profits for the quarter. Kellogg’s has had a project in place since 2013 to save $475 million each year through 2018 by cutting unnecessary jobs and optimizing production, Fox Business reported.
Zero-based budgeting, in which managers need to justify all of their department’s expenses for each budgeting period rather than basing costs on the previous year, was also introduced recently to the company. The company's third-quarter profit increased to $292 million, or 82 cents per share, compared with $205 million a year ago.
Experts expect that the reason for sales falling is the weak demand for breakfast cereal in the U.S. and U.K. as mornings becoming increasingly hectic. USA Today reported that 40 percent of millennials said they thought cereal required too much cleanup. Others are eating heartier fare like oatmeal and eggs more often.
The slip in revenue caused Kellogg’s to fall into a lower tax bracket, which increased cost savings and boosted earnings. But although profits have jumped 42 percent in just one quarter, Kellogg’s has lowered expectations for annual sales, which continue to slump slightly, according to The Wall Street Journal.
Big food companies like Kellogg’s have been the target of criticism from health experts for using chemical additives and other undesirable ingredients in their foods. Despite efforts to get rid of artificial preservatives and food dyes, however, many consumers are still skeptical about consuming large quantities of prepackaged and processed foods.
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