Kellogg is taking its business to new heights by branching out into three independent public companies. The move will allow the cereal giant greater flexibility for managing growth while maintaining control of assets that are crucial.
The food manufacturing company is creating new identities for its iconic brands with companies in the snack, cereal, and plant-based businesses. Kellogg also has shares rising as high as 8% in premarket trading.
Kellogg’s decision to shift its focus on the global snack business came after an entire decade of purchasing Pringles for $2.7 billion, signaling that more people are grabbing snacks between meals.
The food industry is becoming more competitive with the big companies like Pepsico and Mondelez taking smaller brands.
Kellogg’s cereal sales have declined in the past few years due to people’s new eating habits. Its bestsellers no longer have the same traction to be growth drivers, but the company saw a brief resurgence during the pandemic.
Kelloggs expects cereal revenue growth to remain flat in the future.
In 2018, the CEO of this company said that they were considering spinoffs as a potential strategy. Three businesses have significant potential and now it’s being explored whether or not these companies could be sold for their value.
The companies are yet to receive a name, and Kellogg’s spinoff companies will have their proposed management teams announced in the first quarter of 2023. CEO Steve Callihane is also set to be the chief executive for the global snacking company.
Kellogg’s snacking company will have brands like Pringles, Cheez-It and Pop Tarts under its umbrella, which reported $11.4 billion revenue in 2021.
The company has seen a dramatic increase in sales from Africa, where 10% of the business comes from noodles. They also have 10% growth across other markets like Eggo waffles and frozen breakfasts for breakfast.
The company also plans to grow its snack portfolio through acquisitions.
The North American cereal company has been generating a moderate amount of money for years now. In 2021, they generated $2.4 billion dollars and will be focusing on regaining lost market share from supply chain disruptions as well as other factors that have caused them to lose business.
“It’s a pretty stable business, somewhat declining,” said Cahillane. However, the CEO expects more innovation and building from the spinoff with less competition in today’s market.