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Kellogg Co – Risk Profile

Industry: Bakery and Cereals
Current: Company Performance

As per GlobalData's proprietary risk methodology, Kellogg's overall risk score is 3.12, signifying medium risk

The operational risk pillar has boosted the overall risk profile of the company

High proportion of debt on the balance sheet and low liquidity has resulted in an underperforming financial risk pillar

Kellogg Co (Kellogg) has a good risk profile and is one of the leading companies based on our proprietary risk assessment of the food sector in the consumer industry. Due to its diversified operational network, the company's operational risk score is better than the sector's average. However, a low liquidity position is a cause for concern, affecting the financial risk scores.

About the Company

Kellogg's is a producer and marketer of ready-to-eat cereal and convenience foods. Its product portfolio includes cereals, cookies, crackers, savory snacks, frozen waffles, toaster pastries, cereal bars, fruit-flavored snacks, and veggie foods. The company markets its snacks products under Kellogg's, Cheez-It, Murray, Pringles, Austin, Parati, RXBAR, Bear Naked, Kashi brands, Morningstar Farms, and Eggo brand names.

Kellogg's is one of the leaders in the food industry, with reported revenue of $14 billion in 2021, which grew 2.98% over that in 2020. Net income increased 18.94% in 2021 in comparison to that in 2020.

Risk Pillars

Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. Scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.

Kellogg Co's overall risk score is at par with the sector's overall score. Dali Foods Group Co Ltd, Calbee Inc, and Foshan Haitian Flavoring Food Co., Ltd. are the leaders in the sector.

Country Risk: The company has a country risk score of 4.10, given its presence in diverse territories, which insulates it from the risk associated with economic and political factors of a specific region. The company derives the majority of its revenue from North America (60.71%), followed by MEA and Asia (16.43%), Europe (16.20%), and Latin America (6.63%).

Industry Risk:

The company's primary exposure is to the food sector. It generates 100% of its revenue from the food sector, characterized by low-profit margins and weak growth projections compared to other sectors, resulting in an average industry risk score of 3.

Operational Risk:

The company has an operational score of 3.12, primarily attributed to its scale. The company has over 110 brands and markets its products to customers in 180 countries through retailers. The company has revenue growth of 3%, which enhances its ability to provide higher returns to its shareholders and increases its ability to allocate adequate funds for growth initiatives. Healthy profitability margins also boosted the operational score. However, negative operating leverage could be a cause for concern.

Financial Risk:

Kellogg's financial risk score of 1.81 is less than the industry's average. High liabilities have affected the liquidity position of the company. A low liquidity position indicates the company's decreasing ease in funding its day-to-day operations and limits the ability of the company to support any growth prospect that arrives in the market. High debt has impacted the leverage, interest coverage, and cash flow ratios.

About our Methodology:

GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData's proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company's risk and returns potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.

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