® Sustainable Dependable Performance 200720072007 ANNUALANNUALANNUAL REPORTREPORTREPORT TMTMTM

KELLOGG COMPANY 2007 ANNUAL REPORT ® KELLOGG COMPANY • ONE KELLOGG SQUARE • BATTLE CREEK, MICHIGAN 49016 • TEL (269) 961-2000 • www.kelloggcompany.com TEL (269) 961-2000 • www.kelloggcompany.com TEL (269) 961-2000 • www.kelloggcompany.com 49016 • 49016 • 49016 • CREEK, MICHIGAN CREEK, MICHIGAN CREEK, MICHIGAN • BATTLE • BATTLE • BATTLE • ONE KELLOGG SQUARE • ONE KELLOGG SQUARE • ONE KELLOGG SQUARE KELLOGG COMPANY KELLOGG COMPANY KELLOGG COMPANY TM Kellogg Company 2007 Annual Report

Net Sales (million $) Total Shareowner Return Sustainable

11,776 20% 19% Dependable 18% 10,907 15% 16% 10,177 Performance 9,614 7% 5% 8,811 3% Vision To be the food company of choice. -1% Kellogg Mission To drive sustainable growth through the power of our people and brands S&P Packaged Foods Index -8% 03 04 05 06 07 03 04 05 06 07 by better serving the needs of our consumers, customers and communities. Net sales increased again For the seventh consecutive year, in 2007, the seventh Kellogg Company’s total return to With 2007 sales of nearly $12 billion, Kellogg Company is the world’s leading producer of cereal consecutive year of growth. shareowners exceeded that of the and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal S&P Packaged Food Index. bars, fruit-flavored snacks, frozen waffles, and veggie foods. The Company’s brands include Kellogg’s®, Keebler ®, Pop-Tarts®, Eggo®, Cheez-It ®, Nutri-Grain®, Rice Krispies ®, Morningstar Farms ®, Famous Amos ®, Special K ®, Stretch Island ®, All-Bran ®, Frosted Mini-Wheats®, Club ® and Kashi ®. Kellogg products Cash Flow (a) (million $) Dividends ($ per share) Net Earnings Per Share ($) (diluted) Operating Profit (million $) are manufactured in 18 countries and marketed in more than 180 countries around the world.

1,868 1,031 1.20 2.76 1,750 1,766 Table of Contents 1.14 1,681 950 957 2.51 924 1.06 Letter to Shareowners 2 2.36 1.01 1.01 1,544 Global Operations 8 2.14 769

1.92 Sustainable Dependable Global Brands 14 Our Nutrition Heritage 15

03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 Our People 16 Dividends per share have Earnings per share of $2.76 Operating profit increased Including over $60 million of Environmental Sustainability 18 increased 19% over the past were 10% higher than 2006. despite significant cost voluntary pension contributions, 3 years. inflation and continued cash flow for 2007 remained Corporate Social Responsibility 20 reinvestment into our business. strong at $1.03 billion. Corporate Officers 22 Board of Directors 23 Financial Highlights Manufacturing Locations and Brands 24 (dollars in millions, except per share data) 2007 Change 2006 Change 2005 Change Annual Report on Form 10-K Net sales $11,776 8% $10,907 7% $10,177 6% Gross profit as a % of net sales 44.0% -0.2 pts 44.2% -0.7 pts 44.9% - Operating profit 1,868 6% 1,766 1% 1,750 4% Net earnings 1,103 10% 1,004 2% 980 10% Net earnings per share Basic 2.79 10% 2.53 6% 2.38 10% Diluted 2.76 10% 2.51 6% (b) 2.36 10% Cash flow (net cash provided by operating 1,031 8% 957 24% 769 -19% activities, reduced by capital expenditure) (a) Dividends per share $1.20 5% $1.14 8% $1.06 5%

(a) Cash flow is defined as net cash provided by operating activities, reduced by capital expenditures. The Company uses this non-GAAP financial measure to focus management and investors on the amount of cash available for debt repayment, dividend distributions, acquisition opportunities and share repurchases. Refer to Management’s Discussion and Analysis within Form 10-K for reconciliation to the comparable GAAP measure.

(b) Comparable 2006 earnings per share growth of 11% excludes $65 million ($42 million after tax or $.11 per share) of costs attributable to the Company’s adoption of a new accounting standard that required the expensing of stock options. TM At Kellogg we have an unwavering focus on the long-term health of our business.

Letter to Shareowners

Thanks to the hard work and passion of Kellogg Kellogg employees achieved these solid results Operating efficiencies. We continued the disciplined Brand building. In 2007 we continued to focus on Company employees around the world, 2007 was despite being faced with the most difficult operating funding of projects that will provide cost efficiencies building our brands through advertising and consumer another year of continued sales growth, strong environment our industry has experienced in many and enhanced productivity into the future. It has promotion. In fact, we spent more than $1 billion on financial results and increased shareowner return. years. World commodity prices for many of our raw become a part of the Kellogg culture for employees advertising this year. We also focused the expertise The growth was broad-based across categories and materials spiked to all-time highs. Fuel and energy throughout all areas of the organization to of our marketing and promotions groups geographies. Here are some highlights: inflation was dramatic, but the cost pressure did not continually assess our supply chain and throughout the world on increasing the ales • et S Exp shake the solid foundation upon which we have network for potential improvements l N an desirability of our brands and building a d rn G • Net sales increased 8% to $11.8 billion. built our business – a business model that is simple, in simplicity, effectiveness, cost e ro consumer brand loyalty. Advertising t s In s resilient and designed to deliver sustainable growth. control and quality. Solutions and and consumer promotions build • Internal net sales, which excludes the effects of w P o r r o Kellogg people rose to meet this year’s challenges system enhancement projects f sustainable brands sought by currency exchange rates, increased more than 5%. G i t

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David Mackay (Left) President Chief Executive Officer

Jim Jenness (Right) Chairman of the Board We take a global approach to innovation, expanding and adjusting our portfolio to meet consumer needs around the world.

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Letter to Shareowners

Innovation. Kellogg drives development and visibility Realistic targets. Every day, we manage our business expenditures. In 2007 this disciplined financial A clear and focused strategy. The focal points for of a robust pipeline of new products. In 2007 we in a way that supports its dependable, sustainable strategy again enabled continued and rigorous building our business have remained constant over continued our commitment to this key growth driver performance. Our long-term targets of low single-digit review of costs while, importantly, funding the the past six years: by increasing our innovation. We take a global net sales growth, mid single-digit operating profit investments that will grow and sustain our business. approach to innovation, expanding and adjusting our growth, and high single-digit EPS growth encourage • Grow our cereal business portfolio to meet consumer needs around the world. Kellogg people to prioritize their activities and make Flexibility. Our strong cash flow allows us to actively • Expand our snacks business More than 270 new products or adaptations of other good decisions that support the long-term health make decisions based on what is best for sustaining successful products were introduced in 2007 alone of our business – not simply hit short-term, our business and for building shareowner return. • Pursue selected growth opportunities and we generated nearly $2 billion, about unsustainable goals. Realistic targets drive In addition, our cash flow gave us the flexibility 17% of sales, from products launched the behaviors and decisions that most to repurchase 12.4 million shares of Kellogg We remain committed to this t Inc simple strategy because it ow Ne ome within the past three years. These Gr • effectively deliver sustainable growth. Company stock, increase the quarterly dividend • M C in works. The effectiveness of results exceeded our long-term OI im It’s the right way to run our business paid to shareowners and acquire companies in key R iz  e e our strategy is proven, and  target of 15% of net sales from s and is responsible management of geographies or product lines that fit with our strategy. a C e o our results in 2007 and r r innovation and helped drive c e our shareowners’ interests.

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u x t p i e d provide additional sales and/or n management, our cash flow in 2007 improved economics. This focus was over $1 billion, delivering again on continually improves our already-strong our Manage for Cash operating principle. portfolio by improving mix and producing Combined with our focused business strategy, higher returns. Strong innovation, backed with our disciplined financial strategy creates a solid solid marketing support, will drive top-line growth platform for sustaining cash flow for years to come. and keep our categories vital. Our commitment to investing in innovation and research and development Disciplined expenditure. Following the Manage for is another core pillar of our sustainable growth Cash principle keeps Kellogg people around the business model. In line with this, we are expanding world focused on continually exploring strategies the facilities and capabilities of our state-of-the-art for decreasing the amount of cash committed to global research and development center, the W. K. working capital. It is part of the way we manage Kellogg Institute for Food and Nutrition Research. This our business every day. Furthermore, we are is one way we will continue to drive top-line growth. committed to carefully planning and prioritizing the amount of cash we spend each year on capital Our business model and our focused strategy served us well in 2007.

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Letter to Shareowners

Some of our strategic growth leverage Kellogg Company’s Entering 2008 with momentum. With our success sales, grow operating profit, and continue to reinvest opportunities will show brand-building and innovation and continued investments in 2007, we enter 2008 in our business for future growth. In short, while tremendous potential right expertise, our understanding with confidence. Commodity and energy prices delivering strong growth in 2007, Kellogg people away, while others will take of the biscuit and ready-to-eat are projected to remain high and volatile, and around the world have set the stage for another year time and further investment cereal categories, with UB’s competition in the marketplace will likely intensify. of strong performance in 2008. to grow. Because we manage existing manufacturing, sales The year ahead will no doubt be challenging. our business for long-term and distribution infrastructure However, because our business model works, we are Finally, we thank our shareowners for valuing our performance with realistic to drive continued strong confident in our ability to deliver strong results yet long-term perspective on growth and investment. targets, we have the flexibility growth of this business. We again in 2008. We are confident we will grow net We are steadfast in our commitment to delivering to make strategic investments have stringent criteria for sustainable, dependable performance in the future. that strengthen the health of our assessing growth opportunities, and this investment company. Late in 2007 we made acquisitions relating was selected for its ability to create value in the long  to Bear Naked Inc., maker of all-natural granola and term and contribute to the sustainable, dependable  trail mixes, and Gardenburger brand. growth of Kellogg Company.

Our emerging markets growth strategy moved forward 2007 summary. Our business model and our significantly in 2007. We grew our ready-to-eat cereal focused strategy served us well in 2007. Throughout David Mackay Jim Jenness market share in Turkey to 22%. Before our 2006 joint the year, Kellogg people around the world President Chairman of the Board venture with local Turkish food distributor, Ülker, our successfully managed difficult external challenges Chief Executive Officer market share was just 2%. We are actively exploring – unprecedented commodity price increases and other international alternatives and have identified continued tough competition – and delivered another Eastern Europe and Asia as areas where we can year of strong earnings and increased shareowner enter developing markets with immediate scale and value. Each quarter of 2007, Kellogg Company was distribution capabilities. faced with higher input costs, and each quarter we were able to grow our business and increase our Early in 2008 we acquired The United Bakers investment in cost-efficiency projects. We raised Group (UB), one of Russia’s largest cracker, cookie our 2007 annual earnings guidance twice during and breakfast cereal producers. UB’s products, the year and ultimately delivered solid results. This marketed primarily under the Yantar and Lyubyatovo performance speaks to the power of our business brands, are a good strategic fit with the Kellogg model, and we remained focused on it despite the portfolio and expand our presence in international added challenges. In 2007, we continued to reinvest snacks and cereal markets. into our businesses through increased brand building and additional cost-saving projects. We continued to This acquisition is a long-term investment that invest wisely in key growth opportunities in strategic provides Kellogg with a tremendous platform for categories and geographies. Our innovation pipeline growth in a large and fast-growing market. We will continues to be substantial and dynamic. By continuing to focus on nutrition, taste and convenience, Kellogg innovation really resonated with consumers.

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Keebler Fudge Shoppe Fudge measured category share rising to 2008, we are excited about Stripes and Chips Deluxe. We in 2007. This was driven by the move of Kashi snacks (bars, Global Operations built upon these successes in innovations such as Sandies Butter cookies, crackers) to the DSD 2007 by introducing Right Bites Pecan Drops and Keebler Dipping distribution system. North America Fudge Shoppe Grasshopper and Delights. Echoing this positive Ready-to-eat cereal. In 2007 we Mini-Wheats Strawberry and Rice assortment packs. progress was a strong performance The Pop-Tarts toaster pastry business saw sustained growth in our North Krispies Vanilla cereals, added to the from Famous Amos. continues to be strong and retains a American Retail Cereal business. strong sales growth. Additionally, Strong performances in our Cracker category share above 86%. During Plus, measured channel share grew our largest cereal brand in the Club business came from power brands In 2007 innovation drove strong 2007, we launched Pop-Tarts for the full year to 34.1%, making channel, Special K, experienced including Club, Town House and sales in Wholesome Snacks with the Printed Fun, debuting with Trivial this the seventh consecutive year broad growth. Cheez-It, which all grew in dollar performance of Nutri-Grain Fruit & Pursuit and Barbie editions. of share growth in the U.S. retail sales and measured market share. Nut bars, along with new flavors of This exciting innovation allows ready-to-eat cereal category. Snacks. North American Retail This performance was aided by Kellogg’s Crunchy Nut Sweet & Salty consumers to enjoy edible printing Snacks had a very good 2007. Our innovation in Snack crackers, bars. Special K and Special K Honey on their favorite toaster pastries. By continuing to focus on nutrition, business, consisting of cookies, including Club Puffed and Cheez-It Nut bars were also a huge success. taste and convenience, Kellogg crackers, wholesome snacks, Stix. All-Bran has a hit innovation Other snacks that performed well innovation really resonated with fruit-flavored snacks and toaster All-Bran continues to be one of with All-Bran crackers, a strong Canada had solid performances include Kashi snack bars, which  consumers. Our innovations, pastries, lapped strong 2-year  our strongest global brands, and performer rated best snack cracker from the popular All-Bran Snack continue to have significant repeat including Special K Chocolatey growth rates by building on 11% in we launched All-Bran Strawberry by Women’s Health magazine. Bites, Munch’ems, Nutri-Grain, consumer purchases. Fruit Snacks Delight, proved a big success both 2006 and 7% in 2005. We posted Medley cereal in the U.S. in January All-Bran continues to grow in and Kellogg’s Crunchy Nut Sweet & were innovative in the natural/ at breakfast and as an evening 7% internal sales growth to finish 2008. Kashi had another successful U.S. popularity. Salty bars. organic channel with FruitaBü snack. Plus, perennial favorites the year. year and added to its popular line Smoooshed fruit products and in Raisin Bran Crunch cereal and with Kashi GoLean Heart to Heart Our Cookie business Our Special K brand extended its the grocery channel with Stretch Special K cereals responded well We’re able to maintain sustainable Blueberry cereal and Kashi GoLean was important to our global reach with protein water and Island fruit leathers and Yogos fruit to our advertising strategies. growth by building existing brands Honey Almond Crunch cereal, growth, with meal and snack bars, showing that flavored snacks. Fruit Flavored and targeting innovation by utilizing which contains DHA omega-3. “The Difference Snacks were moved into the DSD Rice Krispies, one of our oldest our DSD (Direct Store Delivery) is K” for many system to provide additional sales brands, also experienced a strong distribution system. Recently, the Throughout the U.S., consumers consumers. As opportunities and allow these year, thanks to the introduction of Advantage Group Performance are having “milk-sippin’ fun” we look forward products to gain shelf presence. Rice Krispies with Real Strawberries Monitor rated the Kellogg DSD with new Kellogg’s Cereal Straws and our “Childhood is Calling” system #1 among all snack – launched with Cocoa Krispies and advertising campaign. Great food companies. Froot Loops flavors. innovation continued in kid’s cereals with Froot Loops Smoothie We increased advertising at Canada’s cereal business had a and Corn Pops Peanut Butter, a double-digit rate and had a strong year. New products such as which had new advertising particularly good innovation year Special K Fruit & Yogurt, campaigns. Each of these with portion-controlled packs. In All-Bran Guardian, Frosted innovations lifted base brand 2006 we introduced 100 Calorie sales as well. Right Bites packs in Cheez-It, Europe’s growth was broad-based across countries and categories – driven by strong commercial programs, category-leading product innovations and a double-digit increase in advertising investment. Europe Kellogg Europe turned in another Adult consumption of cereal Our Snacks business in these TM solid year in 2007. In what continues to expand across markets is still young and continues continues to be a challenging the region. Optivita, our heart to expand rapidly, helped by operating environment, overall health cereal, was launched, and increased availability and inclusion sales increased mid single-digits, combined with market leader in major cereal programs. lapping similar growth in 2006. Special K, continued to drive our Europe’s growth was broad-based adult business. Performance in France, our second Global Operations across countries and categories largest European market, was also – driven by strong commercial Southern Europe reported the positive with mid single-digit growth programs, category-leading product strongest growth across the area, in cereal. Frozen and Specialty Channels. Specialty Channels. Growth in our innovations and a double-digit with high single-digit sales increases Solid performance came from Specialty Channels business was increase in advertising investment. in both Italy and Spain. With per Frozen and Specialty Channels, driven by Food Away From Home, capita cereal consumption in with sales rising 6% for the year, as well as Convenience and Our two most developed markets, these markets below the building on 8% growth in 2006 Drug channels. U.K. and Ireland, posted mid levels of Northern Europe, further and 2005. single-digit growth in cereal and growth potential exists. Success continued with our even stronger growth in snacks. Frozen. In 2007 sales in our Frozen strategy to leverage key equities We increased our share in a U.K. ready-to-eat cereal catagory that business grew, driven by a double- to dinner. With our acquisition of for channel relevance. This was continued to show strong growth. digit increase in advertising from Gardenburger veggie foods, we clearly illustrated in our successful We also grew share in the cereal 2006. Our leading market share will be producing more exciting launch of Jump-Starts breakfast kits bar category in both markets. in frozen breakfast products grew innovations. for the K-12 school segment. This 10 because of strong innovation in convenient breakfast alternative Programs like our Special K 11 “Drop a Jeans Size” proved very Eggo Blueberry pancakes, Eggo With “7 whole grains on a mission,” for public schools is designed to effective in engaging consumers. waffles and Eggo Stuffed French Kashi continues to provide provide students access to a And there was strong response to Toaster Sticks. In addition, our additional growth opportunities quality breakfast. cereal innovations like Special K healthy waffle segment had solid with its popular frozen line. Kashi Sustain and Coco Pops Creations. growth with the launch of waffles are off to a good start, and And finally, the success of our Special K Mini Breaks snacks were Nutri-Grain Cinnamon waffles and the new frozen entrees and pizzas Convenience/Drug business introduced in the second half of Special K Red Berries waffles. have performed above expectations. continued from leveraging core the year to a strong start, and both We saw a strong response to three equities, such as the introduction Rice Krispies Squares and Our Veggie Food business, under additional entrees and introduced of single-serve Keebler Soft Batch Rice Krispies cereal enjoyed the Morningstar Farms brand, three new pizza varieties in 2007. cookies for convenience stores. continues to perform well. In This, along with broad wins tremendous growth, driven by engaging advertising campaigns. 2007 we added to the popular Another strength is our Club in the Drug channel through Morningstar Farms sausage patties business, which continued to efficient participation in key with the introduction of Breakfast successfully build the Kashi brand promotion periods such as back Starters and Breakfast Bites. Our franchise. The launches of Kashi to school and New Year’s consumers continue to “see veggies frozen entrees and pizzas were key resolution, also contributed to differently” with creative new to the brand’s continued success our continued success. choices like Mushroom Mozzarella in Club. Veggie Bites. Consumers can now enjoy meatless diet choices with our product line from breakfast Our Mexico business has now grown to be our third largest business, behind the U.S. and U.K.

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Global Operations Latin America Asia Pacific Kellogg Latin America continued Colombia, Ecuador and Venezuela We continued to strengthen the Sales in Asia Pacific were about flat and Wholesome Snacks were and while total sales declined, we to grow and showed strong was the result of strong growth relevance of the cereal category for 2007 as a difficult competitive launched in Korea in June 2007. are encouraged by the aggressive performance through 2007. Our in advertising investment and the with investments in innovation of environment in Australia was offset Our consumer programs were strategy we have in place to move Mexico business has now grown rollout of our Snacks portfolio. popular brands like Special K and by strong sales increases across well tested and grounded in strong this business forward in 2008. We to be our third largest business, Choco Krispis. the rest of our Asian business unit. consumer insights. We effectively refocused our media spend and behind the U.S. and U.K. Double- Throughout Latin America, our This year’s growth in Asia was engaged Asian consumers with advertising efforts, and we are digit sales growth in Brazil, results were driven by strong With programs like the Special K driven by our existing Ready-to-eat advertising and innovations built putting emphasis on developing a performance of Challenge, we were able to attract cereal businesses in Korea, South largely off power brands like more sustainable innovation plan. existing brands like and retain new consumers. We Africa and India, as well as our All-Bran and Special K. Australia saw success with healthy Zucaritas (Frosted continue to build the Special K new Wholesome Snacks business brands such as All-Bran and Whole Flakes) and brand, including ready-to-eat cereal, in Japan and Korea. Our success Kellogg Company’s growth in India Grain Mini-Wheats cereal. Snacking All-Bran. as well as snack products such as in these categories is based on our was based on continued brand- brands that performed well include 12 Special K Delicia (Bliss) Bar. efforts to entice consumers with building investment in our two core LCM Shakes, Kellogg’s Crunchy Nut 13 programs that combine global brands, Kellogg’s Corn Flakes and bars and the re-launch of Be Natural We expanded our presence learnings with local expertise. Chocos. Innovation contributed to bars, which have quickly gained a in Mexico with the growth of growth with the launch of single- 2.2% share. Our Australian business healthy drinks (All-Bran ready- It was another strong year for Japan serve cereal pouches. is a good one for Kellogg, and we to-drink). Sales for this business and Korea. Our Snacks business are putting steps in place to support were significantly above our enjoyed its first full year in Japan, In Australia, we faced strong a strong future. expectations, driven by excellent competitive headwinds in both consumer response. Ready-to-eat cereal and Snacks, For more than a century, our company has built its success around a portfolio of powerful global brands that continue to be as relevant to our consumers’ needs today as when they were Our Nutrition Heritage first created. For more than 100 years, Kellogg around the world. Products that has built a legacy of leadership in don’t meet the criteria will either health and nutrition. We believe be reformulated or they will not TM that balance − or “calories in, be marketed to children under 12 calories out” − must remain the years of age. The Nutrient Criteria central tenet of achieving weight will also guide future innovation management and a healthy and product development. Over lifestyle. We have a long-standing time, the company will work toward Sustainable Dependable Global Brands commitment to help consumers providing consumers with even successfully manage both sides of more product choices featuring that equation through our products, enhanced nutritional value. For more than a century, our ability to adjust to and capitalize areas of global commonality and packaging, promotions, community To help consumers make informed company has built its success on changing consumer dynamics drive scale to our global brand efforts, sponsorships and nutrition- food decisions, Kellogg rolled out For more information, please visit around a portfolio of powerful and trends, creating new growth initiatives in innovation, promotion education initiatives. front-of-pack labeling on ready-to- www.kelloggcompany.com and global brands that continue to opportunities and momentum. and consumer ideas. Recognizing eat cereal packages in a number www.kelloggnutrition.com. be as relevant to our consumers’ the differences that are so often Kellogg offers consumers a wide of markets, including Europe, needs today as when they were Dependable. Through our Global required at a local level allows variety of choices, including Australia, North America, Mexico first created. Key to their success Marketing Leadership Team (GMLT), Kellogg Company to execute low-fat, low-salt, reduced-calorie, and Korea. The easy-to-use front-of- has been anchoring our brands we have the ability to ensure the marketing programs effectively. reduced-sugar, nutrient-enriched pack summary gives a snapshot of to global needs, continuing to transfer of winning ideas and and portion-control options. how a food fits into an individual’s build the relationship between best practices around the globe. Through a portfolio of powerful We continually launch product daily diet and complements existing our brands and consumers This allows us to quickly leverage brands, strong marketing leadership innovations to meet consumers’ nutrition labels. This system was first through strong marketing and success across the Kellogg world and a culture focused around the health needs, such as digestive launched by Kellogg in Europe and 14 innovation, and leveraging our and maximize the strength of our power of ideas, we have been able health, heart health and shape Australia, where it has been well 15 Global Marketing Network to plans. The GMLT meets to share to create a platform of sustainable, management. We have also received and adopted by the food share ideas and maximize global best practices and insight around dependable growth across the reduced or removed trans industry and some retailers. growth opportunities. our innovation pipeline, in-market Kellogg world. fatty acids from almost all of performance and advertising our products. In June 2007, Kellogg announced Sustainable. Special K, All-Bran campaigns and promotional a global commitment to adjusting and Rice Krispies are just three programs that are producing strong We believe that educating how and what we market to brands in our global portfolio that market results. consumers empowers them to children under 12. We established illustrate the continuing relevance make good nutritional choices. a global nutrient standard (Nutrient of Kellogg. The international Performance. By taking a cue from We provide comprehensive Criteria) based on a broad review popularity of these brands the mantra “Think Globally, Act nutrition information, nutrition of scientific and government demonstrates Kellogg Company’s Locally,” we are able to look for education and healthy-lifestyle reports. Kellogg will apply the messages on millions of packages Nutrient Criteria to all of our as well as online. products marketed to children

Kellogg Global Nutrient Criteria (per serving)

• ≤ 200 calories • ≤ 2 grams of saturated fat • labeled 0 grams of trans fat • ≤ 230 milligrams of sodium • ≤ 12 grams of sugar (as labeled) Our company was founded on a commitment to people and doing business in a responsible manner. This commitment continues to guide us today and serves as the foundation of our efforts to drive sustainable business results. TM

Our People

Kellogg Company’s focus on allows efficient and accurate our business leaders and employees Our company was founded on a people builds on the investment exchange of the information we are active participants in creating commitment to people and doing in people which our founder, need to do business. a work environment that values business in a responsible manner. W. K. Kellogg, dedicated himself differences in thought, culture, This commitment continues to to more than 100 years ago. Culture-Guided Results. Our experiences and background. guide us today and serves as the culture is the foundation of Our employee affinity groups foundation of our efforts to drive everything we do, and our K Values – Kellogg Multinational Employee sustainable business results. continually remind us that how we Resource Group (K-MERG), Kellogg generate business results is just as African American Resource Group

An employer of choice: important as the results themselves. (KAARG), Hispanic Resource Hispanic Business – Kellogg in Top 60 Companies for Hispanics An important part of maintaining Group (HOLA), Women of Kellogg DiversityInc – Kellogg in Top 25 Noteworthy Companies for Diversity an effective culture is gathering (WOK) and Young Professionals (YP) 16 LatinaStyle – Kellogg in Top 50 Companies for Latinas feedback from our employees on a – promote cultural and generational 17 Black Enterprise – Kellogg in 40 Best Companies for Diversity regular basis. awareness and provide developmental In 2007 we conducted our third in opportunities and ever before. If Kellogg is to fulfill its future. Our leadership programs a series of culture surveys designed professional vision to be the food company of ensure a deep pool of management to gauge employee perceptions mentoring.

choice, we must also strive to be an talent throughout the organization of our work environment, Three important factors make employer of choice. – so that we’re prepared not only advancement opportunities and Kellogg Company great: our for filling key positions in the near ability to do their work. Results people, their passion for excellence Our people programs are designed future, but are creating the next of this survey will help us ensure

and their pride in our products. to attract and hire the best people. generation of Kellogg leaders. We that our people have the necessary Kellogg Company’s almost Yet, hiring talented individuals clearly define what is expected from information and opportunities to 26,500 employees are talented isn’t enough. To retain our a Kellogg leader and are focused contribute their best work and and dedicated to helping the employees and make sure they are on building each leader’s ability to build satisfying careers. company achieve its business prepared for current and future engage and develop our employees results. Our Human Resources roles, we’ve implemented programs while driving business results. Kellogg has long emphasized strategy focuses on making certain that help employees navigate the having a diverse and inclusive that Kellogg has the strongest onboarding process, build their Creating Synergy and Efficiency. culture that reflects our consumer possible teams around the world skill sets, identify career growth By sharing ideas and best practices base. The company’s focus on to help us achieve our vision of opportunities, and become effective around the Kellogg world, we’re diversity and inclusion ensures that becoming the food company people managers. able to create synergy among our of choice. business units. We’re looking at Kellogg Leaders, Today and technological solutions to simplify, A Talent Powerhouse. The Tomorrow. Strong, effective standardize and automate many competition for qualified leaders are paramount to Kellogg of our processes, which will ensure individuals is more intense than Company’s success now and in the that our global infrastructure This year we’ve implemented several innovative campaigns to promote the restoration of natural resources.

annually. For example, 25 million Water Usage. We are also doing generations of students and teachers pounds of paper packaging have our part to minimize water use. with healthy nutrition options TM been eliminated through a waste Our Queretaro, Mexico, plant and environmental education reduction initiative associated was given the highest award with opportunities. The brand kicked off with bulk material shipping. By a “Recognition to Environmental the partnership with the Fruit Tree taking out the board on Special K Excellence,” which will be Planting Foundation with three bars, we’ve eliminated 4 million awarded to the company from orchard plantings in 2007 and plans pounds of packaging, and liner President Calderon. The plant to fund the planting of 25 to 30 Environmental Sustainability reductions in 2006 eliminated reuses 57 million gallons of orchards by the end of 2008. more than 3 million pounds of water every year. And earlier this plastic packaging. year, washing equipment was We recently formed a cross- Our Environmental Commitment. Focusing on efficiency redesigned to reduce water use functional Environmental Kellogg Company is committed improvements in our operations We also look to optimize the use by 7 million gallons. Stewardship Council to further to minimizing the environmental has helped reduce our energy of materials that are recyclable drive our sustainability efforts. impact of our businesses consumption, thereby reducing our and contain significant recycled Where We Are Going. In 2007 we Beginning in 2008 we are while being socially and GHG emissions. Our energy use content. In fact, the first box of implemented several innovative committed to providing greater economically responsible. per pound of product produced has Kellogg’s Corn Flakes came off the campaigns to promote the transparency to our shareowners declined by more than 15% during line packaged in 100% recycled restoration of natural resources. on the environmental impact of At Kellogg we strive to conduct the past 10 years. paperboard, and Kellogg has used our business. Although we have and grow our business in a manner recycled board for most of our In Ireland, Kellogg’s Corn Flakes many things to be proud of, we that protects the environment and Our Global Logistics team products since 1906 – we are one “Give the Gift of Trees” campaign realize we are just beginning demonstrates good stewardship aggressively searches for ways to of the largest users of recycled has donated more than this challenging journey toward of the world’s natural resources. deliver more products with fewer paperboard in the U.S. 45,000 trees to the charity Bóthar. becoming an environmentally 18 We work toward continual vehicles and less energy use. Case- To see a rolling ticker that provides sustainable company. 19 improvement through the size adjustments, use of intermodal Waste Management. We are regular updates on the number development of specific programs and reduce greenhouse gas (GHG) transport, and product sourcing always looking for ways to improve of trees donated, please visit www. Please visit www.kelloggcompany.com that address the environmental emissions. The EPA works closely choices all contribute to our our waste management programs kelloggs.ie/whatson/makealifeshine. for more information and cost and impact of our activities, with each company in the program saving thousands of gallons of fuel practicing the 3Rs: Reduce, The site also provides more updates on our environmental products and services. These to review its GHG Inventory and annually. For example, 8 million Reuse, Recycle. information about the positive sustainability efforts. programs include a commitment Inventory Management Plan and truck miles have been eliminated impact this project will have to use resources efficiently, provide guidance in setting a GHG by making a case-size change for Our manufacturing facilities on communities in Africa. minimize waste, and promote emissions reduction goal. Kellogg several cereal products. In addition, recycle more than 80% of waste resource conservation. Company’s primary source of GHG our fleet vehicles automatically shut generated. At two of our cereal In the U.S., Stretch Island emissions is the use of energy at our down after five minutes of idle time. plants, we implemented a program Fruit Co., makers of FruitaBü fruit Energy Improvements and Climate manufacturing facilities and in our that diverts an additional 1,000 snacks, is helping fund the efforts of Change. In 2006 we implemented transportation fleet. Packaging Efficiency. Our tons of waste per year from the Fruit Tree Planting Foundation. a global energy-management packaging serves many important landfills to recycling. Our Bremen, Orchards will be donated to public program to promote conservation, functions, such as protecting our Germany, plant sends zero waste to schools in low-income areas manage energy use, and investigate products, maintaining freshness and landfill, and our London, Ontario, throughout the U.S. to provide energy savings opportunities, providing a means to communicate Canada, plant is not far behind, including alternative fuels and to consumers. with more than 95% of the waste renewable energy. generated onsite sent for recycling. Using advances in technology, our In the U.S., Kellogg joined the packaging team has proactively Environmental Protection Agency’s minimized packaging, reduced (EPA) Climate Leaders program, liner weight and paperboard a voluntary government-industry quantity by millions of pounds partnership designed to measure

Donna Banks Senior Vice President Global Innovation and Chief Environmental Officer TM We partner with organizations to provide funds, food and other resources to help improve people’s lives.

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Corporate Social Responsibility As part of Kellogg’s support Opportunities for Minorities and partnership with the organization in in Mexico, Kellogg Mexico Women. Kellogg values 2005 as part of its Earn Your Stripes participated in a food collection individuals for their diverse initiative. The national partnership As a responsible corporate citizen, Kellogg’s Swim Active. An organized by the Mexican backgrounds, cultures and encourages girls ages 8 to 13 to be Kellogg Company invests in the innovative Kellogg program is Association of Food Banks (AMBA). experiences. We support more active, eat right and live a communities where we have increasing access to swimming The national collection was minorities and women through balanced and healthy lifestyle. significant operations. We partner facilities for youngsters in the called “X un México sin hambre” organizations and programs that with organizations to provide United Kingdom. Kellogg’s Swim (For a Mexico without hunger). encourage excellence and provide Building Stronger Communities. TM funds, food and other resources Active, a three-year partnership Employees from Kellogg Mexico, opportunities. These include: We strive to make a difference in to help improve people’s lives. In between Kellogg and the Amateur together with their friends and the communities where we operate. keeping with our company’s more Swimming Association, sets up families and Kellogg suppliers, NAACP Law Fellows Program. We support organizations that than 100-year heritage of nutrition projects that provide primary school collected more than 140,000 Through the NAACP Law Fellows work to strengthen communities leadership, our most important children and their families with pounds of food for the Food Bank Program, Kellogg supports summer by addressing economic and corporate-giving priority is nutrition easier access to swimming facilities. in Queretaro. fellowships for students who have social development issues. education and physical fitness. completed at least one year of law 20 In addition, we support programs America’s Second Harvest. Kellogg Joint Aid Management. Kellogg school to work at the NAACP’s United Way. Kellogg is a long- 21 that improve opportunities for has an extensive partnership is partnering with South Africa- National Legal Department. The time supporter of United Way. minorities and women and build Company’s donation will help the with America’s Second Harvest, based Joint Aid Management law fellows work with civil rights In 2007 Kellogg pledged a total stronger communities. Since YMCA improve the way it works the nation’s largest charitable (JAM) to develop Health Is Vital, a attorneys on issues such as criminal of $4.65 million to campaigns 2003, Kellogg has contributed with health seekers and their hunger-relief organization. Each nutritional intervention program justice, education, housing, voting that will benefit 26 communities. more than $40 million in cash families, and with school-age youth year Kellogg donates nearly for people living with HIV/AIDS. rights and environmental justice. In addition, more than 1,500 and $120 million in products in YMCA child-care programs. $25 million of food products, This program will provide a stable volunteers participated in service to charitable groups around which are distributed through the supply of food to strengthen the Girls on the Run®. Kellogg supports projects as part of Days of Caring. the world. In addition, 24 YMCAs received organization’s network of more than bodies of those on anti-retroviral Girls on the Run in its efforts to United Way recently recognized grants to provide physical activity 200 food banks and food-rescue treatment, while also increasing the provide experiential learning Kellogg Company with the Spirit Nutrition Education and Physical programs for underserved youth organizations. America’s Second effectiveness of the treatment. programs that help enhance of America Corporate Community Fitness. As a company that in communities where Kellogg Harvest recognized Kellogg with the self-esteem in young girls. Kellogg’s Investment Summit Award. produces food products and operates. The Kellogg’s Opportunity Group Volunteer Service of the Year Frosted Flakes launched a three-year promotes eating well and healthy to Play grants helped fund activities award in 2007. living, our commitment to nutrition from basketball to wall climbing in education and physical fitness 11 U.S. states. The Global FoodBanking includes providing food donations Network™. In 2007 Kellogg became and funds to partner organizations. Action for Healthy Kids. Kellogg a founding partner of The Global Organizations and initiatives we partners with Action for Healthy FoodBanking Network. Funds support include: Kids to decrease the incidence of provided by Kellogg will further obesity in children by improving support our commitment to hunger- YMCA of the USA. Kellogg nutrition and increasing physical relief efforts around the world and Company has contributed funds activity in schools. Kellogg has will particularly assist with food- to support Activate America, the provided grants to help implement banking development projects in YMCA’s response to the nation’s mandated wellness policies at Mexico, Guatemala and growing health crisis. Kellogg public schools in 11 U.S. states. South Africa. Corporate Officers

Celeste A. Clark* Gary H. Pilnick* Margaret R. Bath* Senior Vice President Senior Vice President Vice President Global Nutrition and General Counsel Research, Quality and Corporate Affairs and Secretary Technology Corporate Development Bradford J. Davidson* Ronald L. Dissinger Senior Vice President Juan Pablo Villalobos* Vice President President, U.S. Snacks Senior Vice President Chief Financial Officer, Executive Vice President, Kellogg North America Timothy P. Mobsby* Kellogg International Elisabeth Fleuriot Senior Vice President President, Kellogg James M. Jenness* Donna J. Banks* Latin America Vice President Executive Vice President, Chairman of the Board Senior Vice President Kellogg International Managing Director, Global Innovation and Kathleen Wilson- France/Benelux/Central President, Kellogg Eastern Europe/Russia A. D. David Mackay* Chief Environmental Europe Thompson* President and Officer Senior Vice President Michael J. Libbing Chief Executive Officer Paul T. Norman* Global Human Board of Directors (from left to right) Member, Board Jeffrey M. Boromisa* Resources Vice President Senior Vice President of Directors Senior Vice President Corporate Development John T. Dillon Dorothy A. Johnson A. D. David Mackay Ann McLaughlin Korologos President, U.S. Executive Vice President, Alan R. Andrews Morning Foods (A*,C,E,N) (S*,E,M) (E) (C,E,N,S) John A. Bryant* Kellogg International Gregory D. Peterson Vice President Retired Chairman and President, President and Chairman of Board of Trustees, Executive Vice President President, Kellogg Corporate Controller Vice President Chief Executive Officer, Ahlburg Company Chief Executive Officer, RAND Corporation David J. Pfanzelter* Chief Financial Officer Asia Pacific Managing Director, International Paper Company President Emeritus, Kellogg Company Elected 1989 Senior Vice President President, Kellogg Kellogg United Kingdom Elected 2000 Council of Michigan Foundations Elected 2005 22 Ruth E. Bruch* President, Kellogg 23 North America Elected 1998 Gordon Gund Senior Vice President Specialty Channels Joel R. Wittenberg Claudio X. Gonzalez Robert A. Steele (N*,C,E,M) Jeffrey W. Montie* Chief Information Vice President (M*,C,E,N) James M. Jenness (A,M) Chairman and Chief Officer Treasury and Executive Vice President Chairman and (E*) Executive Officer, Investor Relations Vice Chairman- President, Kellogg Chief Executive Officer, Chairman of the Board, Global Health and Well-Being, Gund Investment Corporation International Kimberly-Clark de Mexico Kellogg Company Procter and Gamble Elected 1986 Elected 1990; Retiring Elected 2000 Elected 2007 April 2008 *Member of Global Leadership Team John L. Zabriskie, Ph.D. Donald R. Knauss Note: Italicized type denotes subsidiary or other subtitle Sterling K. Speirn Benjamin S. Carson, Sr., M.D. (C*,A,E,N) (A,M) (M,S) (M,N,S) Co-Founder and Partner, Chairman and Lansing Brown Investments, L.L.C. President and CEO, Professor and Director of Pediatric Neurosurgery, Chief Executive Officer, Elected 1995 Global Leadership Team, from left to right: Paul Norman, Margaret Bath, Donna Banks, Jeff Montie, Jeff Boromisa, Kathleen Wilson-Thompson, W. K. Kellogg Foundation The Johns Hopkins Medical The Clorox Company Jim Jenness, David Mackay, John Bryant, Tim Mobsby, Ruth Bruch, Dave Pfanzelter, Juan Pablo Villalobos, Brad Davidson, Gary Pilnick and Celeste Clark Elected 2007 Institutions Elected 2007

Elected 1997

Committees A = Audit C = Compensation E = Executive M = Consumer Marketing N = Nominating and Governance S = Social Responsibility *Committee Chair Kellogg North America – Brands Manufacturing Locations All-Bran® cereal, bars and snacks, All-Bran™ crackers North America Austin® and Murray® cookies and crackers San Jose, California Cheez-It® crackers, snacks and snack spread TM Atlanta, Georgia Club®, Krispy®, Sunshine®, Toasteds®, Town House®, Wheatables®, Zesta® Augusta, Georgia crackers Values Columbus, Georgia Crunchmania® grain-based snacks Rome, Georgia Our commitment to sustainability and social responsibility led to the adoption of the K Values guidelines a number of years Eggo® waffles, pancakes, French toast, syrup and cereal Chicago, Illinois ago. These values formalize the culture instilled in the organization by Mr. Kellogg and encompass the way we run our Chips Deluxe®, E.L. Fudge®, Famous Amos®, Fudge Shoppe®, Sandies®, Kansas City, Kansas Soft Batch® cookies business and build relationships with our customers, our consumers, and our employees. Florence, Kentucky Stretch Island®, FruitaBü® fruit snacks Louisville, Kentucky We Act With Integrity And Show We Are Passionate About Our We Strive For Simplicity Kashi® cereals, nutrition bars, and frozen entrees; Kashi™ crackers, cookies Pikeville, Kentucky Respect Business, Our Brands, And Our Food • Stop processes, procedures and Keebler® cookies, crackers, pie crusts, ice cream cones Baltimore, Maryland • Demonstrate a commitment to • Show pride in our brands activities that slow us down or do not Kellogg’s® cereals, croutons, breading, stuffing products Battle Creek, Michigan integrity and ethics and heritage add value Grand Rapids, Michigan Apple Jacks®, Bran Buds®, Cinnamon Crunch Crispix®, Cocoa Krispies®, • Show respect for and value all • Promote a positive, energizing, • Work across organizational Complete®, Corn Pops®, Cracklin’ Oat Bran®, Crispix®, Frosted Mini-Wheats®, Wyoming, Michigan Honey Smacks™, Just Right®, Kellogg’s Corn Flakes®, Kellogg’s Crunch®, Kellogg’s Omaha, Nebraska individuals for their diverse optimistic and fun environment boundaries/levels and break down Frosted Flakes®, Kellogg’s Raisin Bran®, Kellogg’s Smorz®, Kellogg’s® Low Fat Blue Anchor, New Jersey backgrounds, experience, styles, internal barriers Granola, Mini-Swirlz®, Mueslix®, Pops®, Product 19® cereals • Serve our customers and delight our Cary, North Carolina approaches and ideas consumers through the quality of our • Deal with people and issues directly Morningstar Farms®, Natural Touch®, Loma Linda®, Worthington® veggie foods Charlotte, North Carolina • Speak positively and supportively products and services and avoid hidden agendas and dairy alternatives Cincinnati, Ohio about team members when apart • Promote and implement creative and • Prize results over form Nutri-Grain® bars and waffles Fremont, Ohio • Listen to others for understanding innovative ideas and solutions Pop-Tarts® toaster pastries and snacks; Go-Tarts® snacks Zanesville, Ohio We Love Success Rice Krispies® and Rice Krispies Treats® cereals; Rice Krispies Treats® and Lancaster, Pennsylvania • Assume positive intent • Aggressively promote and protect Treats Sheet® snack squares Muncy, Pennsylvania our reputation • Achieve results and celebrate when Right Bites® cookies and snacks Memphis, Tennessee We Are All Accountable we do Smart Start®, Froot Loops®, Kellogg’s Crunchy Nut™ cereals and bars Rossville, Tennessee • Accept personal accountability for We Have The Humility And Hunger • Help people to be their best by Special K® cereals, bars, snacks, protein beverages and protein meal bars Clearfield, Utah our own actions and results To Learn providing coaching and feedback Special K 0® protein beverages and protein meal bars Allyn, Washington • Display openness and curiosity to 2 • Focus on finding solutions and • Work with others as a team to London, Ontario, Canada Yogos®, Fruit Streamers® fruit-based snacks achieving results, rather than making learn from anyone, anywhere accomplish results and win 24 Belleville, Ontario, Canada excuses or placing blame • Solicit and provide honest feedback • Have a “can-do” attitude and drive to Kellogg International – Brands • Actively engage in discussions without regard to position get the job done Kellogg’s® cereals, breading products and cereal bars International and support decisions once they • Personally commit to continuous • Make people feel valued Botany, Australia are made improvement and be willing All-Bran® cereals, bars, snacks and beverage and appreciated Charmhaven, Australia • Involve others in decisions and plans to change Coco Pops®, Coco Rocks®, Crunchy Nut®, Day Dawn®, DayVita®, Kellogg’s Sao Paulo, Brazil • Make the tough calls Fruit’n Fibre®, Just Right®, Kellogg’s Extra®, Nutri-Grain®, Optivita® cereals and that affect them • Admit our mistakes and learn bars Bogota, Colombia from them Guayaquil, Ecuador • Keep promises and commitments Be Natural®, Crusli®, Elevenses®, Kuadri Krispis®, LCMs®, Nutri-Grain Twists®, Bremen, Germany made to others • Never underestimate our competition NutriDia®, Rice Krispies Squares®, Special K Bliss™ and Sunibrite® bars Manchester, Great Britain • Personally commit to the success Chex®, Choco Big®, Choco Krispis®, Choco Trésor®, Chocos®, Choco Pops®, Wrexham, Great Britain and well-being of teammates Chocolate Wheats™, Corn Frosties®, Corn Pops®, Country Store®, Crispix®, Guatemala City, Guatemala Kellogg’s Crunchy Nut Corn Flakes®, Crusli®, Froot Loops®, Frosties®, Guardian®, • Improve safety and health for Honey Loops®, Kellness®, Miel Pops®, Muslix®, Rice Bubbles®, Ricicles®, Taloja, India employees, and embrace the belief Smacks®, Speedy Loops®, Sucrilhos®, Sultana Bran®, Tiger Power®, Toppas®, Takasaki, Japan Tony’s Turboz®, Vive® and Zucaritas® cereals that all injuries are preventable Linares, Mexico Choco Melvin™ milk supplement Queretaro, Mexico Eggo® waffles Toluca, Mexico Coco Krispies® straws Gorokhorets, Russia All-Bran® crisp snacks Pskov, Russia Kashi® cereals and nutrition bars Severskaya, Krasnodar, Russia K-Time® bars and muffins Tyumen, Russia TM Komplete® cereal and biscuits Voronezh, Russia Pop-Tarts® toaster pastries Vyazma, Russia Special K® cereals, bars and snacks Springs, South Africa Anseong, South Korea Winders® fruit-based snacks Valls, Spain Vector® cereal meal replacement products and energy bars Rayong, Thailand Munch’ems® granola snacks Maracay, Venezuela ®, TM, © 2008 Kellogg NA Co.

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KELLOGG COMPANY • ONE KELLOGG SQUARE • BATTLE CREEK, MICHIGAN 49016 • TEL (269) 961-2000 • www.kelloggcompany.com 2 0 0 7 A NNU A L R E P O R T