Price of wheat, cocoa up
While the increase on cereals such as Special K and Cocoa Krispies was prompted largely by higher commodity prices for wheat and cocoa that are likely to gobble up much of the profit margin, one food analyst said that Kellogg's decision will probably drive its marketing budget as well.
"[The price hike] keeps the funds in place to raise advertising, which Kellogg has said it wants to do. ... They think they have something to say," one analyst said.
A spokeswoman for Kellogg
Kellogg's U.S. cereal advertising is handled by Publicis Groupe's Leo Burnett, Chicago. Kellogg spent $154 million in measured media against its cereals during the first 10 months of 2002, according to Taylor Nelson Sofres' CMR.
Rivals may follow
Analysts expect that Kellogg's cereal rivals, including General Mills and Kraft Foods, will follow suit.
A Kraft spokeswoman said there have been no changes on Post prices as of now, and said she could not speculate on future activity. A General Mills spokesman was unavailable at press time.