Kellogg's Split
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business

Snap, crackle, pop: Kellogg to split into 3 companies

15 Comments
By MATT OTT and DEE-ANN DURBIN

Kellogg Co, the 116-year-old maker of Frosted Flakes, Rice Krispies, Pringles and Eggo, will split into three companies focused on cereals, snacks and plant-based foods.

Kellogg's, which also owns plant-based food brand MorningStar Farms, said Tuesday that the spinoff of the yet-to-be-named cereal and plant-based foods companies should be completed by the end of next year.

Kellogg’s had net sales of $14.2 billion in 2021, with $11.4 billion generated by its snack division, which makes Cheez-Its, Pringles and Pop-Tarts, among other brands. Cereal accounted for another $2.4 billion in sales last year while plant-based sales totaled around $340 million.

In a conference call with investors, CEO Steve Cahillane said separating the businesses will make them more nimble and better able to focus on their own products. All three businesses have significant stand-alone potential, he said.

“Cereal will be solely dedicated to winning in cereal and will not have to compete for resources against the high-growth snacking business," said Cahillane, a former Coca-Cola and AB InBev executive who joined Kellogg in 2017.

Cahillane will become chairman and CEO of the global snacking company. The management team of the cereal company will be named later. The board of directors has approved the spinoffs.

Shareholders will receive shares in the two spinoffs on a pro-rata basis relative to their Kellogg holdings.

Cahillane said Kellogg has been carefully evaluating its portfolio since 2018, when it announced a plan to shift its resources toward its highest-growth categories, like snacks. In 2019, Kellogg sold its cookie, pie crust, ice cream cone and fruit business to the Ferraro Group.

The pandemic put further changes on hold, Cahillane said. But the company felt the time for the spinoff was right as the company has returned to growth. Kellogg's net sales rose 3% in 2021.

Kellogg has been sharpening its focus on its fast-growing snacks for years; they now make up around 80% of the company's sales. Pringles sales jumped 13% between 2019 and 2021, for example, while Cheez-It sales were up 9%.

But the prospects for cereal and plant-based meat are less clear.

U.S. cereal sales have been waning for years as consumers moved to more portable products, like energy bars. They saw a brief spike during pandemic lockdowns, when more people sat down for breakfast at home. But sales fell again in 2021. In the 52 weeks to May 38, U.S. cereal sales were flat, according to NielsenIQ.

Kellogg's cereal business was also rocked last year by a fire at a plant in Memphis, Tennessee, and by a 10-week strike by more than 1,000 workers at plants in four states. The strike ended after the company promised higher wages, enhanced benefits and a quicker path to permanent employment for its temporary workers.

In March, a few hundred other workers at a plant that makes Cheez-Its won a new contract with 15% wage increases over three years.

Kellogg said it would explore other options for its plant-based business, including a possible sale. Cahillane said the plant-based category is seeing fierce competition from new and, in many cases, unprofitable entrants, and Kellogg needs to be more nimble and aggressive to counter that. To add to the pressure, U.S. plant-based meat sales have been plateauing in recent months after several years of strong growth. In the year ending May 28, U.S. plant-based meat sales were flat; in the same period in 2021, they were up nearly 20%, according to NielsenIQ.

The cereal and plant-based meat companies will remain headquartered in Battle Creek, Michigan, where Kellogg was founded in 1906. The snack company will be headquartered in Chicago with a campus in Battle Creek. Kellogg's three international headquarters in Europe, Latin America, and AMEA will remain in their current locations.

Big-name companies have begun to split up at an accelerated pace, including General Electric, IBM and Johnson & Johnson, but such splits are more rare for food producers. The last major split in the sector was in in 2012, when Kraft split to create Mondelez.

Mondelez made its own big play in the snack business on Monday, when it announced it will acquire Clif Bar & Co., a major energy bar company. The $2.9 billion deal is expected to close in the third quarter.

This is a particularly perilous time in the food industry due to rising costs, both for labor and for material. Russia's invasion of Ukraine has pushed grain prices higher and this month, the U.S. reported that inflation is hitting four-decade highs.

Shares of Kellogg rose almost 3% to $69.89 in morning trading Tuesday.

© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

©2022 GPlusMedia Inc.


15 Comments
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On the subject of Kelloggs, can it (or any other company) sell a breakfast product here in Japan that doesn't come loaded with sugar? The only thing I can't eat here comfortably is oatmeal.

1 ( +5 / -4 )

Cereals once known as healthy breakfast turn out to be One of the Unhealthiest Breakfast, along with Granola.

2 boiled eggs with 2 wholemeal buckwheat bread are classic rare countryside/hilly mountain region are healthy breakfast and enough until Lunch.

0 ( +3 / -3 )

On the subject of Kelloggs, can it (or any other company) sell a breakfast product here in Japan that doesn't come loaded with sugar?

You can buy Weetabix in Seiijo Isshi.

2 ( +4 / -2 )

Rice Krispies go snap, crackle, pop. Not Frosted Flakes.

3 ( +4 / -1 )

You can buy Weetabix in Seiijo Isshi.

Yes, I've bought that a few times. I wish they were cheaper here. I once brought back to Japan a 72-pack for about 800 yen.

1 ( +4 / -3 )

Chicago-based Mondelez is buying Clif Bar as well.

Mondelez Buying Clif Bar & Company for $2.9 Billion

https://www.foodprocessing.com/industrynews/2022/mondelez-buying-clif-bar/

-2 ( +0 / -2 )

On the subject of Kelloggs, can it (or any other company) sell a breakfast product here in Japan that doesn't come loaded with sugar? The only thing I can't eat here comfortably is oatmeal.

No regular Corn Flakes?

Too bad you can't get Crispix, that and the flakes are the best.

0 ( +2 / -2 )

The second to last paragraph is complete nonsense. It is not a “particularly perilous” time for the food industry at all – revenue and profit in this sector has been at record levels and has had double digit growth. The outlook is also very strong. The CEOs and senior management of these companies have had massive pay increases over the last two years to, I guess, reflect their success. 

 

It is however a perilous time for consumers who have are fed this false narrative and suffered in the form of disproportionate price increases. Same can be said for the lower level workers also being fed this complete falsehood.

1 ( +3 / -2 )

Cereals once known as healthy breakfast turn out to be One of the Unhealthiest Breakfast, along with Granola.

Not necessarily. Whole grains are perfectly healthy; processed cereals rather less so. The problem of added sugar in some breakfast cereals has been known for a long time.

2 ( +4 / -2 )

BackpackingNepalToday 09:12 am JST

Cereals once known as healthy breakfast turn out to be One of the Unhealthiest Breakfast, along with Granola.

Yeah, but I still like my Cap'n Crunch. Just ordered some Crunchberries on Amazon. Need that nostalgia fix every Sunday and it's marvelous with drinkable yogurt instead of milk.

1 ( +2 / -1 )

I buy the store branded version of Weetabix, sheeple are just paying for the brand name when a cheaper and identical version is available which is why I'm not fussed by Kelloggs issues. In fact, I do that with most food as it's the brand name that people pay more for when the store branded version is pretty much identical and in some cases, are made by a brand name themselves but relabelled.

It's not well known, but the likes of McVities, Muller, Duracell and Andrex make cheaper store branded items of the same quality as their own. With food prices rising, people should start researching a bit to find which of their favourite brands are doing their products on the cheap.

-1 ( +0 / -1 )

Mocheake

Today 11:54 am JST      BackpackingNepalToday 09:12 am JST      Cereals once known as healthy breakfast turn out to be One of the Unhealthiest Breakfast, along with Granola. 

Yeah, but I still like my Cap'n Crunch. Just ordered some Crunchberries on Amazon.

If you have friends or family in the US or Canada, better to have them send you a "care package" with those items. Country specific items are highly overpriced on Amazon, mostly due to limited private sellers. And if you see for $0.01, run. They have fake shipping of $25 that they pocket so they can lure you into buying

0 ( +1 / -1 )

Cereals once known as healthy breakfast turn out to be One of the Unhealthiest Breakfast, along with Granola. 

That is absolutely not entirely true, it all depends on which cereal we are talking about. In the US you have about 100 different varieties to choose from, if you want the healthy ones or if you want the sugary ones it is your choice

2 boiled eggs

On the other hand, egg yolk is high in calories and cholesterol, but as long as it’s all in moderation

with 2 wholemeal buckwheat bread are classic rare countryside/hilly mountain region are healthy breakfast and enough until Lunch

For you, but not everyone wants to eat THAT particular combination. The good thing about the US is you rally have a large variety arsenal of food to choose from and you can research what is best for you or what you should avoid.

-1 ( +1 / -2 )

I personally eat Grape Nuts, Total, Raisin Bran and Shredded Wheat, that’s for my cold cereals, for the hot cereals, it’s Oatmeal or Cream of Wheat. Nothing but the best and you definitely can’t go wrong with that.

-2 ( +0 / -2 )

Organic bran flakes or porage are healthy breakfasts, as long as you don't add too much sugar. I'm happy with a cup of tea to wake me up and then an English muffin and a matcha as a mid morning snack. Each to their own.

-1 ( +0 / -1 )

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