Global Operations

Asia Pacific

Sales in Asia Pacific were about flat for 2007 as a difficult competitive environment in Australia was offset by strong sales increases across the rest of our Asian business unit. This year's growth in Asia was driven by our existing Ready-to-eat cereal businesses in Korea, South Africa and India, as well as our new Wholesome Snacks business in Japan and Korea. Our success in these categories is based on our efforts to entice consumers with programs that combine global learnings with local expertise.

It was another strong year for Japan and Korea. Our Snacks business enjoyed its first full year in Japan, and Wholesome Snacks were launched in Korea in June 2007. Our consumer programs were well tested and grounded in strong consumer insights. We effectively engaged Asian consumers with advertising and innovations built largely off power brands like All-Bran and Special K.

Kellogg Company's growth in India was based on continued brandbuilding investment in our two core brands, Kellogg's Corn Flakes and Chocos. Innovation contributed to growth with the launch of singleserve cereal pouches.

In Australia, we faced strong competitive headwinds in both Ready-to-eat cereal and Snacks, and while total sales declined, we are encouraged by the aggressive strategy we have in place to move this business forward in 2008. We refocused our media spend and advertising efforts, and we are putting emphasis on developing a more sustainable innovation plan. Australia saw success with healthy brands such as All-Bran and Whole Grain Mini-Wheats cereal.
Snacking brands that performed well include LCM Shakes, Kellogg's Crunchy Nut
bars and the re-launch of Be Natural bars, which have quickly gained a 2.2%
share. Our Australian business is a good one for Kellogg, and we are putting
steps in place to support a strong future.