Price war threatens cereal makers’ profits
Source: Marketwatch.com
U.S. cereal makers are locked in a price war, and their battle for market share is hurting profits and threatening to persist into next year.
It’s unclear who will buckle first.
In an interview with MarketWatch, Kellogg Chief Executive David Mackay said supermarket chains and other retailers were using cereal to draw shoppers into their stores, just as cheap milk and meats were dangled in front of consumers earlier this year. Weak cereal prices forced Kellogg to cut its 2010 profit- and sales-growth targets.
He said the price war — which has effectively erased the price gap between brand-name cereals and store brands — could end as early as October or as late as December.
“It’s not something good for the category,” Mackay said. “Our approach going forward is to take a very responsible and reasoned approach to what we do from a promotional perspective.”
