Retailers have been contacted about the recall of 2.8 million packages of Frosted Mini-Wheats Bite-Size Original and Mini-Wheats Unfrosted Bite Size, which are being pulled from store shelves. Kellogg blamed the contamination on "a faulty manufacturing part," and said no injuries had been reported.
The incident is another supply-chain glitch for the Battle Creek, Mich., food maker, which recalled a variety of its cereals in 2010 because of odd colors and odors traced to improper packaging. It is spending $100 million this year—after spending a similar amount in 2011—to fix its supply chain, which suffered deep cost cuts, leaving several manufacturing facilities overworked and too few people overseeing operations.
Kellogg said the recall would lead to a third-quarter charge of between $20 million and $30 million, but reiterated its existing full-year earnings' guidance of $3.18 to $3.30 a share.
The maker of Pop-Tarts, Rice Krispies and Eggo waffles, which reports earnings on Nov. 1, said the performance by its recently acquired Pringles snack business and changes in estimates for some nonoperating items would offset the recall expenses.
The company's breakfast offerings has been growing much slower than the snacks business, and cereal sales declined slightly in the second quarter compared with a year earlier.
Competition in the breakfast business has become fierce, in part because of expanded fast-food offerings and the faster sales growth of private-label cereals as price-conscious consumers trade down from brand names.