Pringles maker Kellanova’s results beat on ‘sugar-high’ price hikes

(Reuters) -Kellanova, formerly Kellogg, and its newly spun-off North America cereal business WK Kellogg beat third-quarter sales estimates on Wednesday, supported by higher prices for their ready-to-eat breakfast cereals and snacks.

Shares of both the companies rose about 4% in early trading.

Packaged food companies like Kraft Heinz (NASDAQ:), Campbell Soup (NYSE:) and Mondelez (NASDAQ:) have grown margins through repeated prices hikes over the last two years, but budget-conscious consumers are starting to push back.

Kellanova, home to brands including Cheez-It crackers and Pringles, recorded a 7.4% decline in overall volumes for the quarter, while WK Kellogg posted a 13.4% fall following double-digit price hikes across their product ranges.

“Price hikes offer a short-term sugar high that can quickly fade if it pushes shoppers to private labels,” said Zak Stambor, a senior analyst with Insider Intelligence, adding that Kellanova would have to be careful about how and when it raises prices.

Kellanova’s net sales in North America fell slightly, even as the Europe and Latin America regions posted growth.

“Price elasticities … rose as financially constrained consumers curbed incremental expenditures,” the company said.

In October, Kellogg Company (NYSE:) completed the spin-off of its North American cereal business into a new standalone entity called WK Kellogg, and renamed itself Kellanova, in a move to sharpen focus on each division.

Kellanova posted net sales of $3.94 billion for the quarter, surpassing analysts’ average expectations of $3.62 billion, according to LSEG data.

Its adjusted profit of $1.03 per share was above estimates of 84 cents.

WK Kellogg’s reported sales of $692 million beat expectations of $666.3 million.