Posted on: Thursday, September 6, 2001

Kellogg to create Disney-based cereal

Bloomberg News Service

NEW YORK — Walt Disney Co., seeking to milk more profit from Mickey Mouse and Winnie the Pooh, said Kellogg Co. will develop and sell cereal, Pop-Tarts pastries and Eggo waffles based on Disney's characters.

The breakfast products, expected in U.S. stores next year, will feature both companies' brands and be based on children's characters from Disney movies such as "The Lion King," the companies said in a statement. Terms of the multiyear accord won't be disclosed, Kellogg and Disney officials said.

The partnership comes as Disney and Kellogg try to lift sales as they grapple with a sluggish economy in the United States and worldwide. Profit fell last quarter at both Disney, the world's second-biggest media company, and at Kellogg, the maker of Frosted Flakes cereal.

"For Disney, it's a way to expand their franchise without spending any money," said Lehman Brothers Inc. analyst Stuart Linde, who has a "buy" rating on Disney shares. "Kellogg gets well-recognized (children's) characters, and who buys cereal — kids."

The agreement gives Battle Creek, Michigan-based Kellogg exclusive rights to the characters, meaning Disney can't license them to Kellogg's rivals in the breakfast-food business.

Kellogg will promote the new items, as well as existing products, through Burbank, California-based Disney's media assets, which include television, theme parks and film.

Kellogg products also will be sold at restaurants at Disney theme parks and resorts in the United States and Paris, where Kellogg will be an official sponsor, the companies said.