Kellogg's plant-based division will use Morningstar Farms as its anchor brand. "It's a pretty stable business, somewhat declining," Cahillane told CNBC's Sara Eisen on "Squawk Box." following the announcement, adding he expects more innovation and brand building from the spinoff since its brands won't have to compete with Pringles or Cheez-It for resources. Kellogg expects it would generate stable revenue over time as a stand-alone company while improving profit margins. In the near term, the spinoff would focus on bouncing back from supply chain disruptions and regaining lost market share. The proposed North American cereal company last year saw sales of $2.4 billion. The tax-free spinoffs are expected to be completed by the end of 2023. The remaining business includes its snacks, noodles, international cereal and North American frozen breakfast brands. Combined, Kellogg's plant-based division and North American cereal business accounted for about 20% of the company's revenue last year. CEO Steve Cahillane said all three businesses have "significant" standalone potential, although the company is exploring alternatives including a potential sale for its plant-based business. Kellogg has been weighing spinoffs as a potential strategy since 2018, executives told investors on a conference call discussing the announcement on Tuesday. It's the legacy North American business that didn't fit management's plans, and today's announcement makes that final," Consumer Edge analyst Jonathan Feeney wrote in a note to clients. "Those who scratched their head in 2012 about the zero-overlap Pringles deal should scratch no longer. 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. 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. as people eat on the go and reach for a greater variety of options in the morning. On Monday, Mondelez said it is acquiring Clif Bar for $2.9 billion.Ĭereal sales, by contrast, have stagnated in the U.S. Kellogg, along with rivals like Frito-Lay-owner PepsiCo and Oreo-cookie owner Mondelez, have leaned into the trend by introducing more snacks and snapping up smaller brands. While the snacking-focused company will maintain dual campuses in Battle Creek and Chicago, Illinois.The announcement Tuesday comes a decade after Kellogg's $2.7 billion purchase of Pringles, which signaled the company's shift to focusing on the global snacks business with people increasingly eating more often between meals. The company said its North American cereal business and the plant-based focused company will remain headquartered in Battle Creek, Michigan. "Their snack business is more globally focused and has more growth potential." "It is splitting now to take advantage of growth opportunities as economies slow and new growth is hard to find in all aspects of the business," said Randy Allen, senior lecturer at Cornell College of Business. read moreĬompanies often split in an attempt to shed a so-called conglomerate discount, where the valuation is lower than the "sum of the parts" if the component businesses are run separately. The decision by Kellogg to split follows similar announcements by global conglomerates such as Johnson & Johnson (JNJ.N) and General Electric Co (GE.N) in the past year and underscores how big companies need to be nimble in their fight for market share. The cereal business would include Kellogg's, Frosted Flakes and Froot Loops, while the plant-based focused firm would be anchored by its MorningStar Farms brand. It will be the biggest of the three and would be led by current top boss Cahillane. Most packaged-food companies, even those without a huge presence previously in the segment such as Hershey Co (HSY.N) and Mondelez International Inc (MDLZ.O), are doubling down on the business through billion-dollar acquisitions.Īfter the split, the snacking division will have brands such as Pop-Tarts, Kellogg's Rice Krispies Treats and frozen breakfast products such as Eggo waffles.
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