Kellogg’s to Split into Three Separate Companies
2023 Target Completion Date
Kellogg’s (K) plans to split itself into three independent companies in tax-free spinoffs. This is anticipated to be completed by the end of 2023. The move will carve out snacking from cereal, as well as establish a stand-alone plant-based business.
Kellogg’s Chief Executive Steve Cahillane expects the product lines will do better if they are distinctly separate, and stated, “Frosted Flakes doesn’t have to compete with Pringles for resources.” As such, the smaller operations intend to become more agile businesses.
Snacks Fuel Growth
The vast majority of the company’s revenue now comes from snacks such as Pop-Tarts, Nutri-Grain, Cheez-It, and Pringles. Last year the division pulled in $11.4 billion, or 80% of the company’s net sales. Snacks will be the biggest of the three new companies. Industry observers contend the shift reflects the food giant’s interest in capitalizing on the trend of people snacking more frequently. It comes on the heels of Kellogg’s $2.7 billion purchase of Pringles in 2012.
Conversely, the food manufacturer has seen sales of cereals flatline as more consumers eat breakfast on the run. Cahillane shared that the plant-based business, which posted 2021 net sales of just $340 million, may ultimately be sold.
Bringing Innovation to the Market
Cahillane believes the new cereal company will be better able to innovate once it no longer has to compete with other product lines for resources. This could result in more choices for consumers.
Likewise, vegans and vegetarians may see more product options as Kellogg’s struggles to gain market share for its plant-based operation from companies like Beyond Meat (BYND). Morningstar Farms will serve as its core brand, with its range of meat alternatives. In this highly competitive space, consumers could end up winners as they see more to pick from along grocery store aisles.
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