Kellogg to split into 3 companies; 2 will be headquartered in Battle Creek
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.
The companies will be named later on, but are for-now being called "Global Snacking Co.", which will be headquartered in Chicago with a campus in Battle Creek; "North America Cereal Co." and "Plant Co." will remain headquartered in Battle Creek. Kellogg’s three international headquarters in Europe, Latin America, and AMEA will remain in their current locations.
Kellogg’s, which also owns plant-based food brand MorningStar Farms, said Tuesday that the spinoff of the 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.
The Global Snacking Co. will hold onto product offerings that accounts for over 80% of the company's sales. These products include international and domestic snacks, international cereal and noodles, and North American frozen breakfast, like Eggo.
The remaining 20% of the company's assets will be split into two separate companies. One will focus solely on North American ready-to-eat cereals like Frosted Flakes and Raisin Bran.
The last and smallest will take on plant-based meat alternatives, mainly those by MorningStar Farms, a Kellogg company. Kellogg Company is also considering a possible sale of the plant-based branch of the company.
In a conference call with investors, 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.
"These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities." He believes this break will allow each entity the flexibility and autonomy to continue in their respective market.
“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 announced later. The board of directors has approved the spinoffs.
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.
The company has stated that the split has been in the works for some time. Cahillane said, "Obviously during the pandemic, you put a lot of things on pause as you’re just making sure that you can keep people safe, keep food flowing through the system, [and] give back to our communities. But we never stopped exploring value-creation opportunities."
The announcement comes exactly six months after reaching a strike-ending deal with unionized ready-to-eat cereal factory workers. Kellogg workers went on an eleven week strike in 2021 and the company faced consumer criticism after deciding to fire the 1,400 picketing employees. The company took losses and market shares fell during that time.
Market shares in Kellogg rose 4% after the announcement.