There are many ways for a company to grow, and Kellogg is taking its business to new heights by branching out into three independent public companies.
The food manufacturing company is sectioning off its iconic brands into snacking, cereal, and plant-based businesses, with shares rising as high as 8% in premarket trading.
Kellogg’s decision came on Tuesday, an entire decade after it purchased Pringles for $2.7 billion, signaling the company to shift its focus on the global snack business with more people leaning towards grabbing snacks between meals.
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The company is not alone as others like PepsiCo and Mondelez are leaning towards the snack industry, taking smaller brands.
In contrast, due to people’s eating habits, cereals are not as sought after. As a result, Kellogg’s previous bestsellers are no longer seen as growth drivers. However, the pandemic saw a resurgence in sales only for a brief period.
Regardless of the positive revival, Kelloggs expects flat revenue growth in the cereal business in the future.
Since 2018, the company has been contemplating spinoffs as a potential strategy. CEO Steve Cahillane said three businesses have significant potential, and the company is exploring a potential sale for its business.
The names for the companies are yet to be decided, and proposed management teams for the spinoff companies will be announced in the first quarter of 2023. Cahillane will also stay as the chief executive for the global snacking company.
The snacking company will have brands like Pringles, Cheez-It, and Pop-Tarts under its umbrella, which reported $11.4 billion in revenue in 2021.
10% of the sales came from the growing noodle business in Africa, while another 10% comes from Eggo waffles and the frozen breakfast business.
Callihane says the snack-focused company will also add to its portfolio through acquisitions.
In 2021, the North American cereal company generated $2.4 billion. Due to the results, the spinoff will focus on bouncing back from supply-chain disruptions and regaining lost market share.
“It’s a pretty stable business, somewhat declining,” said Cahillane. However, he expects more brand innovation and building from the spinoff with less competition in the market today.
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