Kellogg has announced a plan to split into three businesses. The largest leftover business will be made up of the company’s snack business, which produces 80% of the revenues for the company in its current configuration. The company will split off its cereal business and its plant-based-foods unit into separate companies. Annie Gasparro reports for The Wall Street Journal:
Kellogg Co. said it plans to break up its business into three companies, seeking to jump-start its larger, faster-growing snacks business while helping its namesake cereal brands regain their footing on supermarket shelves.
The move, which Kellogg said would separate snacks such as Pringles, Cheez-Its and Pop-Tarts from cereal-aisle staples including Frosted Flakes and Froot Loops, aims to create more agile, focused companies and marks a shift from the food industry’s decadeslong strategy of pursuing acquisitions and building scale.
“Bigness for bigness sake doesn’t make a lot of strategic sense,” said Kellogg’s Chief Executive Steve Cahillane, who will head the $11.4 billion snacking business, which accounted for 80% of Kellogg’s net sales last year.
The Covid-19 pandemic delivered a boost in sales for Kellogg and other food makers, as families prepared more meals in their kitchens while they stayed home from work and school. The grocery industry now is working to retain that momentum, but food makers over the past year have been battered by rising costs for fuel, labor, ingredients and packaging, creating what Mr. Cahillane called an unprecedented stretch of inflation.
Kellogg said it expects to complete the split by the end of 2023, with the North America cereal business potentially separating first, followed by its plant-based-foods business as the third company. Kellogg said it also is considering selling the plant-based-foods unit, which is predominantly composed of the MorningStar Farms brand. It has yet to name the individual companies.
Action Line: Maintaining focus on what works is very important. Perhaps that’s the point of this Kellogg breakup. The focus for any investor should be on developing a plan that works for you and cutting out the rest of the noise. If you need help, get in touch.
E.J. Smith - Your Survival Guy
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