Steven A. Cahillane
Chairman of the Board and Chief Executive Officer at Kellanova
Thanks, Amit. I'll start with Slide number 23, which shows the two-year compound annual growth rates and net sales across our four regions. Because of the outsized impact of COVID in 2020, this is really the best way to evaluate 2021's performance. And what you see is consistently good two-year growth across all regions in all quarters and the full year. There was notable strength in our three international regions driven by cereal, by snacks and by noodles and other. And North America fared reasonably well in the context of what were by far the most severe supply disruptions.
Let's review each of our regions in turn, starting with North America on Slide number 24. North America's 2021 performance has to be viewed in the context of its year ago comparisons and unusually severe supply constraints. First, remember what we were lapping, a pandemic-related surge in demand, particularly for our most at-home oriented categories, which are cereal, frozen from the griddle and veggie foods. This not only led to exceptionally strong organic net sales growth in 2020, but it also triggered exceptional plant utilization and operating leverage driving up profit that year. We also were lapping a once every six years extra week in our fiscal fourth quarter in 2020. Excluding that 53rd week and any impacts from divestitures or currency translation, North America's operating profit in 2020 grew nearly double digits.
Then, let's remember the unusual supply constraints we faced in 2021. We ended the year at full capacity utilization in cereal and key elements of our frozen from the griddle categories, with the pandemic delaying our ability to expand capacity as previously planned. We then experienced what all companies experienced an unprecedented disruption in global supply chains, which not only impeded shipments and slowed production, but also contributed to unexpected costs. And to make matters worse, we suffered the misfortune of a major fire at one of our cereal plants, followed by a labor strike at all four of our U.S. cereal plants.
So to finish 2021 with a 2% two-year CAGR in organic net sales growth and roughly 1% two-year CAGR on operating profit, excluding since divested businesses, is a good achievement. This reflects momentum sustained in key brands outside of cereal. It also reflects productivity and revenue growth management to offset the market-driven inflation in input costs, and it reflects remarkable execution amid unprecedented business conditions.
Let's dig into each of the three major category groups within North America, starting with the largest, snacks, on Slide number 25. Our North America snacks business finished 2021 with organic net sales growth of 7% year-on-year and 5% on a two-year CAGR basis. This represents a continuation of multiyear momentum for this business and reflects the strength of our brands. Two of these world-class brands are shown on Slide number 26. Pringles closing in on $900 million in retail sales in the U.S., had another strong year in 2021. Not only did it gain share year-on-year, but as you can see on the slide, its two-year CAGRs well outpaced the category all year long and even accelerated as the year progressed. The gains were driven by innovation like scorching, the expansion of pack formats like multi-packs and effective advertising from the Super Bowl on. And then there's Cheez-It, now well over $1 billion in U.S. retail sales. This brand drove most of our share gains in crackers in 2021. As you can see, it continues to well outpace the category on a two-year CAGR basis as well driven by innovation like Snap'd, pack formats like Caddies and effective advertising, which drove the core business. But these aren't our only world-class snacking brands.
Take a look at the continued momentum in Pop-Tarts and Rice Krispies Treats shown on Slide number 27. Pop-Tarts, with over $800 million in U.S. retail sales continued its growth momentum in 2021, outpacing the portable wholesome snacks category on a two-year CAGR in every quarter. Similarly, Rice Krispies Treats also sustained its momentum in 2021. These treats generate $350 million in retail sales. And not only did they gain share again in 2021, their two-year CAGRs continued to well outpace the portable wholesome snacks category. Like Pringles and Cheez-It, these are world-class differentiated brands that respond well to innovation and brand building.
Turning to Slide number 28, let's discuss our 2 North American frozen businesses. Lapping high single-digit growth in 2020, these businesses collectively sustained good momentum on a two-year CAGR basis, even despite operating at/or near full capacity across much of their product lines. Even better, we have capacity coming online in the first half of 2022.
Slide number 29 shows how these two world-class brands performed in market. With almost $900 million in U.S. retail sales, Eggo sustained solid momentum growth on a two-year CAGR basis in 2021, only slightly trailing the category as it operated at capacity. Morningstar Farms, our leading plant-based brand, generating nearly $400 million in U.S. retail sales and it finished the year outpacing the frozen veg/vegan category on a two-year CAGR basis. So similar to snacks, our Frozen Foods brands continue to demonstrate very strong momentum.
Let's round out our discussion of North America with cereal shown on Slide number 30. In addition to lapping 2020's pandemic-aided high single-digit growth, North America cereal faced the most challenging of supply conditions. Recall that we had already been delayed due to the pandemic in previously planned capacity expansions. Then just as we were capacity, came the economy-wide shortages and bottlenecks. In late July, we suffered a fire in our Memphis plant, which not only strained our network further, but impeded our ability to build inventory ahead of what would eventually be a strike at all four of our U.S. cereal plans, spanning almost the entire fourth quarter. The result of not being able to ship enough product and the related reduction in commercial support for these products was a sharp year-on-year decline in net sales. This was mostly in the second half.
In fact, through the first half, our two-year CAGR for this business was roughly flat. Unfortunately, this has resulted in low inventories and even out of stocks in stores for many of our brands. And we therefore elected to pull back on commercial activity. Not only have we had to pull back on A&P investment, we've also had to dramatically reduce our in-store merchandising. The latter can be seen on Slide number 31. Specifically, using scanner data, the chart captures the year-on-year changes in the percent of retail sales volume that was sold on any promotion. It shows how Kellogg was, like the rest of the category, returning to pre-pandemic levels of merchandising in 2021, but then it shows just how much we had to pull back in the fourth quarter, especially late in the quarter due to the strike.
Let's talk briefly about how we are thinking about the post strike and fire recovery of this business shown on Slide number 32. As previously mentioned, the fire and strikes cost impacts spans across the fourth quarter of 2021 and quarter one in 2022, owing to carryover of costs and lost operating leverage. In addition, there will be some missed net sales opportunities as we work to catch up on inventory, both ours and that of our customers. In the end, it will be the second half before we can truly be back on a full commercial program, though we will get started as soon as we can in supporting priority brands and SKUs. This is incorporated into our guidance.
Now let's turn to our international regions whose financial performance is shown on Slide number 33. Remember, these are not small businesses. These three regions collectively account for more than 40% of our net sales. And what they delivered in 2021 was nothing less than impressive, particularly given worldwide supply challenges. All three posted strong organic basis net sales growth in 2021, with both volume and price mix growing on top of what was strong growth last year. And on operating profit, all posted growth in the high single-digits or double-digits on a currency-neutral basis.
Kellogg Europe's organic net sales growth is shown on Slide number 34. In 2021, we sustained strong growth momentum in a region of the world that is comprised predominantly of mature developed markets and an intensely competitive retailer environment. Yet we grew net sales organically for a fourth consecutive year in 2021 and growing both volume and price mix.
As you can see on Slide number 35, the growth was driven by strong in-market performance in both cereal and Pringles. In cereal, master brand advertising and selective innovation continued to drive consumption growth ahead of the category on a two-year CAGR basis in key markets. Pringles, meanwhile, also continues to outpace the category in key markets. The new Sizzl'n line has proven to be incremental, while strong execution of marketing programs, including this year's Euro soccer tournament has continued to drive the base business.
Similarly, we sustained multiyear momentum in Latin America as indicated on Slide number 36. We grew volume in 2021 on top of last year's surge and we increased our price mix in order to help cover the double hit of high input costs and adverse transactional foreign currency impact.
Slide number 37 shows how this organic net sales growth has been generated in both snacks and cereal using two-year CAGRs. Importantly, this growth was underpinned by good in-market performance. In cereal, our consumption growth on a two-year CAGR basis continues to outpace the category in key markets in 2021. Even on a one year basis, we realized share gains in key markets. Pringles, meanwhile also gained share, notably in our biggest markets, Mexico and Brazil.
We'll finish our review with our largest international region in terms of net sales, AMEA, which is shown on Slide number 38. This is yet another international region that built on multiyear track record for organic net sales growth. In 2021, Kellogg AMEA grew net sales on an organic basis for a seventh consecutive year. And it not only grew on top of 2020's strong growth, but it accelerated its growth to levels we haven't seen before, growing both volume and price/mix, this 2021 performance reflected broad-based gains geographically and across category groups. You can see this in the two-year CAGR trends shown on Slide number 39. We continue to see strong organic growth in snacks, cereal and noodles. And in-market, our AMEA cereal consumption outpaced the region's overall category on a one-year and two-year CAGR basis, led by key markets ranging from Australia, to India, to Saudi Arabia. Pringles recorded similarly impressive consumption performance in 2021 in spite of supply disruptions related to the pandemic. Not only did its consumption outpace the category on a one-year and two-year basis for the overall region, but it gained share in many of those same key markets.
Allow me to wrap up with a brief summary on Slide number 41. What you have seen from us this year should give you confidence of what we can do going forward. Firstly, we executed well through what were extraordinarily challenging business conditions, overcoming obstacles to deliver on full year guidance that we had already raised earlier this year. We faced a rapid acceleration in market-driven input cost inflation, and you saw us substantially cover it with productivity and with very effective revenue growth management actions that enabled us to realize price early and sufficiently. We faced economy-wide bottlenecks and shortages, which created supply disruptions and incremental costs, yet we work through them to continue to service our customers around the world. We even faced the misfortune of a major fire in one of our U.S. plants, followed by a labor strike in one of our businesses, and we worked through those interruptions as well.
Secondly, it should be clear that we have strong business momentum. Our international businesses continued to deliver strong growth this year, even accelerating from strong growth last year. They grew in snacks and they grew in cereal. In North America, our largest business, snacks, delivered outstanding growth and category share performance all year long. Brands like Pringles, Cheez-It, Pop-Tarts and Rice Krispies Treats have never been stronger. And in our Frozen Foods businesses, we continue to show growth momentum on a two-year CAGR basis. Eggo's growth was strong enough to run up against capacity limitations, which we are resolving. And Morningstar Farms plant-based foods growth came with increased household penetration.
And finally, we entered the new year in good financial condition. Our cash flow remains strong, and we have de-levered our balance sheet, giving us good financial flexibility. The result of all this was yet another year of balanced financial delivery in 2021, which we expect to sustain reliably and independently in 2022. And driving this dependable performance are the talent and determination of our world-class employees who deserve tremendous credit for working through unprecedented challenges and keeping Kellogg on this path of profitable growth.
And with that, we'd be happy to take any questions that you might have.
