Kellogg CEO John Bryant to Step Down -- 4th Update

By Annie Gasparro and Joann S. Lublin Features Dow Jones Newswires

Kellogg Co. chose an outsider as its new chief executive, becoming the fifth major food and beverage company to name a new leader in a tumultuous year for the industry.

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Steven Cahillane, the 52-year-old CEO of health-and-wellness company Nature's Bounty Co. and a former Coca-Cola Co. executive, will succeed Kellogg CEO John Bryant next week.

Mr. Bryant said Mr. Cahillane's experience running a company that sells natural and organic supplements will help Kellogg expand its own health-conscious product offerings.

"Steve can hit the ground running on Monday," Mr. Bryant, 51, said in an interview. Kellogg wouldn't make Mr. Cahillane available for an interview.

Mr. Cahillane emerged as a strong contender early in Kellogg's monthslong search for a new CEO, said a person familiar with the company. Mr. Bryant wouldn't say when directors began looking for his successor. But he said Kellogg has worked on succession plans with executive search firm Spencer Stuart for years. Some Kellogg executives passed over in favor of Mr. Cahillane were offered retention packages, Mr. Bryant said.

Kellogg board members hope Mr. Cahillane can quickly reignite sales growth, the person familiar with the company said. "The biggest challenge, obviously, is accelerating growth again on the top line," because Kellogg already has cut costs and made significant acquisitions, the person said.

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"We don't expect major changes in Kellogg's strategy, but we believe Mr. Cahillane's fresh perspective will be good," said Brittany Weissman, a consumer analyst at Edward Jones.

In Mr. Bryant's nearly seven years as chief executive, Kellogg posted just one quarter of sales growth. The shift toward fresher, more niche brands has also confounded executives at other big food and beverage makers whose products filled U.S. grocery carts for more than a century. Coke, Mondelez International Inc., Hershey Co. and General Mills Inc. have all also named new chief executives in the past year.

Unlike some of its competitors, Kellogg has chosen an outsider to revive its sales and refresh a stable of products that includes Frosted Flakes, Pop-Tarts and Pringles.

Mr. Cahillane, who joined Nature's Bounty as CEO in 2014, produced "good returns for the investor" partly by bringing in a new management team, one of his longtime acquaintances said. In July, private-equity firm KKR said it was acquiring a majority stake Nature's Bounty.

But Mr. Cahillane had a mixed record at Coke, where he worked for seven years, this person said.

As head of Coke's America's division in 2013, Mr. Cahillane was seen as a potential successor to Muhtar Kent, Coke's chief executive at the time. But that December, Mr. Cahillane unexpectedly said he was leaving. He "got blamed" for poor performance in North America, the acquaintance said.

"He took the bullet," this person added. "I am not sure it was his fault."

Coke declined to comment beyond a 2013 statement praising his leadership of the North America unit under tough economic conditions.

Mr. Bryant said Mr. Cahillane has had "a distinguished career."

Mr. Bryant will remain chairman of Kellogg's board until March, when Mr. Cahillane will assume that role, too. Mr. Bryant, who has worked for Kellogg since 1998, said he is leaving to spend more time with his family.

Mr. Bryant had stints at Kellogg as finance chief and as chief operating officer before taking over as chief executive from fellow Australian David Mackay in 2011. Mr. Bryant inherited a stable of cereal brands like Special K and Rice Krispies that were losing favor among consumers as they sought fresher and more natural products. The rise of high-protein, low-carbohydrate diets also hurt traditional cereals, heavy in grains and sugar. Breakfast bars and egg sandwiches eclipsed cereal in the morning routine of many Americans.

About a year into Mr. Bryant's tenure, Kellogg acquired Pringles chips, signaling an effort to focus more on snacks and the potential for growth outside the U.S.

"Kellogg is in the middle of a transformation," said Mr. Bryant. "We have dramatically expanded in emerging markets, and we are committed to being on-trend with snacking occasions around the world."

Still, the cereal business that drives 40% of Kellogg's sales has continued to suffer. Last month, Kellogg said sales in its most recent quarter fell 2.5% to $3.19 billion, including a 2% drop in North America.

Like its competitors, Kellogg is hoping to boost sales by reformulating its brands with a focus on fewer and more natural ingredients. Removing artificial coloring from products like frozen Eggo waffles has improved their sales, the company says.

Kellogg has also mirrored its peers in cutting costs by laying off employees at its headquarters and closing factories. The yearslong effort has boosted Kellogg's operating profit margin. Since Mr. Bryant took over as CEO, the stock has climbed about 24%.

This year, though, Kellogg shares have dropped as turmoil across the industry has deepened. Kellogg shares are down 19% in 2017, similar to declines suffered by its peers.

Write to Annie Gasparro at annie.gasparro@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

(END) Dow Jones Newswires

September 28, 2017 17:33 ET (21:33 GMT)