Joel Wittenberg – Vice President, Investor Relations David Mackay – President and Chief Executive Officer John Bryant – Chief Operating Officer and Financial Officer Gary Pilnick – General Council

Jonathan Feeney – Janney Montgomery Scott Andrew Vincent – Morgan Stanley Judy Hong – Goldman Sachs Robert Moscow – Credit Suisse Andrew Lazar – Barclays Capital Alexia Howard – Sanford Bernstein Terry Bivens – JP Morgan David Driscoll – Citigroup Eric Katzman – Deutsche Bank Chris Growe – Stifel Nicolaus Phil Turfly – Longbow Research

Good morning. Welcome to the Kellogg Company fourth quarter and full year 2008 earnings call. All lines have been placed on a mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions) Thank you. At this time, I will turn over the call over Joel Wittenberg, Kellogg Company Vice President of Investor Relations. Mr. Wittenberg, you may begin your conference.

Thank you, Latonya and good morning everyone. Thank you for joining us for a review of our fourth quarter and full year results and for some discussion regarding our strategy and outlook. With me here in Battle Creek are David MacKay, President and CEO; John Bryant, Chief Operating and Financial Officer, and Gary Pilnick, General Counsel. We must point out that certain statements made today such as projections for Kellogg Company’s future performance including earnings per share, net sales, margin, operating profit, interest expense, tax rate, cash flow, brand building, upfront costs, impact of the recall and inflation are forward-looking statements. Actual results could be materially different from those projected. For further information concerning factors that could cause these results to differ, please refer to the second slide of this presentation as well as to our public SEC filings. A replay of today’s conference call will be available by phone through Monday evening by dialing 800-964-4463 for both U.S. and international locations. The passcode is #5355644. The call will be also available via webcast which will be archived for 90 days. Now, let me turn it over to David.

Thanks, Joel and good morning everyone. We’re pleased to report another year of sustainable and dependable performance at Kellogg Company despite what has become and continues to be a very difficult environment. Some of our 2008 highlights include broad based sales growth around the world. Reported sales grew 9% and internal sales grew a strong 5% in line with this year’s guidance and ahead of long-term target of low single digits. Reported operating profit rose by 5% and internal operating profit rose 4% in line with our long term target. EPS grew at 8% to $2.99 per share and this includes the estimated impact of the recent recall related to Peanut Corporation of America which reduced EPS by about $0.06 a share. We added to our platform for future growth through several bulks on acquisitions in Russia, China, the U.S. and Australia. In addition, we invested more than $1 billion in advertising and another $0.14 in upfront cost saving initiatives. We generated $1.1 billion of cash flow before a net after tax $300 million year-end contribution to our retirement plans. This exceeded our guidance of $1 billion to $1,075,000,000 billion. Despite record cost pressures, cash returned to shareholders was once again topped $1.1 billion through another $650 million of share repurchases and about $500 million of dividends. In 2008, we remained true to our business model and strategy while managing through fast moving commodity price increases. To achieve our goals and provide future visibility, we drove strong price realization, significant cost savings, and positive advertising efficiency during the year. With our continued momentum and heightened focus on cost saving initiatives, we move into 2009 confident in our ability to once again achieve our goal of sustainable and dependable growth. We also recognized the challenges and uncertainties created by the current economic environment and the strain that places on consumers everywhere. These impacts are reflected in our latest guidance. Also, this morning we announced the 650 million share repurchase authorization for 2009. The prior 500 million authorization was cancelled due to the $300 million net of tax retirement plan contribution and $150 million reduction in commercial paper in Q4. These actions improved the company’s financial flexibility in this difficult economy. Before I turn it over to John, I’d like to say a few words on the recent recalls of some peanut based products. Our top priority is consumer safety. When we became aware that one of our suppliers, Peanut Corporation of America, had breached our food quality and safety standards, we quickly issued a precautionary hold announcement which was then followed by a voluntary recall. While we’re obviously very unhappy with the situation caused by our supplier and its negative impact on our consumers and customers, we believe that our proactive actions were in the best interest of consumer safety. We’re managing and continue to monitoring the situation which is unfortunately impacting much of the food industry. Now, I’d like to turn it over to John to review the financials. John A. Bryant: Thanks, David, and good morning everyone. Slide 4 highlights our financial performance for the full year ending January 3, 2009. We exceeded our long-term internal sales target of low single digit growth. We met our long-term operating profit target of mid-single digit growth and our EPS target of high single digit growth. Recorded sales increased by 9% to 2008 surpassing last year’s strong 8% growth. Internal sales growth which excludes the effect of foreign exchange, our recent acquisition, and the 53rd week was 5% building on last year’s 5% growth. Reported operating profit rose by 5% lacking 6% growth. Internal operating profit rose 4% driven by our sales performance and proactivity initiatives despite the highest cost inflation experienced in our history and the impact of the recall. Full year earnings per share rose 8% to $2.99 which is well above the guidance that we gave at the beginning of 2008. These strong results were driven by our operating performance and fewer shares outstanding partially offset by our higher tax rate. The 53rd week profits of $0.05 were reinvested back into our recent acquisitions. Our $2.99 EPS result included $0.14 of our product costs. It is important to note that our 2008 results also include the impact of a subsequent event. In January 2009, we became aware that the Peanut Corporation of America had supplied us with tainted product. We initiated a recall which we expect to impact the company around $0.12 per share. Of this $0.12, an estimated impact of $0.06 was booked in our 2008 results and $0.06 was expected to be incurred largely in the first quarter of 2009. Let’s turn to slide 5 to discuss our fourth quarter and full year net sales growth components in more details. For the full year, we achieved solid 5.4% internal sales growth. Tonnage contributed about 1% of sales growth while our price and mix initiatives continue to flow through with solid 4.5% growth. As you know, we took broad based pricing during 2008. The past year offset rising inflation pressures. For the full year, the price component contributed approximately 3% of net sales which is ahead of 2007. While we are still achieving solid mix improvement, the current economic environment has slowed the rate of this improvement. Foreign exchange had no impact on sales for the full year but reduced fourth quarter sales by 7.3%. During 2008, our acquisitions added almost 2% to sales growth and the 53rd week added 1.7% through quarter sales. Q4 reported sales rose by 5% versus last year’s strong 8% growth and internal sales grew 3% versus last year’s 5% growth. Let’s turn to slide 6 to discuss our gross profit performance. Our gross profit for the year was a record $5.4 billion. As expected, gross profit margin declined from 2007 by about 200 basis points to 41.9% with about half of the decline driven by our recent acquisitions, the impact of the recall, and higher upfront investments in cost of goods. While the remaining decline was driven by commodity inflation, partially offset by pricing, and cost savings initiatives. For 2009, we anticipate gross margin to be approximately unchanged from 2008 despite another 5% increase in cost pressure. Now let’s turn to slide 7 to discuss operating profit growth. Full year internal operating profit rose 4% driven by solid internal sales growth, cost savings, and lower upfront sets. Offset by 10% cost of goods cost pressure and the fourth quarter recall. Fourth quarter operating profit declined 2%. However, the recall had a 10% adverse impact on operating profits in the quarter. Our North American business reported full year internal operating profit growth of 6% due to stronger sales and more upfront costs. In the fourth quarter, North America internal operating profit declined by 8% while the recall had a 12% adverse impact on operating profit. European internal operating profit was essentially flat for the full year versus last year’s tough 14% comparable. The results were significantly impacted by higher commodities inflation as well as higher upfront costs that reduced operating profit growth by about 2%. In Latin America, internal operating profit declined 2% versus 2007. However, 2008’s higher upfront costs had an 8% adverse impact on operating profit. In Asia Pacific, internal operating profit increased by 11% driven by a high single digit sales growth and a very strong performance in Australia. Below the operating profit line, we benefited from fewer shares outstanding and our tax rate rose to about 30%. In addition, full year interest expense declined to $308 million. Let’s turn to slide 8 to review our advertising. Our commitment to investing in advertising is a pillar in our business model and essential to achieving our goals. During the fourth quarter, reported advertising spending declined versus last year’s unusually strong 26% increase. In addition, to the top comparable, the decline was driven by our efficiency programs. For the full year 2008, advertising spending rose slightly versus last year’s 16% growth. We began to see the benefits of our efficiency initiatives during the second half of 2008. As you know, we are driving these initiatives across brand building to further improve the efficiency and effectiveness of our more than $1 billion investment. For 2009, we will continue to drive efficiency initiatives and are also benefiting from modest media deflation. We plan to increase our advertising investment in line with sales growth. If media deflation increases we may see less growth in advertising spending despite more impressions. We believe that the combination of improved efficiency and media deflation will drive even more impressions. We will provide additional details on these initiatives at the Cagney. Let’s go to slide 9 to discuss cash flow. For the full year cash flow before the impact of our net $300 million discretionary year end retirement plan contribution was $1,106,000,000 which was above our prior guidance. As you may recall, we generally make contributions to maximize our financial flexibility which is particularly important in this challenging economic environment. Cash flow benefited from another strong improvement in our core working capital as our cash conversion cycle declined to a new record low of 21.6 days and improvement of about 2.5 days versus last year. Capital expenditures declined to 3.6% of sales. For 2009, we expect capital expenditures of 3 and 4% of sales driven by our Klean manufacturing efficiency initiative. As a reminder, Klean stands for lean efficient agile network. This program will ensure we are optimizing our manufacturing network, reducing waste, and developing best practices across our global facilities. Also, during the quarter we reduced our commercial paper balance by $160 million. We continue to maintain good access to the financial markets. For 2009 we anticipate another strong year of cash flow. Our forecast of cash flow is between $1,050,000,000 and $1,150,000,000 which includes the impact of about $100 million adverse foreign exchange headwind. Let’s turn to slide 10 to review our cash return to shareholders. During 2008, we returned cash to shareholders through share repurchases and dividends. We repurchased $650 million of shares and raised the dividend 10% during the third quarter. For 2009, we will continue returning cash to shareholders. As David mentioned, we announced a new $650 million share repurchase authorization for the year and cancelled our previous $500 million authorization. In addition, we target a 40 to 50% dividend payout ratio and expect to grow our dividend in line with earnings. Let’s turn to page 11 for a summary of 2008. We are very pleased with our 2008 performance in a difficult trading environment. Around the world, broad based sales growth was ahead of our long-term targets and despite record cost pressure, 2008 operating profit met our expectations. In addition, earnings per share were at the higher end of our increased expectations. As we discussed previously, the 53rd week added about $0.05 to earnings per share which was reinvested into our recent acquisitions. To drive future visibility we invested back into the business with several costs on acquisitions, $0.14 in upfront costs and more than a $1 billion in advertising. Now, I’ll turn it over to David on slide 12.

Thanks, John. In 2008, sales from products launched in the last three years were roughly $2 billion or 15% percent of sales. As you can see, we are more exciting innovations planned for 2009. In U.S. retail cereal, we’re launching Special K blueberry muffin and Frosted Mini Wheats little bites. Outside the U.S., new cereal innovation includes Nature’s Pleasure in the UK, Special K chocolate in Australia, and Extra in Germany. As is the case with innovations, despite many successes, we’ve had a few missteps as well. Go Packs and straws both targeted at out of the bowl consumption have not met our expectations. In snacks, we’ll continue to drive our successful portion control packs with Koshi seven grain TLC cracker packs and right bite’s cookies n’ cream 100 calorie packs. Other snacks innovation includes Cheez-It Scrabble Junior and Chips Deluxe Oatmeal Chocolate Chips and wholesome snacks, our new Fiber Plus bars are off to a solid start backed by a new advertising program. In addition, we continue to innovate around our successful Koshi brand. We have strong based sales (inaudible) in our frozen business which will continue with innovation likes Eggo bake shops twists and new varieties from Koshi frozen meals and pizzas. If we can turn to slide 13 for the business review. You can see our North American business internal sales growth was a very strong 6% versus last year’s 5% comparable. If we’d turn to slide 14 to discuss each business unit in more detail. Ready to eat cereal continues to be a great category responding to brand building and growing in the current difficult economy. Kellogg continued to perform well in a competitive cereal market during 2008 and we feel good about our current position with trade inventories declining versus Q3. We estimate fully a category growth across all channels was about 5 to 6%. As anticipated our fourth quarter internal sales declined 3% as we left year’s tough 8% comparable. However, our estimate of consumption across all channels was actually solid rising 2%. As many of you have seen, we had a relatively soft IOI market share performance in U.S. cereal in the fourth quarter. Across all channels, we estimate our market share declined by approximately 100 basis points. We continue to see aggressive price based activities from our largest competitor and as we go into 2009, we expect a tough comp Q1 but remain committed to our long-term strategy to win in U.S. cereal. For the full year solid execution and price realization drove a 3% internal sales increase versus last year’s 3% growth. While we’re happy with our performance, we’re disappointed that we lost in share on a full year basis. That reflects the strength of the category, aggressive trade activity and our efforts to clean up some of our (inaudible) products. Our Canadian business grew mid single digits for the full year despite aggressive competitive pricing. So on Canada, had a strong Q4 performance and our IRI market share rose to more than 45% in the fast growing cereal category. Recent innovations including Special K cinnamon pecan and Rice Krispies cocoa was strong. If we’d turned to slide 15 to discuss the North American snacks performance. As you can our snacks business posted another strong year with 6% internal sales growth. Our performance was driven by successful innovation and price realization. Portion control cookie and cracker packs performed ahead of expectations. We continue to look at other opportunities to optimize and lever our DSD system, captures our recent purchase of the Mother’s trademarks and recipes on the West coast. In addition, we recently announced price increases across the rest of the snacks portfolio. Let’s turn to slide 16 to look at more detail about snacks business performance. Our Pop-Tarts business posted a solid year with low single digit sales growth driven by higher core sales and price realization. This year’s double digit cracker sales growth resulted in strong IRI market share gain. Cheez-It and Town House grew at double digits for the year including great performance from Cheez-It Duos as well as Town House flipsides, our most successful cracker innovation in years. Lite Bites and Fudge Shoppe were strong contributors to our cookies sales growth and helped gain shares for the year. Wholesome snack sales grew mid single digits for the year driven by Koshi and partially offset by several SKU reductions. Special K bliss innovation and Rice Krispies treats performance was strong. Let’s turn to slide 17 to discuss our frozen and specialty channels performance. Frozen and specialty channels had a great year with sales rising 9% versus 6% last year. Fourth quarter sales grew a solid 6% despite the impact developed by the retail inventories at the end of Q3 due to our frozen food price increase. For the year we achieved double digit frozen food sales growth through price realization, innovation, and strong advertising. Full year Eggo sales grew at double digits driven by price realization and base sales growth. Innovations like Bake Shop swirls and Bake Shop mini muffin puffs are performing well above expectations. These successes resulted in more than 1 point of IRI market share gain in the frozen breakfast category for the year. MorningStar Farms veggie foods also grew double digits for the year. Koshi frozen meals continued to deliver double digit growth through 2008 driven by increased distribution and new varieties of frozen entrees and pizzas. Also, we’re very pleased with our food service business which achieved mid single digit sales growth for the year. Our strong brands and innovation continue to drive this successful in a difficult environment. You can see on slide 18 that our international internal sales grew 5% for the full year. In Europe, we posted 4% internal sales growth for the year and solid ready to eat cereal growth was driven by a mid single digit increase in our core UK market. Our European snacks business delivered double digit sales growth driven by strength in the UK and continental Europe. Fourth quarter sales rose 2% with contributions from the UK, Germany, and Switzerland while sales rose slightly in France. We saw declines in Spain and Italy due to the weak economy and we saw a reduced trade inventories across all three markets. For 2009, we anticipate low single digit sales growth in Europe for the flat first quarter as we expect a continued decline in retailer inventories. For our operating profit, we expect a more difficult first half comparison due to the decline in trade inventories, the saving of commodity inflation, and timing of cost savings. In Latin America, internal sales rose 6% during Q4 driven by both cereal and snacks growth in Mexico as well as strong performances in Venezuela and Brazil. For the full year, internal sales grew 4% versus last year’s strong 9% growth. As we discussed last quarter, we anticipate 2009 internal sales growth at closer to mid single digits. In (inaudible) are expected to be flat as we face tough comps, continued retailer inventory reduction, and a tough economic environment across the region. In Asia Pacific, full year internal sales grew 8% driven by solid performance in both cereal and snacks. Now, I’ll turn it back over to John to discuss our financial outlook and cost pressures on slide 19. John A. Bryant: Thanks, David. Two thousand and nine cost pressure is currently forecasted approximately 4 to 5% of cost of goods. As we discussed last quarter, the cost pressure increases are primarily given by rice, packaging, and general factory inflation with the commodity portions due to Europe and Latin America. The commodity inflation will be weighted towards the first half with about 60% of the full year’s cost pressures occurring in the first half of the year. As you know, we have demonstrated an ability to manage through growth inflation and volatility. During the fourth quarter of 2008, we announced or executed broad based pricing actions to partially offset these headwinds. In addition, significant productivity initiatives in 2009 are expected to drive savings closer to 4% for the year versus our historical 3% savings. Let’s turn to slide 20 to discuss foreign exchange. Over the past several years, we’ve achieved high single digits, constant currency, EPS growth with currency at a roughly 1 percentage point. However, as we discussed last quarter the U.S. dollar has reversed and has depreciated at an unprecedented rate. Slide 20 shows our key currencies with 2008 actual rates and recent spot rates. The shooting current spot exchange rates, the full year impact on EPS on translational foreign exchange will be approximately 9%. As we discussed on the third quarter call, our 2009 guidance of high single-digit EPS on a local currency basis excludes this adverse foreign exchange impact. We will continue to update you on the impact of foreign exchange on a quarterly basis. Turn to slide 21 to discuss the full outlook. For 2009, we remain confident in our ability to deliver another year of sustainable and dependable growth. We now forecast 3 to 4% internal net sales growth. This reduction from our prior guidance of mid-single-digit growth reflects a more conservative view in 2009 given the tough economic environment. We continue to be confident in our ability to deliver mid-single-digit internal operating profit growth driven by our price realization and cost savings initiative partially offset by 4 to 5% cost inflation. Gross profit margin is expected to remain unchanged as our cost savings initiatives and price realizations offset inflation. Upfront investments are projected to be consistent with 2008 of $0.14 per share with over half of that allocated to the K LEAN manufacturing initiative . We also want to provide you with some shape for next year. We anticipate a difficult first half followed by an easier back half driven by the timing of (inaudible) inflation, pricing, the impacts of the recall, and cost-savings programs. Below the operating profit line, interest expense is expected to decline between $280 to 285 million driven by lower short-term interest rates while the full-year tax rate is forecasted between 30 and 31%. Shares outstanding are expected to decline in the back half of the year as we execute the $650 million share repurchase announced this morning. To summarize, we will maintain the focus on our proven business model and strategy to deliver another year of growth with an earnings per share still projected to grow at high single-digits on a currency neutral basis. Now I’d like to turn it back to David on slide 22.

Thanks John. We entered 2009 with continued confidence that our business model and strategy will deliver another year of growth. At the same time, we are realistic given the headwinds of a volatile economy, consumers that are under significant stress, and continued cost inflation. The current conditions are truly unique, but we’ll drive the business to overcome these challenges. We’ll continue to invest in exciting innovation, strong advertising, and upfront cost initiatives, as well as aggressive cost-savings programs across the business. The K LEAN project currently underway in our manufacturing area gives us increased confidence that we’ll achieve our cost-savings and productivity goals. We’re reviewing all aspects of our business to simplify and standardize our processes for higher efficiency while maintaining our drive for executional excellence. In summary, we’re well positioned to continue delivering long-term sustainable and dependable growth. Our business model and strategy are more relevant than ever and we remain committed to our operating principles and manageable cash and sustainable growth. Finally I’d like to thank our Kellogg employees around the world for their continued great work in 2008 and commitment to our 2009 goals. And now let’s open it up for questions.

Thank you. We will now be conducting the question and answer session. (Operator Instructions). Our first question comes from Jonathan Feeney with Janney Montgomery Scott. Please proceed with your question. Jonathan Feeney – Janney Montgomery Scott: Good morning. Thank you guys.

Hi Jonathan. Jonathan Feeney – Janney Montgomery Scott: David, you mentioned specifically price-driven competition in cereal your biggest business. And I guess I’m wondering does the response to that ultimately have to be price-driven? And as part of that, when you talk about a low single-digit, I guess a 3 to 4% internal net sales growth for 2009, I’m assuming you grow volume in U.S. cereal as part of that assumption.

Well I think our key focus is driving our brand, engaging with consumers through advertising and innovation, but we’re also pragmatic about the current environment and we’ll tailor our activities to respond to our consumers’ needs and the current sensitivities in the market. So we think we’ve got ourselves well positioned as we look at that for 2009. I did mention that second-half comps in U.S. cereal through the first quarter until we see that competitive activity being lapped. But we’re very focused on driving the business the right way, but we’re also cognizant of the pressures the consumers are under and we’ll work to respond to those in any way we can. Jonathan Feeney – Janney Montgomery Scott: And are you comfortable saying whether you think cereal as a whole will grow this year?

Cereal as a category, yes, I think definitely the category showed great robust growth in ’08. We’d expect that to continue through ’09 and would expect to grow in that environment also. Jonathan Feeney – Janney Montgomery Scott: Okay, thank you very much.

Thank you.

Our next question comes from Andrew Vincent with Morgan Stanley. Please proceed with your question. Andrew Vincent – Morgan Stanley: Thank you. Good morning. I’m just wondering if you could help me tie the guidance together a little better relative to what you said at the 3Q call. You’re taking down the top-line by mid-single-digits to 3 to 4%, but you’ve left your operating profit forecast at mid-single-digits. But now there’s the $0.06 from the peanut butter. And then also am I correct that previously you thought (inaudible) and now you’re saying 4 to 5%. Is that right?

Yes, that’s right. Everything you said there is correct. Remember we had $0.06 from the peanut butter related recall in both 2008 and 2009. Andrew Vincent – Morgan Stanley: So what is going to change then that’s going to allow you to lower top-lines until we get the same level of operating profit even though you’ve got an incremental $0.06 of expense for peanut butter?

Well, I think the reduction in the sales growth that we’ve seen that would lead us to 3 to 4% is not that substantial of a reduction. It’s a fine-tuning of the guidance. We continue to have very good confidence in our cost-savings programs. We’ve also seen, as you saw from the inflation numbers, some moderating of inflation coming down from 5% to 4 to 5%. I think the guidance is not dramatically different from what we said on the third quarter call. Andrew Vincent – Morgan Stanley: And that’s all enough to cover the incremental $0.06 of the peanut butter?

Again, because the $0.06 in both years, if you look at it from a year-on-year perspective, and since the guidance is in percentage changes, it doesn’t really impact our outlook in 2009. Andrew Vincent – Morgan Stanley: Okay, and then the other question I have is just on the activity in U.S. cereal, you highlighted one piece of it which is brand competitive activity, but what are you seeing from private label, which according to the IRI data is gained about a point of share in the latest four weeks.

I think if you look at product label in the U.S., it’s growing. We saw that in the back-half of 2008. We’ll expect they’ll continue to grow. We’re also seeing retailers respond to the current economic environment and push the private label pretty hard. But remember when you’ve got a category growing as strongly as we’re seeing cereal grow, with private label around about 10% of the category, all players within the category are still doing pretty well even within the context with private label growing a little faster than we’ve seen. So our expectations and the way we’ve looked at ’09 is that private label will likely continue at a slightly higher rate. But the category growth and the dynamics for the category remain very positive. Andrew Vincent – Morgan Stanley: Okay, and one last thing, you didn’t mention anything about a step-up in pension expense. Are we to assume that there’s nothing going on there?

Pension expense is largely flat year-on-year. It’s up about one penny of EPS. We made the discretionary pension contribution at the end of 2008 that largely offset any increase in outlying expense either from poor asset returns in 2008 or changes in discount rates. Andrew Vincent – Morgan Stanley: Okay, that’s very helpful. Thank you very much.

Our next question comes from Judy Hong with Goldman Sachs. Please proceed with your question. Judy Hong – Goldman Sachs: Thanks. Good morning everyone.

Good morning Judy. Judy Hong – Goldman Sachs: David, I’m wondering if you can just give us a little bit more perspective on this advertising efficiencies as well as the media deflation issues that you’ve talked about. Clearly media costs are down pretty substantially so you’re getting more bang for your buck. And then at the same time you have these efficiencies that are helping you overall spending. But I’m just hoping that you can give us a little bit more color in some of these activities and how we feel comfortable that in light of some of the share performance weakness that you can continue to get these efficiencies and not see better volume performance.

Judy, that’s a great question. We’re going to go through and detail Cagney the efficiencies, particularly focusing on 2009 where we expect that while we’ve had some benefits in ’08, ramp up in 2009 and I wouldn’t draw any conclusion about our fair share loss relative to our involvement and commitment on advertising because really as we looked at cereal in the U.S. and our support, we are in the brands that remain very strong. There were some efficiencies we saw, parts of the globe. We did see a modest decrease in our snacks advertising, so if anything, snacks was the one area that came down a little bit. So I wouldn’t be reading too much into that. You’ve got to remember when you look at it, advertising trucks is foundational to our model. We saw spending at (inaudible) which is double our peer group average at over 8%. And really the areas we’re focusing on were the things like commercial production will take you through that Cagney of media efficiencies and media mix. And we did see the start of some modest deflation at the back part of 2008, which we expect to increase into 2009. And when you look at 2008, particularly Q4, you’ve got to remember that our comps in Q4 last year were up 26%. So while we were down Q4 this year, if you added the two together, the down Q4 this year and the 26, we’d still be up nearly double digits for both years. So I wouldn’t be reading too much into it and we will give you a bit more flavor on the productivity and efficiency initiatives at Cagney Judy. Judy Hong – Goldman Sachs: Okay, and then just a little bit more color in terms of some of the trends that you’re seeing in Europe in that both from a retail perspective and then from a competitive perspective.

Well, Europe remains a very challenged economy as we’ve seen in most markets around the world. We did see a fair amount of inventory reduction in the back part of the year, second-half of ’08, particularly across France, Spain, and Italy, a little less so in the UK. We think that will continue as some of the retailers in continental Europe try to manage their cash flows and pull down inventory. But our performance has been pretty positive. The cereal category in a market like the UK is still growing strongly, doing pretty well in a number of the markets across Europe. But still, I think all in all, our view is hopefully conservative that low single-digits is a reflection of the stress that’s going on there across the consumer base and some of the challenges that we’re seeing on inventory reduction. Judy Hong – Goldman Sachs: And then John, I think in the first half, you’ve alluded to some increased competition in Mexico. John A. Bryant: For next year? Judy Hong – Goldman Sachs: No, in the first half of ’08, I’m wondering if the competitive activity has gotten better. John A. Bryant: Well, it bounces around a bit. I think we saw probably pretty aggressive competitive activity in Q3. That abated in Q4. We had pretty strong programs and you saw our performance come back. But again in Latin America, I think hopefully we’re taking a pragmatic view. Again the economy is slowing a little bit there, particularly driven by the fact that oil’s coming down and a lot of them are dependent on oil. But still, we think Latin America will grow mid-single-digits. We did pull out of Q1 to a lesser extent the first half being slightly tough for comps. Again, we are seeing retailers reduce inventories a little bit. It’s a lot harder to measure there, but nothing too unusual Judy. Judy Hong – Goldman Sachs: Okay. Thank you.

Our next question comes from Robert Moscow with Credit Suisse. Please proceed with your question. Robert Moscow – Credit Suisse: Thank you. I noticed you didn’t mention any inventory reduction in the U.S. at the end of the year. I wanted to know if you’re seeing stable inventory in breakfast cereal. And also, can I ask, I’m getting a $75 million pre-tax charge for peanut butter. How do you need to spend that money? What are the elements of the recall that that money is going to go to? And then lastly maybe you could tell us a little bit about this box size test production that you’re doing in the Michigan area. How big of a change are we talking about in terms of box size?

Well, the first one, inventories in the U.S., really the only things we saw that were noticeable is we did end Q3 with frozen foods higher because we had a price increase at the end of Q3. So we saw those come down in Q4, which is a natural event. On cereal we saw our inventories come down Q3 to Q4, which we believe is a very positive thing working with our retail partners. We have a big chunk of our customers (inaudible). So we work with them to manage those inventories tightly, but we didn’t really see it apart from those two smallish areas. On peanut butter, the cost of the recall in 2008 was about $34 million. And if you look at that, about half of that cost was due to inventory, about a third was because of styles reversal that we had to take. And about a sixth was the cost to actually retrieve all of the products given the complexity of the channels that some of those products were through. If you come to 2009, really you’ve got about a third of the cost is reversal of styles and then the cost to retrieve. And then we have two-thirds of the 2009 is an estimated business disruption. So that one is very tough. We believe we’ve made an appropriate estimate. We don’t think it will be higher than the $0.06 or the two-thirds disruption is about $0.04. But it’s very complex. We moved with speed. We used third parties. We did everything we could to ensure that as soon as we know we had a problem we took every step to protect our consumer base and to work with our consumers to proactively remove all of the product as quickly as possible. And while it says a lot, we think the investment was absolutely important and critical. Robert Moscow – Credit Suisse: And then the box size test.

The box size test, Rob, started on the 26th of January in Detroit, so we’re not even two weeks in, so it’s a little premature. Our intent there is hopefully within three months or so, by the time we get to first quarter we may have some preliminary data. I doubt it’s going to be that conclusive. But the intent with that is purely to try and help consumers and in so doing, help ourselves and the environment by bringing down the amount of packaging we use, which will enable us to use more optimization in the way we cube out trucks to bring down the number of trucks on the road. So a big initiative if it works. We just have to see how consumers respond, so not much to report at this point. Robert Moscow – Credit Suisse: Okay, would it be accretive to price per pound with this box size change?

No, it would make no difference. It would be critical for us to ensure that the amounts in each box, whether it was a tall box or a somewhat squattier box was exactly the same, so consumers did not think there was any change in the value proposition. Robert Moscow – Credit Suisse: Thank you.

Thank you.

Our next question comes from Andrew Lazar with Barclays Capital. Please proceed with your question. Andrew Lazar – Barclays Capital: Good morning.

Good morning. Andrew Lazar – Barclays Capital: So David, in listening to your comments around the fourth quarter and market share performance in cereal in such in a somewhat competitive environment and what not, that I understand. But in looking at perhaps some of the trends around cereal for long phase line sales growth. That’s something that you’ve talked about in the past I guess perhaps normalizing a little bit for that promotional environment and looking at the core health of the full price sales if you will. That hasn’t looked as great for Kellogg over the last couple of quarters. I’m trying to get a sense of is that more troubling to you? And if it is, is that something we can expect to start seeing turning up in the right direction and if so what’s driving it because even in this morning’s data from the most recent months, it’s only a month, but it’s kind of continued that trend?

Yes, I think Andrew, clearly we like to see base data and there’s a couple of things going on there. And we’ll show you a couple of charts at Cagney. But if you look at what we call our core business, our top eight SKUs or brands, which is roughly 80% of our business, those top eight and that 80% core gained share for 2008 even in IRI, which as we know is a little distorted. The issue for us is really in the pile, which is normally the case. I’d have to say as we look back at some of the innovations we’ve done in the last 12 to 18 months, we are reviewing those and believe we need to modify them. And then the other final thing that is impacting base not only for us but for most branded players is private label growth because when you look at the base cereal, the only one really growing is private label in base. Almost all of the branded competitors are actually down on an IRI basis. Something we’re watching, we feel very positive about our core business, where over 80% of our sales are at and is something that we’re going to need to address and fix. Andrew Lazar – Barclays Capital: Thanks, and then lastly, on the more recent price increases that you’ve taken heading into 2009, that perhaps surprised some just given that it bucks the trend a little bit of what we’ve seen from some of the broader package food players given the cost environment of late. Can you give a sense of how that’s worked its way through? Do you find that those are sticking and that they have gone through as you would have hoped they would?

Well, clearly we had some very tough discussions with our retail partners because when you look just on the base of it and just take some of the spots and some of the reductions we clearly had to explain to them why our inflation was still low running. At that point, it was 5%. It has come down largely to four to five, mainly driven by what’s happened in oil and the price of diesel. But I think you’ll find that it’s a much more complex equation than just looking at the spot price of corn and wheat. And for us, some of the key drivers have been rice packaging and the costs in the plant. But having said all that, as we looked at the hedges we’ve got and the physical contracts, we feel positive on a mark-to-market basis so it’s not like we’ve gone out with the things that have really disadvantaged us. And we’ve explained that to our retail partners and I don’t think anyone likes having to take part in this environment, but we just thought it was necessary to protect the fundamentals of the business and while it was reluctantly accepted, all of those have gone through. Andrew Lazar – Barclays Capital: Great and lastly, how long at this (inaudible) for ’09?

At the moment, we’re about 70% hedged for ’09. Andrew Lazar – Barclays Capital: Great. Thanks very much.

Thanks Andrew.

Our next question comes from Alexia Howard with Sanford Bernstein. Please proceed with your question. Alexia Howard – Sanford Bernstein: Hello there.

Hello Alexia Alexia Howard – Sanford Bernstein: So a question on the futures of cash from this point forward, it seems to me that you have used this long in the private equity market to pick up a few of the decent brands both domestically and internationally. With the increase in the share buybacks announced this morning, how are you thinking about that going forward? Are you expecting to continue to do a similar amount of small sale acquisitions and if so, where are they likely to be targeted?

Alexia, we always remain open to bolt on acquisitions that fit in with our core categories of cereal and snacks. And who knows what will happen. Certainly it’s a very difficult time for many out there, so it may create some opportunities for us. But we, like most companies, are being relatively prudent. We took the opportunity to fund up our pension at the end of the year. We think that’s important for us and for our employees. And while we’ve announced a incremental new $650 million share buyback, more likely than not, that will be skewed to the second half of the year. So we can watch the markets and ensure that we feel very comfortable about what’s going on in the financial markets so that we stay very, very solid as we are. Alexia Howard – Sanford Bernstein: Okay, thank you very much.

Thank you.

Our next question comes from Terry Bivens with JP Morgan. Please proceed with your question. Terry Bivens – JP Morgan: Good morning everyone. David Mackay Morning Terry. Terry Bivens – JP Morgan: Dave, a little bit further on cereal, obviously Nelson (ph) but what we can see so far in January shows that Mills rate price increases move roughly equal to your own, but you guys do show a down market share in the category. They do show it up a little bit. Did they follow your price increase as of mid-January?

I have no clue, but we mentioned in the call that when you look at Q1, we had tough comps and you look at some of the competitors’ activity, they don’t lap that until April 1st of this year. Terry Bivens – JP Morgan: Right.

So our expectation is that in cereal, the first quarter will be tough, but we remain committed to our business and growing it as we go forward. Terry Bivens – JP Morgan: Do you think that it’s possible you may do more promotional activity in U.S. cereal over the course of Q1?

I think what I’ve already said in one of the responses is given we’re in a recessionary environment that we certainly will maintain our focus on advertising and innovation, but we’re also going to tailor our activities to respond to consumer need and the current sensitivities in the marketplace. Terry Bivens – JP Morgan: Okay, and maybe this one’s for John. Just in terms of the currency, John, we look at it I guess going forward as you do on the spot rates, to what extent do you think hedging could mitigate that 9% you showed us?

I think, Terry, we haven’t got any translational hedges in place for 2009. If we did try to put some translational hedges in place, I suspect we’d be going at forward rates, which are probably even worse than the current spot rates, so there’s not much we can do unless those spot rates move from where they are today to reduce that 9% impact. In the past we’ve done some translational hedging because it’s given guidance in reported EPS terms. Because we’re now giving guidance in local currency terms, it’s not our plan to do translational hedging. So you should expect the foreign exchange impact to improve through our P&L as it changes in the marketplace. Terry Bivens – JP Morgan: Okay and there shouldn’t be any transactional mitigation?

We do have some transactional hedges, but most of our manufacturing is local and it’s plants in Europe and plants across Latin America but clearly euro, U.S. dollar, peso, Canadian dollar, we have transactional hedges of varying levels across those currencies already. Terry Bivens – JP Morgan: Okay. Thank you very much.

Thank you.

Our next question comes from David Driscoll with Citigroup. Please proceed with your question. David Driscoll – Citigroup: Thank you. Good morning everyone.

Good morning, David. David Driscoll – Citigroup: David, can you go back over your guidance for 2009 for all of international? What the underlying question is here is the constant currency gross of 9% offset by foreign currency headwinds of 9% with zero GAAP growth (inaudible) in ’09, but that is predicated on the international assumption. And I suppose that I’m just a little worried about what’s happening internationally. General Mills, I believe, made a comment two weeks ago that the international cereal markets were weakening. So go back over your international guidance and then maybe just give a little color on your thought process on the strength of those markets and what could happen in ’09.

Sure, we said that for Europe, low single-digits, mid-south and for Latin America, mid-single digits. I think when you look at market-to-market, we didn’t give any guidance for Asia, but the Australian category, the UK cereal category, the Canadian cereal category, are all still growing very strongly and as are some markets in Latin America. So while they may have slowed a little bit, they’re still pretty positive. The capital may have weakened, but in general terms, our biggest markets are looking fairly positive from a cereal category perspective and we continue to expect to do pretty well in the context of those markets. So I don’t know whether that helps you, but is that what you were after? David Driscoll – Citigroup: It is. The only question I would have is do you guys have any thought process as to why these economic environments in those international markets perhaps is negatively impacting the cereal category. And is this something that is hard to forecast and that would be the big risk in ’09?

I think the less developed markets because the cereal habits by default in the less developed markets is less entrenched. They make up a smaller proportion of our international business. The developed markets with very strong and entrenched cereal habits make up the majority. So you’ll see more volatility no doubt in those less developed markets, but we think we’ve got that factored into our current expectations for 2009. David Driscoll – Citigroup: And just one final question, John, the reduction in the revenue guidance. You called it like just a tweaking of it, but if I may, was that tweaking of it a reduction in the expectation for volume growth? So component-wise you now saw these price increases earlier in January. I imagine that didn’t change, but what then theoretically would have changed? (Inaudible) am I reading that right?

Well, I think in addition to volume, there’s also some slowing down of mix as we’ve gone through 2008. So as you go into a recession, you should probably expect less mixed-growth than we had historically so there’s a number of factors that can slightly slow that sales growth. David Driscoll – Citigroup: Great. Thank you so much.

Our next question comes from Eric Katzman with Deutsche Bank. Please proceed with your question. Eric Katzman – Deutsche Bank: Hi, good morning everybody. I guess a few follow-ups, first on Dave’s question about the volume hit or adjustment to ’09, do you have any sense as to how much of the inventory de-loading that you’re seeing from the retailers? How much do you think that primps your ’09 volume growth.

It’s very hard to put a real measure on that. I know when you look at volume in the fourth quarter, we probably saw an inventory reduction most pronounced in Europe. That’s where our volume was weakest. So there is a correlation there. As we look at 2009, we’re probably expecting volume to be flat to slightly down. I would hope to do better, but we think that’s a pragmatic approach to 2009. And I think retailers pulling back their inventories will have an impact on that. But once it’s done, it’s done. It’s normally a very positive thing, you just feel a little pain for a quarter or two and in this environment it’s just more likely than not we’re going to see that certainly in Europe and parts of Latin America, slightly less so, in our view, in North America. Eric Katzman – Deutsche Bank: Okay, and then on the peanut butter recall, it’s unclear to me that it’s in the fourth quarter given that it seems like everything’s happened in the first. Is that because the shipments were recorded in the fourth quarter?

Yes, it’s a subsequent event. So we actually had closed our books internally before the recall even occurred. Then the recall occurred and we had to reopen our 2008 books and reverse some of the sales because we’re now picking up those products from customers, write off inventory that was on our balance sheet at the end of the year, and also accrue for the cost of retrieval. Eric Katzman – Deutsche Bank: Okay, and then last question. Based on the slide, I think it shows that your cumulative cost inflation for the last four years through 2008 was about 26%, and I’m wondering how much pricing you’ve taken cumulatively relative to that that would give some comfort to the idea that you haven’t priced above inflation and to the extent that input costs come down in the second half of ’09 that the retailers aren’t going to be overly aggressive knowing that you haven’t fully priced to inflation.

Yes, I think Eric, as we look at it and we talk to retailers about this, if you look at the inflation in our pricing, I haven’t got the absolute number in my head, but maybe it’s 8 to 10% and we can concern that. That’s with a 20% plus increase in costs, so clearly we’ve had a significant offset from productivity. And that would be our intent going forward that we’re going to drive productivity and cost-savings to makes sure that while we’re priced, we remain competitive in the marketplace. Eric Katzman – Deutsche Bank: Okay, thanks. See you at Cagney.

Thanks.

Our next question comes from Chris Growe with Stifel Nicolaus. Please proceed with your question. Chris Growe – Stifel Nicolaus: Hi, good morning. I just wanted to follow up on that point you just made to Erik’s question. You’ve taken pricing in 2009 and you’ve also got a more aggressive promotional environment, so sounds like it’s going to be more competitive, if you will. Is there an intention therefore that promotional expenses should be up in ’09?

Well, I think what we feel on that is that we are going to maintain our focus on advertising and innovation but engage with our consumers and tailor our activities to respond to their current needs in a recessionary environment are clearly looking for more value. So we would expect that there’d be more products bought on promotion than would typically be the case. But we’re going to continue to try and respond to consumers to the extent we can. Chris Growe – Stifel Nicolaus: I had one more question for you just regarding the cost-savings. You mentioned having a little more aggressive level of cost-savings in 2009 based on where inflation shakes out. Your cost-savings could overcome a lot of your cost inflation. If the benefit’s coming through pricing, should we see a pretty solid gross margin expansion in the year as a result?

We’re actually gave guidance in gross margin to be flat year-on-year, so you’re right. The level of inflation is coming down and our savings program’s coming up. We have the potential to do better than that, but at this stage, with the impact of the recall this year and also with the acquisitions, I think we’re flat gross margin, so we saw the right guidance. Chris Growe – Stifel Nicolaus: Okay, and then just to be clear, I think you mentioned it to an extent before, but you said you actually have a translation cost in there but is there an incremental transaction cost for currencies that are part of that 9% figure or is 9% just straight translation.

The 9% is just straight translation. Transactional expense is significant and it’s above that, but we’re covering that within our normal operating model. Chris Growe – Stifel Nicolaus: Okay, that makes sense. Thank you.

Latonya just one last question please.

Okay, our last question will be from Alton Stump with Longbow Research. Please proceed with your question. Phil Turfly – Longbow Research: Good morning. This is actually Phil Turfly calling for Alton. I just wanted to go back to cereal real quick if you guys could talk a little bit about what you’ve been seeing maybe late 2008, early 2009 particularly in regards to the Post cereals, especially under a new owner, and kind of how you’re thinking about that going forward. Thanks.

Phil, I really don’t have any comments to make. I’m sure they’re in the process having finalized these integrations. You’d need to ask them to get more specifics, but nothing that I’m seeing that I would highlight to you on what they’re doing. Phil Turfly – Longbow Research: Okay, thank you.

Thanks.

I would like to turn it back over to management for closing comments.

Thank you very much for joining us on the call.

This concludes today’s teleconference. (Operator Instructions) Thank you for your participation.