Global Operations

Strong performances in our Cracker business came from power brands including Club, Town House and Cheez-It, which all grew in dollar sales and measured market share. This performance was aided by innovation in Snack crackers, including Club Puffed and Cheez-It Stix. All-Bran has a hit innovation with All-Bran crackers, a strong performer rated best snack cracker by Women's Health magazine. All-Bran continues to grow in U.S. popularity.

Our Cookie business was important to our growth, with measured category share rising in 2007. This was driven by innovations such as Sandies Butter Pecan Drops and Keebler Dipping Delights. Echoing this positive progress was a strong performance from Famous Amos.

In 2007 innovation drove strong sales in Wholesome Snacks with the performance of Nutri-Grain Fruit & Nut bars, along with new flavors of Kellogg's Crunchy Nut Sweet & Salty bars. Special K and Special K Honey Nut bars were also a huge success.

Canada had solid performances from the popular All-Bran Snack Bites, Munch'ems, Nutri-Grain, and Kellogg's Crunchy Nut Sweet & Salty bars.

Our Special K brand extended its global reach with protein water and meal and snack bars, showing that "The Difference is K" for many consumers. As we look forward to 2008, we are excited about the move of Kashi snacks (bars, cookies, crackers) to the DSD distribution system.

The Pop-Tarts toaster pastry business continues to be strong and retains a category share above 86%. During 2007, we launched Pop-Tarts Printed Fun, debuting with Trivial Pursuit and Barbie editions. This exciting innovation allows consumers to enjoy edible printing on their favorite toaster pastries.

Other snacks that performed well include Kashi snack bars, which continue
to have significant repeat consumer purchases. Fruit Snacks were innovative
in the natural/ organic channel with FruitaBü Smoooshed fruit
products and in the grocery channel with Stretch Island fruit
leathers and Yogos fruit flavored snacks. Fruit
Flavored Snacks were moved into the DSD system to
provide additional sales opportunities and allow these
products to gain shelf presence.