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Dive Brief:

• WK Kellogg will spend $200 million on its ongoing supply chain modernization effort this year, according to its Q4 2024 earnings presentation. 
• The cereal maker’s supply chain already showed boosted productivity and reduced waste in Q4, resulting in a 7.5% year-over-year increase in adjusted EBITDA, according to its Feb. 11 earnings report. 
• “That's meaningful because as time goes on, the team is executing. And for us, it's not a big surprise given even though the initiative is so complex,” CEO Gary Pilnick said of the upswing in profitability during the company’s Q4 earnings call. 

Dive Insight:

WK Kellogg’s latest investment is part of a three-year, $500 million supply chain initiative announced in Q2 last year to increase production output and improve profit margins.

The plan has eight distinct initiatives, Pilnick said during his Q4 comments. According to a report published in August 2024, $390 million in capital investments will be allocated to new infrastructure, equipment, technology and capabilities at its Michigan, Pennsylvania and Ontario facilities. The effort also includes $110 million in restructuring costs for consolidating the company’s manufacturing operations in Omaha, Nebraska, and scaling back production in Memphis, Tennessee. 

“We make sure that each of those priorities do not interfere with the commercial agenda. So we integrate that work with the way we're running the business,” Pilnick said during the earnings call.

WK Kellogg’s revamped supply chain operations were a key driver of its nearly 30% gross margin for full-year 2024, and the company still expects to grow its EBITDA margin from 9% last year to 14% by the end of 2026 through the modernization. 

“We are on track to deliver that target even in a challenging operating environment, demonstrating the team's ability to execute and the earnings power of our business,” Pilnick said. 

Despite supply chain strides, the maker of Special K and Froot Loops reported a 2% dip year over year in net sales in 2024, citing a challenging business environment. Net income also slipped 35% YoY, which the company attributed to its business and portfolio realignment and supply chain transformation.