Innovation.
Kellogg drives development and visibility of a robust pipeline of new products. In 2007 we continued our commitment to this key growth driver by increasing our innovation. We take a global approach to innovation, expanding and adjusting our portfolio to meet consumer needs around the world. More than 270 new products or adaptations of other successful products were introduced in 2007 alone and we generated nearly $2 billion, about 17% of sales, from products launched within the past three years. These results exceeded our long-term target of 15% of net sales from innovation and helped drive another year of improved sales volume, price and mix for Kellogg Company.
Our innovation teams around the world are focused on developing value-added and differentiated products that provide additional sales and/or improved economics. This focus continually improves our already-strong portfolio by improving mix and producing higher returns. Strong innovation, backed with solid marketing support, will drive top-line growth and keep our categories vital. Our commitment to investing in innovation and research and development is another core pillar of our sustainable growth business model. In line with this, we are expanding the facilities and capabilities of our state-of-the-art global research and development center, the W. K. Kellogg Institute for Food and Nutrition Research. This is one way we will continue to drive top-line growth.
Realistic targets.
Every day, we manage our business in a way that supports its dependable, sustainable performance. Our long-term targets of low single-digit net sales growth, mid single-digit operating profit growth, and high single-digit EPS growth encourage Kellogg people to prioritize their activities and make good decisions that support the long-term health of our business – not simply hit short-term, unsustainable goals. Realistic targets drive the behaviors and decisions that most effectively deliver sustainable growth. It's the right way to run our business and is responsible management of our shareowners' interests.
Financial vision.
Strong cash flow generation. The ability to generate cash is an essential component of a financially healthy company. As a result of strong net earnings, disciplined capital expenditures and sound balance sheet management, our cash flow in 2007 was over $1 billion, delivering again on our Manage for Cash operating principle. Combined with our focused business strategy, our disciplined financial strategy creates a solid platform for sustaining cash flow for years to come.
Disciplined expenditure.
Following the Manage for Cash principle keeps Kellogg people around the world focused on continually exploring strategies for decreasing the amount of cash committed to working capital. It is part of the way we manage our business every day. Furthermore, we are committed to carefully planning and prioritizing the amount of cash we spend each year on capital expenditures. In 2007 this disciplined financial strategy again enabled continued and rigorous review of costs while, importantly, funding the investments that will grow and sustain our business.
