The US dollar isn’t the only thing shrinking these days. After struggling for months to keep margins up in the face of skyrocketing grain prices, Michigan cereal giant Kellogg Co (K:NYSE) has decided not to raise prices (again) for several popular brands.
Rather, they are charging the same price for less of the crunchy sweet stuff. As of early June, cartons of Apple Jacks, Cocoa Krispies, Corn Pops, Froot Loops and Honey Smacks were reduced by an average of 2.4 ounces.
“This price adjustment on select ready-to-eat cereal brands was taken to offset rising commodity costs for ingredients and energy used to manufacture and distribute these products.” - Kellogg spokeswoman Susanne Norwitz.
Kellogg last increased prices in January. It didn’t help then: Q1 profit still fell 2%, quarter over quarter. And shrinking boxes won’t help now: look for K shares to complete their 38% retracement over the next six to eight weeks.
Will $43.06 mark the bottom for the Corn Flake King? Only for a month or so, as we are not expecting the dollar fall to end - or dollar-denominated commodities like oil and corn to
plateau - until at least January 2009. Kellogg share price at $34.68 is entirely possible over the next few months.
Adam Lass
Senior Editor, WaveStrength Options Weekly
Here's Your Perfect Track Record Guarantee… At Half the Cost!
One of the fastest-growing option advisories in the country just released their strongest offer ever: a perfect track record guarantee!
Too hard to believe? No, it’s not. And we’re so determined that you get in on this opportunity, that we’re slashing half the price off this amazing service… and offering you 6 MONTHS FREE!
Read on for all the details on this special deal…