Kellogg Co. tapped Nature's Bounty Chief Executive Officer Steven Cahillane to run the breakfast-cereal giant, turning to an outsider to help reinvigorate moribund sales.
Cahillane, 52, will take the helm on Oct. 2, when current CEO John Bryant steps down after seven years, the maker of Rice Krispies and Eggo waffles said on Thursday. The new chief also will take the chairman role from the 51-year-old Bryant, but not until March 15.
Cahillane -- once considered a potential successor to Coca-Cola Co. chief Muhtar Kent -- will have to contend with a slowdown in the packaged-food industry and a particularly pernicious slump for cereal. Sales in the $9 billion U.S. cold cereal market have declined for four straight years, according to data tracker IRI, forcing Kellogg to look to new areas like salty snacks for growth.
Many shoppers have turned away from longtime staples like Special K, which has been hurt by changing diets and the perception that other breakfast fare is more wholesome. Even Kellogg's Kashi line of high-fiber, protein-rich cereals have shed sales in recent years, inviting criticism that big food companies have trouble shilling better-for-you options. In response, Bryant has cut costs and acquired the Pringles snacks business, but the turnaround efforts have been slow to bear fruit.
"It's a signal for change," said Ken Harris, managing partner at Cadent Consulting Group. "They needed to hire from the outside because internally they could not address the issues as significantly or as profoundly."
Shares of Kellogg declined in the wake of the announcement, falling 0.7 percent to $62.58 at 10:55 a.m. in New York. The stock is down 15 percent this year.
In an interview, Bryant said the company had some "very strong" internal candidates, but was "extremely fortunate" to find Cahillane. He becomes Kellogg's 11th chief executive since the company was founded in 1906.
Cahillane (pronounced KAY-hil-lane) brings recent experience in better-for-you products, which may steer his approach. He joined vitamin purveyor Nature's Bounty in 2014 and oversaw the company during a takeover deal by KKR & Co. earlier this year. The private equity firm agreed to buy Nature's Bounty from Carlyle Group in July.
"He was tremendously successful in navigating a rapidly changing health and wellness environment," said Bryant, who became Kellogg's CFO at age 36 and replaced Carlos Gutierrez as CEO in 2011.
Most of Cahillane's working life has been in the beverage business. He began his career as a salesman for E&J Gallo Winery. In 1995, he founded State Street Brewing Co. in Chicago, which he owned until 1997. He joined the brewer then known as InBev NV in 1999, rising through the ranks under its heralded CEO John Brock to become chief commercial officer in 2005. Two years later, Cahillane followed Brock and traded beer for soda, accepting a post to run the European unit of beverage bottler Coca-Cola Enterprises Inc.
In 2010, Coca-Cola Co. hired him to run the newly created Coca-Cola Refreshments Inc., formed after the company acquired its U.S. bottling operations. There, he was considered a contender to become CEO, but Cahillane ended up leaving the company amid a 2013 management shake-up.
"Steve is the right person to energize our teams and bring new thinking to our company," Donald Knauss, Kellogg's lead director, said in a statement.
Cahillane's annual pay package will be about $10.1 million at Battle Creek, Michigan-based Kellogg. That includes a salary of $1.25 million, a $1.88 million target bonus and equity awards valued at $7 million. He'll also get a $1.5 million cash sign-on award and restricted shares valued at $3 million as of yesterday's close. The one-time equity awards will vest after three years.
As for Bryant, the Australian said he plans to spend more time with his six children, who range from 10 to 22 years old. "I have no intentions of a full-time role," he said.