Kellogg's New CEO Makes $600 Million Deal for Protein-Bar Maker

(Bloomberg) -- Kellogg Co. is pursuing a health kick under its new chief executive officer.

The breakfast-cereal giant, which handed the reins to Steve Cahillane this week, agreed to buy protein-bar maker Chicago Bar Company LLC for $600 million. That company produces the RXBAR, which is made from eggs, fruit and nuts -- and lists ingredients prominently on the front of the package.

Kellogg hired Cahillane from vitamin purveyor Nature's Bounty, a sign that the maker of Frosted Flakes wants to pursue a more health-conscious strategy. The Battle Creek, Michigan-based company has been struggling to cope with broad shifts in how Americans eat and shop. Cereal sales have declined for years, and Kellogg's snack-bar business also has performed badly -- with its once-strong Special K brand losing its allure with consumers.

Large packaged-food companies also are facing concerns that a grocery price war will further batter margins, especially as Amazon.com Inc. pushes into supermarkets with its acquisition of Whole Foods. Grocery stores are increasingly turning to private-label products in a bid to draw price-conscious customers, adding another headwind to national brands.

Shares of Kellogg have dropped 15 percent this year. The stock was little changed on Friday, trading at $62.83 in New York.

With RXBAR, which launched in 2013, Kellogg is acquiring a business that appeals to younger customers and has a strong presence online, Cahillane said in a statement.

“RXBAR is perfectly positioned to perform well against future food trends,” he said.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Mark Schoifet