Kellogg CEO discusses boosting advertising spending amid down economy

On the Call: Kellogg Co. CEO David MacKay

Food and cereal maker Kellogg Co. has been working to reduce its costs and has reinvested much of those savings into product development and advertising. The company said this emphasis will help its long-term growth and takes advantage of some lower advertising costs in the down economy. Kellogg CEO David Mackay discusses the issue in a conference call with investors Thursday.

QUESTION: Good morning. First question was on advertising. Are you still increasing your spending in a pretty healthy rate. Could you just comment on the ROI (return on investment) on that advertising, especially in this consumer environment and then how that is offset of course by some deflation in media?

RESPONSE: I think our line advertising is a perennial challenge. We have a number of methodologies to ensure that we are getting the best return from our advertising possible. We pretest all of our commercials …and we are seeing improvements in the breakthrough on those ads. That’s a good indication.

We are working on other ways to actually measure the ROI.

If you look this year we are going to be up mid single-digit in a market where we are probably seeing a degree of media deflation, we are seeing media buying efficiencies and some consolidation benefits in Europe and we are seeing reduction in non-working advertising. So the increase in impressions is probably double-digit while the absolute dollar spend is around mid single-digit.

We think it’s a great time to invest on our brands, make sure consumers are full year aware of their benefits and keep them at the forefront for as many consumers as we can. As we go to next year our expectation would be that we will see advertising growing in line with sales and again we would expect to see some but less deflation in media costs in 2010.