Forward-Looking Statements. Strong Business Model and Strategy. Earnings per Share. Sales ($ Millions) Sustainable and Dependable Performance

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2 Forward-Looking Statements This presentation contains, or incorporates by reference, forward-looking statements with projections concerning, among other things, the Company s strategy, and the Company s sales, earnings, margin, operating profit, costs and expenditures, interest expense, tax rate, capital expenditure, dividends, cash flow, debt reduction, share repurchases, costs, brand building, ROIC, working capital, growth, new products, innovation, cost reduction projects, and competitive pressures. Forward-looking statements include predictions of future results or activities and may contain the words expects, believes, should, will, will deliver, anticipates, projects, or words or phrases of similar meaning. The Company s actual results or activities may differ materially from these predictions. The Company s future results could also be affected by a variety of other factors, including competitive conditions and their impact; the effectiveness of pricing, advertising, and promotional spending programs; the success of productivity improvements and business transitions; the success of innovation and new product introductions; the recoverability of carrying amounts of goodwill and other intangibles; the availability of and interest rates on short-term financing; changes in consumer behavior and preferences; commodity and energy prices and labor costs; actual market performance of benefit plan trust investments; the levels of spending on systems initiatives, properties, business opportunities, integration of acquired businesses, and other general and administrative costs; U.S. and foreign economic conditions including interest rates, taxes and tariffs, and currency rate translations or unavailability; legal and regulatory factors; the underlying price and volatility of the Company s common stock and the impact of equitybased employee awards; business disruption or other losses from terrorist acts or political unrest; and other items. Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update them. 3 Strong Business Model and Strategy Performance Sustainable and Dependable Performance $9,614 Sales ($ Millions) $11,776 $10,907 $10,177 MSD Earnings per Share $2.36 $2.51 $2.76 $2.95-$3.00 $ E E 4

3 Confidence Managing in a difficult environment Executing a strong business plan Delivering solid results Investing for long-term performance 5 Business Model 6

4 Operating Principles Sustainable Growth (V2V) Manage For Cash Executional Excellence Remain Consumer Centric Continuous Efficiency Improvement 7 Strategy 8

5 Long-Term Growth Opportunities - China Navigable Foods 2 plants, 25 sales offices, strong distribution GDP Kellogg Sales Category Opportunity $3.3 trillion +10% Approx. $50-$60 million Biscuits $1.4 billion 10%+ growth Breakfast Health Snacks 9 Long-Term Growth Opportunities - China 10

6 Long-Term Growth Opportunities - Russia United Bakers 6 plants, 8 sales offices, strong distribution GDP $1.3 trillion, +7% Kellogg Sales Approx.$140+ million Category Opportunity Biscuits and Crackers $1.2 billion RTEC $200 million Premium Biscuits Kellogg RTEC 11 Other Long-Term Opportunities Emerging Markets RUSSIA CENTRAL AND EASTERN EUROPE ASIA TURKEY 12

7 13 Consumers Are Stressed 120 Consumer Sentiment Index* * University of Michigan Consumer Sentiment Index 14

8 Consistent Category Performance Volume, U.S. RTEC Category Growth Our business is sustainable and less sensitive Recessionary years Non-recessionary years 1970s 1980s 1990s * In each decade, all channels, Kellogg estimate. 15 In-Home Consumption Annual In-Home Meals per Person Cost Savings: Average of at home is $5 vs. $12 to eat out Belief that food at home is healthier Growing awareness of the importance of family mealtime Source: NPD Group s National Eating Trends Service 16

9 Food Spending Mix In-Home Versus Out-of-Home Food Spending Share Out-of-Home Food Purchases In-Home Food Purchases U.S. Western Europe Mexico 30% 16% 49% 51% 70% 84% Australia Canada 26% 38% 74% 62% Source: Planet Retail 17 Private Label Share is Low Category factors driving low PL share: Highly branded Responds to advertising investment Innovation driven RTEC Private Label Share vs Select Categories 19% 10% Ready-To-Eat Cereal Other Food Categories Source: Select categories, FDMx IRI August 10,

10 Cereal is a Great Value and Healthy Cost Calories Fat Bowl of Cereal with Milk $0.50 <200 1g Egg, Ham & Cheese Muffin $ g Garden Scramble $ g Chicken Biscuit $ g 19 Total Category Sales Growth Annual Estimated Growth Rate 5%-6% 3% 3% 1% YTD Kellogg estimate of all channel category growth. 20

11 21 Total Cost Pressures * Sustainable and dependable earnings per share growth 9% 6% 6% 4% E EPS Growth 10% 6% 10% 7%-9% * Percentage of total cost increases to cost of goods sold excluding volume changes, foreign exchange, acquisitions, up-front costs and cost savings productivity initiatives. 22

12 Sustainable Dependable Performance Driving Long-Term Growth Through: Pricing / Mix Brand building Innovation Productivity Up-front costs 23 New Saving Opportunities Current COGS COGS Early 2000s Factory and Food Freight ingredients ~ 40% ~ 40% Packaging and Energy ~ 20% Factory and Freight Food ingredients Packaging, Fuel, Energy 24

13 Savings Visibility Significant Savings Opportunities Supply chain projects Waste / energy projects Low cost country options Plant continuous improvement Other supply chain opportunities Overhead savings Indirect procurement Improved SAP utilization Stock option expense Return on marketing investment Working media efficiency Non-working media efficiency Promotion effectiveness 25 26

14 Marketing Accountability $700 Advertising Expense $800 $ Millions $850 $900 $1,000+ Promotion $300+ Million Advertising spending exceeds $1 billion Reflects the company s belief in the power of advertising Category highly responsive to ideas Strong brands are the foundation of a sustainable model Supports a healthy category Opportunity to look harder for efficiency and savings 27 Areas Of Focus Stronger central oversight Media Promotional costs 28

15 Benefits of Greater Central Oversight and Coordination Strategic alignment and leverage Best practice tools and process Idea transfer Production efficiencies number of executions Improved and standardized ROI and post activity discipline 29 Effective Communications Testing Protocol Engagement Average $ Strong $$$ Strong $$$ Weak Average $ Strong $$$ Weak Average $ Weak Persuasion 30

16 Media Costs and Efficiencies Working Media Stronger core media management Embrace new media opportunities Non-Working Media Production costs cost per execution Agency costs 31 Consumer Promotion Costs Changing economy drives reappraisal of constituents of added value Re-evaluate activity design and mix Enhance ROI disciplines by improving tools and resources Leverage learning globally 32

17 Summary Commitment to brand building investment Opportunities to drive efficiency and effectiveness Stronger central oversight Media Promotional costs Spending plans being reviewed to ensure no loss of pressure or effectiveness Confidence in plan 33 34

18 35 Full Year 2008 Affirming Guidance Internal Net Sales * Greater than our long-term target Internal Operating Profit * Significant investment in innovation Strong advertising Inflation headwinds Up-front cost investment +Mid SD +Mid SD Earnings Per Share Guidance Range of $2.95 to $3.00 Tax rate of approximately 31% * Internal sales and operating profit growth exclude the impact of foreign currency translation and if applicable, acquisitions, dispositions and differences in the number of shipping days. 36

19 Cash Returned to Shareholders $ Millions Dividends Share Repurchases $1,099 $1,100 $1,125 $1,150 Additional $500 mil. Share Repurchase $435 $450 $475 $500 $664 $650 $650 $ E 2009E 37 Summary 38

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