Steve Cahillane
Chairman, President and Chief Executive Officer at Kellanova
Thanks, Amit. Slide number 23 splits our portfolio into category groups to help remind you of their relative sizes and how Kellanova's portfolio is clearly oriented toward growth. Beginning in the fourth quarter, Kellanova will no longer have the North America cereal portion nor the very small Caribbean cereal portion of international cereal.
As you can see on the slide, the businesses that will remain with Kellanova continue to drive most of our growth in quarter three. As we walk through our regions, which is how we are structured, we will once again organize our discussion around the businesses that comprise Kellanova first, followed by the North America cereal business that is now part of WK Kellogg Co. We'll start with the region's most exposed to emerging markets.
Slide number 24 shows the financial performance of our AMEA region. Once again, this region generated double-digit organic net sales growth on top of extremely strong comparisons. It again expanded its operating profit margin year-on-year in the third quarter and it again posted exceptional operating profit growth, up 14% on an adjusted and currency-neutral basis. And this profit was delivered in spite of high cost inflation and substantial reinvestment into the business.
Within AMEA, we see on Slide number 25 that snacks turned in another quarter of double-digit organic growth in net sales. This organic growth was again broad-based across Australia, Asia and Africa and the Middle East. In market, Pringles continues to gain share in the region with notably strong outperformance relative to the category this quarter in Australia and Japan.
As shown on Slide number 26, AMEA's cereal also sustained growth in the third quarter in spite of lapping elevated year-ago growth. Growth was broad-based with notable growth in Australia, Africa and Southeast Asia. And in-market, our overall share gain in the region was led by notably strong performance in Korea and New Zealand.
And then we come to Noodles & Other shown on Slide number 27. This business continues to post exceptional growth even as it begins to lap substantial price increases taken last year to offset cost inflation and weakened currencies. Our business in Nigeria continues to grow strongly, owing to the strength of Dufil's brands and the huge competitive advantage of our distributor arm Multipro. We also continue to expand our Kellogg's Noodle business outside of Nigeria. AMEA enters the Kellanova era with solid momentum. For the full-year, we continued to expect to sustain strong growth across all three category groups delivering yet another year of organic net sales growth and we plan to do that while restoring our profit margins and investing for the future.
Now let's look at our other emerging markets region, Latin America, starting on Slide number 29. Kellogg Latin America in quarter three delivered another quarter of strong organic net sales growth on top of exceptionally strong growth last year. This organic growth was once again led by our two largest markets: Mexico and Brazil, though our Pacific sub-region also posted strong growth. It's important to note that roughly half of our volume decline both in the third quarter and year-to-date was attributable to price pack architecture changes and SKU rationalization that we have undertaken to improve profitability. We again expanded our operating margin in quarter three, leading to a fourth straight quarter of operating profit growth of 20% or better.
On Slide number 30, we see that our Snacks business in Latin America generated strong organic net sales growth in the third quarter led by sustained momentum in Mexico and Brazil. Both of those markets saw double-digit category growth in salty snacks and Pringles gained share in both of these key markets. And in portable wholesome snacks, we continue to outpace the category in Mexico.
On Slide number 31, you can see that Kellogg Latin America grew net sales organically again in cereal, in spite of lapping exceptional growth in the year-ago quarter. This growth was led by Mexico and our Pacific sub-region. Keep in mind that a sliver of this business, our Caribbean cereal business has since been spun-off with WK Kellogg Co., but this business represented only about 5% of our Latin America cereal business last year. So it is quite small.
So Latin America is performing well, as it heads into the Kellanova era. For the full-year, we continue to expect this region to sustain strong topline momentum with growth in both snacks and cereal, and continued recovery in its profit margins. Once again, we can see that both of our emerging markets regions are showing current momentum to grow with their outstanding long-term prospects.
Now, let's turn to our developed markets regions, starting with Kellogg Europe and Slide number 33. This region sustained yet another quarter of strong organic net sales growth on top of strong year-earlier growth. Operating profit increased sharply year-on-year, owing to good topline growth, moderating cost pressures and solid margin expansion. All of which more than offset the impact of divesting Russia earlier in the quarter.
If we look deeper into the business, on Slide number 34, you can see that snacks, which represents over half of our sales in Kellogg Europe continue to lead our growth in this region. In fact, quarter three marked the ninth quarter in the last 11, in which we have posted double-digit organic net sales growth in our European snacks business. The growth in quarter three also continued to be broad-based with double-digit gains in all three of our sub-regions. In-market, the salty snacks category remains in double-digit growth overall with Pringles outpacing the category in markets like the UK, France, Spain, Italy and Poland. And in portable wholesome snacks, category growth rates have accelerated into the double-digits and we continued to gain substantial share in the UK, led by double-digit growth in Rice Krispies Squares.
Our cereal business in Europe shown on Slide number 35 posted a small organic decline in net sales in the third quarter. As we've discussed previously, this business has slowed, owing to the rising category elasticities. But we are confident in our quarter four plans, which includes incremental brand-building shifted from previous quarters. So, it was another strong quarter for Kellogg Europe. For the full-year, we continue to expect the region to post yet another year of solid topline growth, led by snacks. We also remain on track to deliver improved margins during the second-half in spite of sustained cost pressures. Our divestiture of our business in Russia was a necessary move in an unfortunate situation. But overall, this region is showing good momentum as it heads into the Kellanova era.
We'll now turn to Kellogg North America and Slide number 37. As anticipated, net sales growth has decelerated in recent quarters as elasticity continued to move higher and as we begin to lap last year's sizable replenishment of trade inventories. However, we continue to recover gross profit margin, reflecting productivity, revenue growth management and diminishing bottlenecks and shortages. This enabled us to substantially increase investment in our brands and still deliver high-single digit operating profit growth year-on-year in the third quarter. The rise in elasticities, as well as the lapping of last year's strong growth in inventory replenishment can be seen in all three category groups in the third quarter.
Slide number 38 shows Snacks, which represents over half of our North American net sales. In the third quarter, its net sales were up very slightly against a very big quarter last year. In-market, all three of our snacks categories experienced rising elasticities particularly in higher cash outlay items like multi-packs. In addition, we took a more measured approach than many in restoring merchandising activity.
It was a similar story in frozen foods, shown on Slide number 39. Our frozen foods net sales were flat in the third quarter. Like Snacks, our Eggo business faced a rise in category elasticities. In addition, our MorningStar Farms brand continued to feel the impact of a shakeout in the plant-based category, even as it continued to gain share.
Now, let's turn to our North America cereal business, which forms most of what is now WK Kellogg Co. You will get more detail from WK Kellogg Co. in its own earnings release. But as shown on Slide number 40, this business faced the same dynamics as the Kellanova businesses in the third quarter; flattish sales, reflecting a continued rise in category elasticities and the lapping of strong year-ago growth.
Turning to Slide number 41, our North America region is having a good year in terms of balanced financial delivery. We now are back to full commercial activity and feel confident in our ability to execute. Snacks should finish the year solidly in growth, while frozen is expected to continue to finish with improved performance. We are off to an earlier-than-expected start to margin recovery in this region, even as we reinvest more in our brands. And with the spin-off, we become that much more focused and streamlined behind snacks and frozen foods. Simply put, North America too is ready to start our new era as Kellanova.
So, let me summarize with Slide number 43. The third quarter closes the books on the 117-year-old Kellogg Company and does so in a solid way. In spite of rising elasticities across the industry, we continued to deliver good topline growth, while getting our service levels back to where they should be and continuing to restore profit margins faster than we had anticipated. And we delivered all that while executing the spin-off of WK Kellogg Co. During the quarter, we made all the final preparations to ensure business continuity and the sustained success of both companies.
Our Company and the Company-parallel operations were successful and our transition services agreements are in place and in operation. And we now enter the Kellanova era from a position of strength. We're back to full commercial activity. Our free cash flow and balance sheet are strong, giving us good financial flexibility. We are proactively mitigating stranded margins. And we have a plan that should continue to deliver the kind of financial algorithm that you would expect from a portfolio that is weighted towards snacking, emerging markets and highly-differentiated brands. In sum, we are on track and ready to deliver as Kellanova.
So in closing, I want to first express a heartfelt congratulations and thank you to our entire family of Kellogg employees for the tireless efforts and endless passion that went into executing the spin-off and creating such a promising future for both companies. We wish our former colleagues all the best as they embark on their next chapter as WK Kellogg Co. And to our Kellanova employees, I share in your excitement for our future. We enter this new era with a more growth-oriented portfolio, a sharpened strategy and more ambitious financial expectations, and we have just the team to deliver on it.
And now we'll be happy to take your questions.
