Kellanova Refocuses on Traditional Pricing and Promotions as Volume Growth Returns
Kellanova is aiming to reestablish a more typical business environment following years of supply chain disruptions, according to CEO and president Steve Cahillane on the company's recent earnings call.
To help drive growth, the company is leaning on innovations such as new flavors, health-oriented products and entirely new food platforms.
“The things that are going to drive these categories are innovation, brand building, quality display merchandising,” said Cahillane.
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In recent years, Kellanova relied heavily on pricing levers to combat inflation and other economic pressures. While cost inflation made price increases necessary, Cahillane said much of that “price discovery” has now taken place, and although consumers remain financially strained, they are beginning to adjust.
At the start of the year, promotional lifts were limited because price discovery was still ongoing. Now, as pricing begins to stabilize, Cahillane anticipates promotional investments will deliver returns similar to those seen before the pandemic.
As a result, Kellanova is returning to a more traditional commercial approach, including the reactivation of promotional activity that had been scaled back during supply bottlenecks. This, he said, should lead to a better balance between price, mix and volume in the North American market.
Meeting the Needs of Price-Sensitive Consumers
Cahillane noted that today’s consumer — particularly households earning under $100,000 with children — is facing intense financial pressure. Price sensitivity is also impacted by the timing of the month, depending on consumers' cash flow.
These dynamics make tailored pricing and promotional timing more important than ever before.
To meet these needs, Kellanova is investing in flexible price-pack architecture, allowing it to offer products at a variety of price points.
“It doesn't mean they're not still under pressure,” Cahillane said. “We have to make sure … we're hitting the right price points, the right pack sizes, the right promotions at the right time in the month. We have to make sure that we're continuing to invest in our brands and innovation, meeting the consumers where they are.”
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He added that success now depends on exceeding retailers' same-store sales by aligning pricing with consumer needs and executing effective commercial activations.
“Then you get into a much more constructive dialogue with customers versus who's taking what share of the pie,” said Cahillane.
