Kellogg Co (NYSE: K) revolutionized breakfast a century ago when founder W.K. Kellogg invented the toasted corn flake and rescued American palates from the bland mush of boiled grains. Although Kellogg is best known for its iconic cereal brands—ranging from Rice Krispies to Froot Loops—the company has expanded its portfolio of products over the years via acquisition and now offers fare as diverse as MorningStar Farms’ line of vegetarian foods and Keebler cookies.

The company faces a challenging economic environment characterized by weak consumer sentiment and commodity inflation. Consumers have reined in spending on branded items at the grocery store, opting for cheaper private-label offerings instead. And Kellogg faces inflationary pressures on several fronts, including agricultural commodities, packaging, and the fuel required to distribute its products. In fact, management revised its estimate of cost inflation to 9 percent from 6 percent for its 2011 fiscal year. In response, Kellogg raised prices on many of its products, but this action only partially offset the rise in input costs.

As such, Kellogg’s stock is trading toward the lower end of its 52-week trading range. However, this presents investors with an opportunity to build a position in a consumer staple that yields a compelling 3.4 percent. Kellogg offers a quarterly payout and has raised its dividend in 46 of the past 50 years. Additionally, the company has a history of share repurchases and is presently in the midst of a $2.5 billion stock buyback program set to conclude at the end of 2012.

Although Kellogg’s third-quarter revenue increased 4.9 percent year over year to $3.3 billion, its operating income declined 14.2 percent from the year-ago period to $464 million. Management also lowered the range of its guidance for 2011 earnings per share to $3.35 to $3.41 from $3.42 to $3.49.

But Kellogg is focused on recovering lost momentum with a pipeline of innovative products along with investments in brand building and supply chain efficiencies. Although the company’s supply chain initiatives should improve margins over the long term, they weighed heavily on its recent quarterly results. Management estimates that more than half of the decline in operating income stemmed from these investments.

The catchphrases used by Kellogg’s cereals’ mascots in its television commercials are a cultural touchstone for most Americans. The firm recognizes that extensive marketing is necessary to maintain its dominant brand. Indeed, Kellogg commits 9 percent of revenue toward marketing and advertising.

Kellogg’s industry-leading brands command a 33 percent share of the US cereal market and North America accounted for 76.2 percent of the firm’s third-quarter operating profit. Kellogg’s international operations are largely concentrated in developed markets, such as Europe. Further expansion into emerging markets will eventually be a key growth driver for the firm.