Letter to Shareowners

Operating efficiencies. We continued the disciplined funding of projects that will provide cost efficiencies and enhanced productivity into the future. It has become a part of the Kellogg culture for employees throughout all areas of the organization to continually assess our supply chain and network for potential improvements in simplicity, effectiveness, cost control and quality. Solutions and system enhancement projects are initiated at all levels of the company, and there is a pervasive sense of accountability for keeping our cost structure lean while continuing to produce results. We
believe this is the right way to run our business day-in, day-out, which is why we account for
these up-front investment costs within our P&L as part of the cost of doing business. This
practice avoids the need for large, one-time charges that impair earnings quality or
obscure actual performance for a particular quarter or year.

Brand building. In 2007 we continued to focus on building our brands through advertising
and consumer promotion. In fact, we spent more than $1 billion on advertising this year.
We also focused the expertise of our marketing and promotions groups throughout
the world on increasing the desirability of our brands and building consumer brand loyalty.
Advertising and consumer promotions build sustainable brands sought by consumers
and selected as household mainstays. We focused on increasing our presence with more
targeted communications at a lower cost, allowing us to invest more in our best ideas.

By continuing these significant investments, we are building a company with a solid future of dependable performance and consistent growth. Our commitment to reinvesting in the business is a core pillar of our sustainable growth business model.