The company that makes Mini-Wheats cereal, Pringles potato crisps and MorningStar veggie burgers now plans to see those each of those three product lines go their separate ways by the end of next year.
Michigan-based Kellogg Co. said Tuesday its board has approved a plan to break into three yet-to-be-named independent publicly-traded companies by way of two spinoffs. One would be its ready-to-eat breakfast cereal business for the U.S., Canada and the Caribbean; the other, its plant-based foods business for the same regions.
The company’s remaining worldwide product lines — such as its global snack foods business, its North American frozen breakfast food lines and its international cereals and noodles businesses — would remain with the third company, which would be the biggest in terms of sales.
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The global snacking company, which last year booked net sales of $11.4 billion, would include brands such as Pringles, Cheez-It, Eggo, Pop-Tarts and Nutri-Grain, among others (all figures US$).
That business, on its own, is expected to be a “higher-growth” company than today’s Kellogg, the company said, with a more “growth-oriented” portfolio, aided by “more focused resources and attention to brand building, innovation, and international expansion of world-class brands.”
The North American breakfast cereal business, which last year had net sales of $2.4 billion, would include Kellogg’s lone Canadian plant, at Belleville, Ont., where it makes the Mini-Wheats cereal line. Kellogg shut down its other major Canadian breakfast cereal plant at London, Ont. in 2014.
This business’ brand portfolio also includes Corn Flakes, Frosted Flakes, Froot Loops, Special K, Raisin Bran and Kashi, among others. The Rice Krispies cereal brand would remain with the cereal business, while the Rice Krispies Treats product line would go to the snack company.
As a stand-alone company, the North America cereal business would have “greater strategic focus and operational flexibility” and will direct capital and resources toward “unlocking growth, regaining category share and restoring and expanding profit margins.”
In the near term, Kellogg said, the North American cereal spinoff would focus on “the restoration of inventory, profit margins and share position following 2021 supply disruptions.”
The plant-based foods company, with 2021 net sales of about $340 million, would also be focused on the U.S., Canadian and Caribbean markets, as a “leading, profitable, pure-play” firm led by the MorningStar Farms brand of vegan and veggie plant-based foods.
The plant-based business, Kellogg said, marks “a significant opportunity to capitalize on strong long-term category prospects by investing further in North America penetration and future international expansion.”
That said, while it “intends” to spin off the plant-based business, Kellogg added it will consider other alternatives for that business — “including a possible sale.”
Reuters on Tuesday quoted market observers as saying the plant-based business, while profitable, faces a “tough environment” without Kellogg’s support.
Gary Stibel of New England Consulting Group told Reuters “the rate of growth in plant-based is slowing and will continue to slow.” Kellogg CEO Steve Cahillane was quoted as saying last month on a call with analysts that the meat alternatives sector generally was in a state of “irrational exuberance” up until lately.
Kellogg’s two proposed spinoffs would involve tax-free distributions of shares to Kellogg Co. shareholders, who’d get shares in the two spun-off entities on a pro-rata basis relative to their Kellogg holdings.
The North America cereals spinoff is expected to happen before the plant-based spinoff, Kellogg said. The company expects both to be completed by the end of 2023 pending the usual closing conditions and regulatory approvals.
The North America cereals and plant-based spinoffs would both remain headquartered at Kellogg’s current home base at Battle Creek, about 150 km west of Detroit; the global snacking business would be headquartered at Chicago, with a campus at Battle Creek. — Glacier FarmMedia Network
