Carlos Gutierrez, Chmn. and CEO of Kellogg

This is a partial transcript from Your World with Neil Cavuto, February 27, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: Is it me or does it seem like every time you walk in the grocery store cereal makers are taking another bite out of our wallets? The industry trying to fight flat sales and some of those generic store brands. But Kellogg is pinning its hopes on a new healthy cereal called Fruit Harvest. The company serving up breakfast on Wall Street today, hoping to woo the business crowd. And that's where we find Kellogg CEO Carlos Gutierrez.

Carlos, good to have you back.

CARLOS GUTIERREZ, CHMN. & CEO, KELLOGG (K): Thank you, Neil, good to be here.

CAVUTO: Now what was this - this new fruit cereal about?

GUTIERREZ: Well, we have a new cereal called Fruit Harvest. And it is actually made with real pieces of fresh fruit. So it tastes wonderful. It tastes like fresh fruit that is healthy. And it is really targeted at the Baby Boomer crowd.

CAVUTO: Now I always wondered when you're up, because your name and company is so familiar with so many products, you've got Rice Krispies, Frosted Flakes, and on and on, do any of those sales get hurt or cannibalized when a new cereal comes on the market?

GUTIERREZ: Well, we have about a third of the market. So you can expect that some sales can come from some of our existing brands. But incrementally we do get some business. And we do take some market share or make the market grow.

CAVUTO: You know what is interesting about that market, Carlos, you are able to pass along price increases at a time when everyone says inflation is not a problem. And the only area they see it is in, let's say, the oil field, maybe the metals field. But we are actually seeing it in a lot of other commodities. And cereal, which uses a lot of them, from wheat and barley and a host of others, have seen double-digit increases. What is the deal?

GUTIERREZ: Well, you know, Neil, the only people who say that there is no inflation, at least from my standpoint, the only people who continue to say there is no inflation are the economists. But everywhere we look, we see commodities going up, we see wages going up, we see health care going up, so the idea that there is no inflation, it is a little bit of a quandary.

CAVUTO: But what's interesting about that argument is normally in the past when we have seen this sub-inflation, you know, the commodities that ultimately go into the goods, companies have not been able to pass that along. You have, how is that? Do people just need their cereal so much they don't care how much it is?

GUTIERREZ: Well, what we try to do is obviously pass it on on brands where there is some value added for the consumer, where the brand can command a higher price. But we have taken our price up. We just took a very moderate increase of 2 percent. Before that, we had taken a price increase two years ago. So we try to stay up with inflation, maybe slightly below inflation. But that is really what we are doing, passing on costs that are almost at the level of CPI.

CAVUTO: All right. We shall see, Carlos Gutierrez, Kellogg's CEO, good seeing you again.

GUTIERREZ: Always a pleasure, Neil.

CAVUTO: Thank you.

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