Jeff Arnold, Senior VP, North America Supply Chain Kellogg Company 11/12/09. Global Supply Chain

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Sharyl Scott
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Global Supply Chain Forward-Looking Statements This presentation contains, or incorporates by reference, forward-looking statements with projections concerning, among other things, the Company s

1 Global Supply Chain Forward-Looking Statements This presentation contains, or incorporates by reference, forward-looking statements with projections concerning, among other things, the Company s strategy, and the Company s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, and competitive pressures. Forward-looking statements include predictions of future results or activities and may contain the words expects, believes, should, will, will deliver, anticipates, projects, estimates, or words or phrases of similar meaning. The Company s actual results or activities may differ materially from these predictions. The Company s future results could also be affected by a variety of other factors, including competitive conditions and their impact; the effectiveness of pricing, advertising, and promotional spending programs; the success of productivity improvements and business transitions; the success of innovation and new product introductions; the recoverability of carrying amounts of goodwill and other intangibles; the availability of and interest rates on short-term financing; changes in consumer behavior and preferences; commodity and energy prices and labor costs; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; U.S. and foreign economic conditions including interest rates, taxes and tariffs, and currency rate translations or unavailability; legal and regulatory factors; the ultimate impact of product recalls; the underlying price and volatility of the Company s common stock and the impact of equity-based employee awards; business disruption or other losses from terrorist acts or political unrest; and other items. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them. 1

2 Supply Chain Cost Challenges / Initiatives History Cost pressures have not gone away Cost challenges Initiatives $ Millions LE 2010 LE Supply Chain Cost Challenges Seeing reduced levels of commodity inflation Healthcare and pension expense increasing Savings initiative pipeline capable of offsetting challenges in

3 Cost-Savings Visibility Annual savings of $1+ billion in 3 years - LEAN manufacturing Indirect procurement savings Overhead discipline Goals of - LEAN Lean, Efficient, Agile, Network Become the best in the food industry Not a project, but a new way of doing things at Kellogg Entire Supply Chain operation (plants and HQ) Enlisted external help to kick-start the journey Engage everybody down to shop floor 3

4 Cost Savings - LEAN is driving results Step change in savings for 2009 Pipeline enables trend to continue Savings as % of COGS 4.0% 4.4% 3.1% 3.1% 2.9% LE Cost Savings Operations Savings Savings Trend is Increasing Manufacturing Supply Chain Enterprise OAE: Operating Asset Effectiveness Continuous Improvement

5 Cost Savings vs. Peer Group Goal is to be the Best in the Food Industry % of 09 NSV est. % of 09 COGS est Competitor A Kellogg Competitor B Competitor C Competitor D Competitor E Source: Most recent company annual reports / 10-K filings. Great visibility into cost-reduction opportunities RQT / Procurement 35% Plant Driven Initiatives 40% Engineering 10% Logistics / Network 15% 5

Plant-Driven Initiatives Lean principles and training driving engagement Capacity creation Multiple organization-effectiveness initiatives Plant-Driven Initiatives Portable Foods Plant in UK on track

6 Plant-Driven Initiatives Lean principles and training driving engagement Capacity creation Multiple organization-effectiveness initiatives Plant-Driven Initiatives Portable Foods Plant in UK on track increasing capacity by 20% through creation of additional 80 production days increasing margin by 6 points Queretaro Plant in Mexico increased packaging throughputs equivalent to 100 days of capacity creating opportunity to close plant in Guatemala Lean problem-solving tools and engagement supported our employees on a milling kaizen to eliminate the use of knives 6

7 RQT / Procurement Strategic Sourcing Formula Renovation Idea Portals RQT / Procurement Strategic sourcing with our global flexible bid will deliver $25 million in savings Next generation trans-free oils have delivered $26 million in savings this year Portal events that leverage engagement of employees have generated hundreds of actionable ideas that keep our pipeline full of future opportunities 7

8 Logistics & Network Lowest delivered cost sourcing Transportation and distribution Regional manufacturing Working capital management Logistics & Network Taking over 5,000 truckloads of freight off the road annually due to cubing and intermodal initiatives DSD stops per truck are up 13%, allowing us to take 58 trucks off the road The addition of regional plants into our network (Mexicali and Belleville) has allowed us to place flexible production plants closer to points of consumption 8

9 Engineering-driven productivity Total installed cost management Low-cost country sourcing Strict investment guidelines Capital Spend Millions Engineering-driven productivity $455 $472 $459 Consistent investment level; Higher returns $374 $ LE Percent of Net Sales

10 Future Enablers K expansion Sales and operations planning SAP optimization Summary Annual savings of $1+ billion in 3 years Great visibility Sustainable continuous improvement Driving reinvestment and margin improvement opportunities On track to exceed expectations Building an even stronger Kellogg 10

Kellogg Company November 3, 2011

Kellogg Company November 3, 2011 Third Quarter 2011 Financial Results November 3, 2011 1 Forward Looking Statements This presentation contains, or incorporates by reference, forward looking statements with projections concerning, among