A New Tiger Tamer

By Barbara Kiviat

In the low-growth and ultracompetitive world of packaged foods, maintaining an empire can be just as difficult as building one. In 1999, Kellogg Co., the $9 billion behemoth that makes Frosted Flakes and Froot Loops--plus other consumables like Pop-Tarts, Nutri-Grain bars and Eggo waffles--lost its first-place cereal market share to rival General Mills. Carlos Gutierrez, who became CEO that year, led a massive revamp of the company that restored sales, morale and the No. 1 position. But in November, Gutierrez was poached to take over the Commerce Department, leaving board member Jim Jenness at the helm of Kellogg. The question is whether Jenness, who has never held an operational role at the company, based in Battle Creek, Mich., can successfully follow a star CEO and keep the ball rolling.

At first glance, Jenness is an odd choice. He is a career adman who worked for decades at Leo Burnett before opening his own consulting firm. But delve a little deeper, and Jenness starts to look a lot like a Kellogg man in disguise--and we're not just talking about the time at an Atlanta sales convention when he donned a Tony the Tiger suit. From his first days at Leo Burnett, he worked on the Kellogg account. By 1985, he was running all of his firm's global Kellogg business, often traveling around the world with Kellogg's marketing team or CEO.

In 2000, Gutierrez asked Jenness to join the Kellogg board, where he became one of the more vocal advocates of the turnaround strategy. Kellogg had been suffering at the hands of consumers who were flocking to cheaper cereals--or finding other things to eat altogether. The company's initial reaction was to discount, which only hurt the bottom line more. At the core of Gutierrez's fix-it strategy was a shift in financial goals: instead of focusing on the number of pounds of product sold, executives started looking at performance in terms of dollars. As a result, the company put increased emphasis on more expensive items, such as Special K Red Berries and Raisin Bran Crunch. Also, Kellogg bought Keebler Foods (to add brands like Cheez-It and play on Americans' increasing tendency to eat on the go) and made tough calls to control costs.

Going forward, Jenness will need to retain key players like COO David Mackay who were passed over for the top job. And then there is the challenge of anticipating Americans' fickle eating habits. Jenness was in the boardroom for Kellogg's reaction to the low-carb craze--cereals with a third less sugar and products like low-carb Eggos--but that trend is increasingly in the rearview mirror. What's next? General Mills is betting that broader health consciousness is here to stay and is in the process of converting its brands to whole grains. Kellogg will instead churn out a wide range of products, Jenness says, while focusing on creating more high-margin items, then funnel those profits back into more innovation. "Once you get something going, it takes tremendous discipline to keep it going," says Jenness, a marathon runner. "Food companies that can deliver year-in and year-out performance--it's a wonderful thing and a challenge." Now the challenge is all his. --By Barbara Kiviat