Kellogg pops as it plans spin-off of legacy cereal business

by John BIERS

Iconic breakfast food brand Kellogg became the latest US corporate giant to announce a breakup, unveiling plans Tuesday to split into three companies in a move that lifted its share price.

The company — known for such ubiquitous brands as Corn Flakes and Pop-Tarts — will spin off its North American cereal business into a new company, while a second venture will house Kellogg’s plant-based businesses.

The remaining corporation will be positioned as a higher-growth snacks business with exposure to emerging markets. This unit — which will also house the international cereal operation — accounted for roughly 80 percent of Kellogg’s $14.1 billion in 2021 revenues.

“This will unlock and create opportunity for all three businesses,” Kellogg Chief Executive Steve Cahillane said on a conference call with analysts.

The yet-to-be-named entities will initially be known as Global Snacking Co., North America Cereal Co., and Plant Co. The latter two will be created through tax-free spin-offs.

North American Cereal, covering the United States, Canada and the Caribbean, “will be solely dedicated to winning cereal and will not have to compete for resources with a fast-growing snack business,” said Cahillane, who will lead the new snacks company.

North American Cereal and Plant Co. would remain headquartered in Battle Creek, Michigan, while Global Snacking will have dual headquarters — in Battle Creek and Chicago.

Leadership for the other two ventures has not yet been announced.

Kellogg’s announcement comes on the heels of earlier corporate break-ups including General Electric’s November 2021 announcement of a split into three ventures, which was followed a few weeks later and by Johnson & Johnson saying it will break in two.

– Growth markets –

The company’s origins date to 1894 when WK Kellogg created Corn Flakes breakfast cereal, launching the Kellogg company 12 years later in Battle Creek, Michigan.

Subsequent products included Rice Krispies, released in 1928, and Frosted Flakes, which was unveiled in 1952 with the Tony the Tiger character on the box, which became famous for his “They’re gr-r-reat!” tagline.

But the bulk of the company’s revenues now come from global snacks, where about 50 percent of sales come from emerging markets and developed international markets.

Snack brands include Pringles, Pop-Tarts and Rice Krispies Treats, while the group also houses Eggo and other frozen breakfasts and products such as noodles in Africa, which Kellogg described as a “rapidly expanding business.”

Kellogg is aiming to complete the split by late 2023, subject to approval by US regulators.

Kellogg will continue to report as one company throughout 2022, said Chief Financial Officer Amit Banati.

The company expects to produce the required three years of audited financial statements for each of the ventures in the second half 2023.

Cahillane said it will be “business as usual over the next 18 months” while the company moves through the process.

He said Plant Co., which will house the MorningStar Farms alternative meat products, could also be acquired by another company if such an option arises and is better than an initial public offering. praised the move, saying the cereal business had “weighed down” the higher-margin snack business and adding, “we also think that Kellogg’s promising plant business has sort of been buried.”

Shares rose 2.0 percent to finish the day at $68.86. — Agence France-Presse

Subscribe to

Stay in the know with Bilyonaryo’s unparalleled coverage of business news and global industries!

Elevate your understanding of the Philippine business landscape and gain insights into worldwide markets by subscribing to our dedicated channels. Receive breaking news, in-depth analyses, and exclusive interviews with industry leaders directly on Viber, WhatsApp, and Facebook. Stay informed and empowered with our Email Newsletter, delivering curated content right to your inbox.

Don’t miss out on crucial updates and trends shaping economies and businesses both locally and internationally.

Join Bilyonaryo’s community today by clicking the button below to subscribe and stay ahead in the dynamic world of business.

Share this Bilyonaryo story