"Let them eat cornflakes," what Kellogg's profiteering can tell us about a geopolitical crisis in the making.

The power of a cereal company to snatch ever higher profit margins, even as families starve, is part of the story of how "the West" is in danger of failing badly.

"Let them eat Corn Flakes"

Kelloggs’ CEO Gary Pilnick, was over the moon!

His company just posted a 240 basis point increase in profit margin for the first quarter of 2024 and fewer things excite a Chief Exec more than a significant rise in margin!

In its quarterly call, WK Kellogg Co. said its first-quarter profit rose by about 38% to $33 million, from $24 million in the year-ago quarter. This is in the midst of a cost of living crisis started by the Russian invasion of Ukraine. A crisis that’s hammered ordinary families in the US, UK and across Europe. In January in the UK, 15% of households - 11 million people - were food insecure. Elsewhere, Germany just suffered the biggest drop in living standards since World War 2, a calamitous drop that coincided entirely with the rise of the far right AfD Party.

“Let them eat cornflakes”

Still at least Kelloggs’ CEO can find the funny side, joking that struggling households should eat cereal if they're struggling to make ends meet.

Kelloggs’ success hasn’t come from selling more cornflakes. The company’s accounts show that the total volume of goods sold in the last few months barely changed compared to 2023.

No, in common with almost every consumer-facing firm today, Kelloggs simply enjoys uncontested power to protect its margins by displacing the costs of inflation (caused by by war) on to households.

To get a sense of how cereal price inflation has rocketed in recent years, click on the inflation dashboard that Campaign Salience recently designed for a client.

The cost of cereals rocketed in the recent cost of living crisis. Source: Campaign Salience inflation dashboard.

Kelloggs’ are doing what any well run company does: protecting their margin in a difficult economic environment. That’s what the hedge funds and shareholders who invest in such a company expect, right?

But if it’s right for firms to protect their margins, then surely it’s right for households and workers to do the same? Well, apparently not if you listen to the politicians and technocrats who run the UK economy.

On the contrary, they argue that wages need to be restrained, on pain of mass unemployment, so a future of economic joy can dawn (somewhere over the horizon, no-one really knows where).

Deaths of despair

The Nobel economist Angus Deaton has characterised the actions of firms like Kelloggs’ as akin to waging a “war against the poor”.

Deaton’s no lefty, he believes in capitalism. He’s currently heading up the Institute for Fiscal Studies’ commission on inequality. But he’s been increasingly vocal in his criticisms of the unfair power the modern firm has to grow and jealously distribute profit margins to business and the wealthy, at the expense of ordinary households.

Nowhere is this argument more starkly made than in the pre-pandemic book co-authored with fellow economist, Anne Case, into the epidemic of “Deaths of Despair”  in the US.

Case and Deaton argue this epidemic - of suicide, drugs overdose and lifestyle-related co-morbidity - is unique to the US. Yet we have a name for it here in the UK as well: “shit life syndrome”.

Given the collapse we are seeing in healthy life expectancy in parts of the UK today, it’s no surprise that when they wrote their book, Deaton and Case had spotted early signs the UK was heading in the same direction as the US.

It should be obvious that this kind of insecurity is a fertile breeding ground for political cynicism and the type of conspiratorial thinking that leads to the popularity of politicians like Donald Trump, Suella Braverman and Giorgia Meloni.Is no-one able to join the dots?

What the price of conflakes means for Western geopolitical “grand strategy”

We are living in a world marked by multiple crises: from climate breakdown, to geopolitical tension and the prospect of outright war with Russia - now fully a war economy - within five years.

Whilst rubbishing the idea mass conscription, a recent comment piece at the Royal United Services Institute (RUSI) notes how difficult it would be - given the state of the UK - to raise an army, even if politicians wanted to.

And not because Brits are lazy or lacking the type of cleansing martial spirit beloved of delusional Tory politicians and right wing media. On the contrary, as RUSI imply, it’s the utter lack of a sense of society among our leaders that militates against politicians being able to raise an army.

“… expecting a single lever (conscription) to solve a systemic issue (the relationship between government, society and armed forces) is unwise,” they point out.

Yet, as we sit on the precipice of further conflict, this is the sum total of the so-called peace premium our post Cold War politics has bestowed on us.

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In their preface to their book about Deaths of Despair, Case and Deaton strike a note of optimism. Citing the ability of the UK to reform in the 1800s in response to the growing inequalities that marked that age. The authors argue there’s every chance countries like the UK can progressively reform themselves whilst avoiding war and societal breakdown.

One has to hope they are right, but the omens look bleak. Let them eat cornflakes, indeed.