The Kellogg Company will be splitting up into three separate companies. The company we all grew up with as THE quintessential cereal company, a name that was synonymous with corn flakes, has reached such a point of largesse and global success that it can no longer be managed under one roof, so to speak. It’s also just doing what nearly every other major food company is doing.
The trifecta of new companies will be global snacking, North American cereal, and plant-based foods. All will be independent businesses that will be relied upon as catalysts for growth and stakeholder value, each with their own executives and management teams.
Global snacking will command the $11.4 billion snacking portion of Kellogg’s business, a portfolio that includes well known products such as Pringles and Pop Tarts. This is a hotly contested category, maybe the hottest category of foods right now. General Mills, Mondelēz, and others have all made snacks a high priority, and in most of those cases, companies have been reorganized to make snack foods a central part of business. COVID lockdowns made snacking a big part of the American diet and created a massive sales opportunity. It’s little wonder then why Kellogg’s would want to create a company devoted to it. It already accounts for nearly 60% of Kellogg’s net sales.
North American cereal will encompass the iconic cereals for which Kellogg’s is famous. Corn Flakes, Frosted Flakes, and Special K, to name a few, are the products that have made this classic American company what it is, and it certainly makes sense to form a separate company around them. It isn’t a category as powerful as snacking, but at $2.4 billion in net sales last year, it’s no slouch. Still, it will only be relied upon for steady growth and revenue rather than the aggressive pace set for snacks.
Lastly, the plant-based business will be mostly comprised of Kellogg’s MorningStar Farms brand. Other offerings not under the MorningStar name could come along as well. However, Kellogg’s has stated that creating this company and then selling it could be an option too. If it’s kept, it will be expected to show strong growth through greater awareness and penetration. As it stands, the category only accounts for $340 million, so one could understand its expendability, but it’s that expendability that makes this the hot storyline.
Moves like this involve lots of moving parts to accomplish, most of which are concerned with reviews and approvals done by a board of directors and the IRS. In addition to all of that will be the reviews and audits done by the SEC. In all, these fiduciary fun times are expected to take more than a year to finish, but by late 2023 we should have our three separate companies.