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SCOTT JAGOW: Wait, don’t pour the milk into your cereal just yet. We have something to tell you. This month, Kellogg’s raising the price of cereal. Ashley Milne-Tyte explains why.
ASHLEY MILNE-TYTE: Kellogg has already tested the public’s loyalty. Back in the spring it shrank its 19-ounce box of Rice Krispies by an ounce, without shrinking the price.
Sales remained steady. So the company plans to decrease more package sizes and hike prices by two percent.
Morningstar analyst Greg Warren says Kellogg and other food companies have been contending with whopping commodity costs in the last two years. And cereal’s really feeling the crunch.
GREG WARREN: “Wheat prices have increased this year and so have sugar prices, and wheat the problem is that there’s been a drought throughout uh the Dakotas, the upper Midwest there, and that’s had an impact on the pricing.”
He says rivals like General Mills, concerned about their own margins, are likely to follow with similar price increases.
I’m Ashley Milne-Tyte for Marketplace.
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