A monthlong strike at Kellogg Co. is raising the cereal giant’s costs as it contends with continuing inflation and supply-chain disruptions.

More than 1,000 employees walked off the job at Kellogg’s U.S. cereal plants last month, objecting to the company’s proposals during contract negotiations regarding holiday and vacation pay, retirement benefits and healthcare, according to the union representing the workers.

The...

A monthlong strike at Kellogg Co. is raising the cereal giant’s costs as it contends with continuing inflation and supply-chain disruptions.

More than 1,000 employees walked off the job at Kellogg’s U.S. cereal plants last month, objecting to the company’s proposals during contract negotiations regarding holiday and vacation pay, retirement benefits and healthcare, according to the union representing the workers.

The cereal and snack maker behind Pop-Tarts, Frosted Flakes and Rice Krispies said Thursday that it expects supply-chain bottlenecks and shortages to continue in coming months, boosting costs as the strike aggravates existing difficulties.

“There is no question that today’s business environment is as challenging as we’ve ever seen it,” said Chief Executive Steve Cahillane.

Rising costs for everyday foods like bacon and fruit have raised concerns about inflation. Here’s why you may be paying more for breakfast, and what that says about where prices might be heading in the future. Photo: Carter McCall/WSJ The Wall Street Journal Interactive Edition

Michigan-based Kellogg is among the major U.S. companies where employees are demanding higher pay and expanded benefits as labor shortages persist across industries from food to manufacturing. Union officials have said workers’ wage and health concerns deepened over the course of the Covid-19 pandemic, and some labor leaders have said they see an opportunity to organize more workplaces. Critics have said strikes and other worker demands risk pushing up inflation and muting the U.S. economic recovery.

Mr. Cahillane said Kellogg is negotiating with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represents workers at the company, and he said that the food maker hopes to reach a reasonable conclusion.

Kellogg took steps to prepare in advance for contract negotiations, Mr. Cahillane said, including working to build its cereal inventory. Since the strike, he said Kellogg has enacted contingency plans to keep cereal flowing to grocery store shelves, including deploying white-collar and replacement workers in its plants and importing cereal from its international facilities as distant as Australia.

Kellogg’s four U.S. cereal plants aren’t running at full capacity, Mr. Cahillane said, but production is improving daily. He said that Kellogg is anxious for its striking employees to return and that he believes the company’s current offer is fair, including increased compensation on top of already strong wages and benefits.

The union has said Kellogg is asking its employees for concessions on pay, healthcare and retirement benefits while the company books large profits and as employees work long, difficult hours during the pandemic. Union representatives had no immediate comment Thursday.

“The mitigations are working to help us meet the demand we have in the marketplace,” Mr. Cahillane said in an interview. “But the objective is we’ve got to get people back to work.”

Meanwhile, Kellogg said it is working to temper demand for products where it faces capacity constraints, including cereal, by cutting back on promotions and shifting advertising spending to items like crackers. “We don’t want to create demand we can’t meet,” Mr. Cahillane said.

Kellogg on Thursday raised its sales outlook for the full year. The company said it expects organic net sales—which exclude the effect of acquisitions, divestitures, foreign currency and differences in shipping days—to rise 2% to 3% in fiscal 2021. That is up from the company’s prior guidance of flat to 1% growth in organic net sales.

The company reaffirmed its outlook for currency-neutral adjusted earnings per share to grow about 1% to 2% for the year.

Kellogg posted net sales for the quarter that ended Oct. 2 of $3.62 billion, up 5.6% from the comparable period last year and beating Wall Street estimates. The growth came from emerging markets and from within its snacking brands, the company said. Third-quarter adjusted earnings were $1.09 a share, ahead of expectations of analysts polled by FactSet.

In North America, net sales for the quarter were about flat, with supply challenges weighing on results.

Write to Jesse Newman at jesse.newman@wsj.com and Dave Sebastian at dave.sebastian@wsj.com