General Mills, Inc. (GIS), Kellogg Company (K) & Post Holdings Inc (POST): How Cereal Companies Will Weather Cost Increases

So how will Kellogg Company (NYSE:K) make up for the rising prices? The company has a habit of purchasing commodities in advance, but it has also raised its prices a couple of years ago in preparation for a rise in costs. Still, if the cost of grain stays high much longer, the company will be forced to jack prices to avoid major losses.

Post marketing

Promotions were the problem for Post Holdings Inc (NYSE:POST), which reported a 60% drop in profits to $5.1 billion. Post manufactures Raisin Bran, Bran Flakes, and Fruity Pebbles–all popular cereals. But unlike Kellogg’s and General Mills, Post’s loss was chalked up to marketing and spend in exchange for heavy promotion on in-store displays.

Recently, Post Holdings Inc (NYSE:POST) purchased Hearthside Food Solutions’ granola snacks and cereals. These products had previously been sold through natural food sources, but Post may have the ability to move it into a more widespread market. The company’s CEO said the acquisition will add $70 million to Post’s net sales. Post Holdings Inc (NYSE:POST) also acquired organic and natural food business Attune Foods late last year.

Foolish final words

These gains may be enough to offset the increase in costs, possibly making Post the winner in the short run. But long-term, Kellogg Company (NYSE:K)’s and General Mills, Inc. (NYSE:GIS) have weathered enough tough times that they’ll likely come through this ordeal with flying colors.  Ultimately, all these businesses are good enough for you to take a closer look.

The article How Cereal Companies Will Weather Cost Increases originally appeared on Fool.com.

Stephanie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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