US-based cereals giant, Kellogg is planning to break into 3 independent public companies focusing on snacks, cereals and plant-based businesses.
The decision comes a decade after Kellogg’s US$2.7 billion purchase of Pringles, which signaled the company’s shift to focusing on global snacks business as consumers eat more often between meals.
Cereal sales, by contrast, have stagnated in the US as people eat on the go and reach for a greater variety of options in the morning. Brands including Special K, Froot Loops and Rice Krispies had for decades been a foundation of Kellogg, but are no longer seen as key growth drivers for the company. The pandemic briefly revived the cereal category as more consumers ate breakfast at home, but Kellogg expects flat revenue growth for its North American cereal business in the future. In 2021, cereal sales reached only US$2.4 billion.
Kellogg has been weighing spinoffs as a potential strategy since 2018, according to its spokespersons. Kellogg CEO Steve Cahillane said all 3 businesses have significant standalone potential, although the company is exploring alternatives including a potential sale for its plant-based business.
Kellogg’s plant-based division and North American cereal business accounted for about 20% of the company’s revenue last year. The remaining business includes its snacks, noodles, international cereal and North American frozen breakfast brands.
Names for the new companies have not been finalised yet so as the management teams. Cahillane however will stay on as Chief Executive of the global snacking company which will house snack brands like Pringles, Cheez-It and Pop-Tarts amongst others which reported sales of US$11.4 billion in 2021. More acquisitions are also planned for the new snacks unit.
Meanwhile, Kellogg’s plant-based division will use Morningstar Farms as its anchor brand. In 2021, this division reported US$340 million in turnover. The creation of a new company will compete alongside famous meat alternative brands like Beyond Meat.
The spinoffs are expected to be completed by the end of 2023.
