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Tuesday, September 27, 2022

There will soon be three separate Kellogg entities: Snap, Crackle, Pop!

BusinessThere will soon be three separate Kellogg entities: Snap, Crackle, Pop!

The 116-year-old Kellogg Company, which produces such well-known brands as Frosted Flakes, Rice Krispies, Pringles, and Eggo, has announced that it plans to divide itself into three separate businesses that would each concentrate on cereals, snacks, and plant-based foods.

Kellogg’s, which also owns the plant-based food brand MorningStar Farms, said on Tuesday that the separation of the unnamed cereal company and the plant-based food company should be finished by the end of the year following the one in which it takes place.

The company’s snack segment, which produces Cheez-Its, Pringles, and Pop-Tarts, amongst other brands, contributed $11.4 billion to the company’s total net sales in 2021, which amounted to $14.2 billion overall. Another $2.4 billion in sales were accounted for by cereal during the previous year, while plant-based products brought in around $340 million.

During a conference call with investors, CEO Steve Cahillane said that the firms would benefit from being split apart since it would make them more agile and better equipped to concentrate on their respective goods. According to him, each of the three companies has the ability to be successful on its own.

The international snacking firm will soon have a new chairman and chief executive officer in the form of Cahillane. The cereal manufacturer will announce the members of its management team at a later date. The spinoffs have been given the go light by the board of directors.

Shareholders will get a proportional number of shares in the two spinoff companies based on the amount of Kellogg stock they now own.

Since 2018, when it announced a strategy to focus its resources into its highest-growth categories, such snacks, according to Cahillane, Kellogg has been closely assessing its portfolio. Cahillane said this has been going on ever since. 2019 was the year that Kellogg completed the sale of its fruit, cookie, pie crust, and ice cream cone businesses to the Ferraro Group.

Kellogg has spent the last few years honing down on its rapidly expanding line of snacks, which now account for almost 80 percent of the company’s total revenue. For example, between 2019 and 2021, there was a 13 percent increase in sales of Pringles, whereas there was a 9 percent increase in sales of Cheez-Its.

Cereal sales in the United States have been on the decline for years as customers have shifted their attention to more portable items such as energy bars. They saw a slight increase in the number of individuals sitting down for breakfast in their homes while there was a pandemic lockdown. But that year, sales were down once again. According to NielsenIQ, sales of cereal in the United States remained unchanged in the 52 weeks leading up to May 38.

In addition, Kellogg’s cereal business was severely impacted by a fire that occurred at a mill in Memphis, Tennessee, as well as by a walkout that lasted for ten weeks and included more than one thousand employees working at locations in four different states. The walkout was called off when the corporation assured its temporary employees that they would get increased compensation, improved benefits, and a more direct route to permanent employment.

Kellogg has said that it would investigate additional opportunities for its plant-based business, which may include the possibility of a sale. According to Cahillane, the plant-based category is under severe competition from new and, in many instances, unprofitable entrants. As a result, Kellogg has to be more flexible and aggressive in order to combat this. After many years of steady expansion, the market for plant-based meat in the United States has reached a plateau in recent months, adding to the existing strain. According to NielsenIQ, sales of plant-based meat in the United States remained unchanged for the year that ended on May 28; however, over the same time in 2021, sales increased by about 20 percent.

The headquarters of the cereal and plant-based meat industries will continue to be located in Battle Creek, Michigan. Kellogg was established in this city in 1906. The firm that makes snacks will have its main office in Chicago, and its campus will be in Battle Creek. The present sites of Kellogg’s worldwide headquarters in Europe, Latin America, and the AMEA region will continue to serve in those capacities.

Large corporations like General Electric, IBM, and Johnson & Johnson are just a few examples of the organisations that have recently began to fragment at a rapid rate; nevertheless, such fragmentation is far less common among food manufacturers. The most recent significant division in the industry occurred in 2012, when Kraft was broken up to become Mondelez.

On Monday, Mondelez made its own significant move in the snack industry by announcing that it would purchase Clif Bar & Co., a significant energy bar firm. The transaction worth around $2.9 billion is anticipated to be finalised within the third quarter.

Kellogg Company stock increased by over 2 percent on Tuesday, closing at $68.86 per share.

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