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James Jenness: "I Am Kellogg"

After more than 25 years in advertising, James M. Jenness was named to Kellogg's (K ) board in mid-2000. Now, he's the surprise successor to Kellogg Chairman and CEO Carlos M. Gutierrez, the miracle worker who revived the slumbering cereal giant. But can outsider Jenness keep Kellogg popping?


A former vice-chairman and COO at Kellogg's longtime ad agency, Leo Burnett, the 58-year-old Jenness certainly knows the company's brands. Indeed, he recalls that his first job at Burnett in 1974 was on the Special K account. As chairman of the board's Consumer Marketing Committee, Jenness says he also played a big role in Kellogg's revitalization. "I am an insider," he insists.

Kellogg's turnaround is based on a strategy called "volume to value" at the Battle Creek (Mich.) headquarters. Rather than focus on overall volume, the emphasis has been on Kellogg's highest-margin products. Sales of Special K cereal, for instance, have grown 20% a year since 2000, to $800 million, estimates analyst John M. McMillin of Prudential Equity Group.

Second, Kellogg moved beyond the cereal aisle with its $4.3 billion acquisition of Keebler Foods in early 2001. The takeover makes Kellogg No. 2 in the cookie and cracker market in the U.S., behind Kraft Foods (KFT ), as well as the world's biggest cereal maker, with a 37% market share.


Despite Jenness' long involvement with Kellogg, industry analysts complain he's largely an unknown and wonder whether he has the skills to run a $9.3 billion company. "Putting his consultant background into practice at Kellogg may be a big leap," McMillin warned in a Nov. 29 note. "Also, following in Mr. Gutierrez's footsteps won't be easy."

Because of those worries, McMillin lowered his target price for Kellogg shares to $42 from $43 and maintained his neutral recommendation on the stock. Investors also were nervous. Kellogg shares closed at $43.70 on Nov. 30, down 3% following news of Gutierrez' departure.


My mission is to continue Kellogg's great performance. What we have in place now is a strategic approach to the business, this idea of volume to value and managing the company for cash. That has proven extremely successful. We know we have more room to grow it. So my sequel is to keep this baby going.


Low-carb things certainly have come in. They got some initial trial. But they sure don't seem to be sticking. We sure haven't felt their impact on our business. We don't see this hurting us.
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