KASHI CO. IS PURCHASED BY KELLOGG

BARBARA MURRAY

BATTLE CREEK, Mich. -- Cereal giant Kellogg here has bought the alternative cereal and convenience-food maker Kashi Co., La Jolla, Calif., for an undisclosed sum.

Kashi, which generated $25 million in sales in 1999, will operate as part of Kellogg's natural and functional foods division. Founded in 1984 by Philip and Gayle Tauber, Kashi grew by more than 100% in the fiscal year just ended and is expected to deliver strong double-digit growth through the rest of 2000.

"The acquisition of Kashi Co. will give Kellogg leadership in a growing segment of the ready-to-eat cereal category," said Kellogg executive vice president John Cook, president of Kellogg North America, in a prepared statement.

In November, 1999, Kellogg acquired Worthington Foods, Worthington, Ohio, maker of Morningstar Farms and Harvest Burger veggie patties.

"Kashi was founded as a nutritional/functional food in that the grains and seeds are a protein source," Philip Tauber said. "In the 80s, we were a vegetarian-food company. By the late 80s we were a grain-based specialty-food producer, and by the mid-90s, chiefly a gourmet specialty cereal maker. In the last four to five years, we've been a diet cereal. All the different cereals are made with seven grains and sesame," Tauber said.

Kashi products are available in supermarkets and natural-food stores in the United States and Canada. Brands include the original Kashi Pilaf, a cooked product suitable for breakfast, lunches and dinners; Kashi to Good Friends, which is recommended by diet programs such as Weight Watchers; Puffed Kashi; Kashi GoLEAN Cereal Slimming System (soy-based cereal, shakes and bars); Kashi Medley; Honey Puffed Kashi; Kashi Pillows; Kashi go (portable meals); and Kashi Baby & Me.

"Distribution is what we have worked on the hardest," Tauber said in an interview with SN. "We are totally direct, in the West, East and Chicago, and pockets in Florida.

"When Kashi has gained that shelf space, it's been at the expense of the big cereal companies. We have had to buy our way on to those shelves. Now, with Kellogg, we will be on the center of the aisle, a better position."