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These Analysts Say Kellogg Is Still Having a Hard Time With Millennials

Kellogg's Corn Flakes cereal is pictured at a Ralphs grocery store in PasadenaKellogg's Corn Flakes cereal is pictured at a Ralphs grocery store in Pasadena
Kellogg's Corn Flakes cereal on grocery shelvesMario Anzuoni—Reuters

Kellogg (K) is still having a hard time selling cereal to millennials, according to analysts at Credit Suisse.

The investment bank downgraded its rating on the stock Wednesday to “Neutral” from “Outperform” saying the company’s efforts to engage younger consumers have yet to take hold. Shares edged lower in afternoon trading.

Kellogg, the analysts wrote, “took several positive steps to re-engage millennial consumers with more granolas, mueslis, and ‘fashion-forward’ ingredients. But from what we can tell, these efforts have not fully stabilized the business.”

The Credit Suisse report notes that Kellogg’s revenue growth rate “continued to under-punch its peers” due to ongoing pressure in the overall breakfast cereal category, which accounts for 45% of sales, as well as company-specific problems in wholesome snacks. The bank lowered its price target on the stock to $77 from $84.

 

Kellogg has taken several steps over the past year to reach out millennial consumers, from opening an all-day cereal café to selling Frosted Flakes and Special K as snack food. But Credit Suisse says “efforts have not fully stabilized the business,” with consumers continuing “to seek alternative breakfast solutions.”

A survey conducted early this year found that 40% of millennials think that eating cereal is too difficult, because it needs to be cleaned up after eating.