Kellogg Issues Recall of Honey Smacks Cereal Amid Salmonella Outbreak

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Fans of Honey Smacks aren’t going to be completely satisfied about this one.

Shares of Kellogg Co. (K)  fell barely to 66.56 on Friday, June 15, after the corporate voluntarily recalled about 1.1 million circumstances of the sweetened puffed cereal within the wake of a multi-state Salmonella outbreak.

The U.S. Food and Drug Administration and the Centers for Disease Control and Prevention found that Honey Smacks had been the doubtless supply of the outbreak after they interviewed affected individuals. Of the 39 individuals who officers spoke with, 30 mentioned they ate chilly cereal and 14 recognized Honey Smacks particularly by title, based on the investigation report. As of Thursday, 73 circumstances of Salmonella had been reported throughout 31 states, and 24 individuals have been hospitalized. 

The firm recalled the 15.three and 23 oz. packing containers of the cereal which have a “finest if utilized by” date of June 14, 2018, by way of June 14, 2019. The 15.three oz. dimension packing containers come eight packing containers to a case whereas the 23 oz. circumstances comprise 12 packing containers, so Kellogg officers do not have an correct variety of what number of packing containers should be recalled and do not have a strategy to know what number of packing containers are nonetheless on cabinets or in properties, a Kellogg consultant mentioned in an emailed assertion.

The firm and the third-party producer that makes Honey Smacks plan on launching an investigation into the power the place the cereal was made, based on a press launch from Kellogg.

Kellogg officers are nonetheless working by way of how the recall will have an effect on the corporate financially, however they “count on the recall value to be lined by the third-party producer,” an organization consultant mentioned.

Timothy Ramey, an analyst with Pivotal Research Group, mentioned buyers can have a look at the recall as a one-time occasion and should not fear about it an excessive amount of primarily based on the remoted nature of the incident — no different Kellogg merchandise had been affected by the outbreak. Ramey has a “Buy” score on Kellogg’s inventory and is optimistic of the corporate’s progress potential in worldwide markets. He raised his per share goal value to $90 at first of May.

“It’s not the worst factor that may occur to Kellogg,” Ramey mentioned in regards to the recall. “The monetary impression is just too early to inform. The model isn’t basic to their enterprise.”

Most analysts do not share his sentiments as they’ve lowered their goal costs on the inventory to between $60 and $73 with 9 out of the 14 analysts recommending a “Hold” score, based on FactSet. 

Ramey acknowledged that recollects do not encourage a lot pleasure amongst buyers, however mentioned individuals mustn’t categorize Kellogg as only a cereal firm primarily based on its different breakfast and snack product strains.

That might be excellent news for Kellogg, which has seen its cereal gross sales decline yr after yr since 2011. The firm reported first-quarter cereal gross sales of $691 million in 2018, a 2.four% drop from the identical time a yr in the past when gross sales had been at $708 million.

The marketplace for cereal has shrunk dramatically in previous years as shoppers have moved towards extra wholesome and handy breakfast choices. Cold cereal gross sales general have declined by 11% over the previous 5 years, based on Mintel, a market analysis agency.

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