Kellogg is doing better than expected so far in 2009 on the strength of its US cereal business. For 1Q2009, the cereal sales grew 6%, doubling its 2008 growth rate. Consumers will continue to turn to cereal, a relatively low cost food, as the look to save money on groceries. Kellogg will continue to benefit from the trade down effect - the tendency of consumers to trade down to less expensive goods in tough economic times - for the rest of the year as the recession continues.
Although the global economy may be emerging from recession, consumers around the world are still in trouble. Unemployment, generally a lagging indicator, continues to rise, forcing consumers to make do with smaller incomes. This will encourage consumers to trade down to lower cost alternatives. In the case of food and dining, this means that more consumers will be eating breakfast at home, instead of spending money on more expensive options like Starbucks. Kellogg should benefit from this trend.
Food Prices have risen to unbelievable amounts. the World Food Index has surpassed it's 2008 peak, during that years' financial crisis. Here is just some price hikes in recent months.
-Apples- (1 lb)
That is just an idea of price inflation. Inflation + The Fact everyone needs to eat only equals profit. plus, their recent organic trend will increase revenue. Overall, it is a good stock.