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Kellogg is distinguished in 3 companies that focus on snacks, cereals and plant-based foods

Kellogg plans to split into three independent public companies, distributing its iconic brands to a variety of snacks, cereals and vegetable-based businesses.

The company’s shares rose 8% in pre-market trading, but closed only 1.9%.

Tuesday’s announcement comes a decade after Kellogg bought $ 2.7 billion from Pringles, which the company said focused on the global snack business because it eats more and more meals. Kellogg, along with Frito-Lay owner PepsiCo and Oreo cookie owner Mondelez, has leaned toward the trend by introducing more snacks and getting smaller brands. On Monday, Mondelez said it was buying Clif Bar for $ 2.9 billion.

Cereal sales, on the other hand, have come to a halt in the U.S. because people eat from everywhere and reach for plenty of opportunities in the morning. Brands including Special K, Froot Loops and Rice Krispies have been Kellogg’s base for decades, but are no longer seen as the company’s main growth engine. The pandemic briefly revived more cereal consumers as they ate breakfast at home, but Kellogg expects revenue growth for the North American cereal business in the future.

“Those who violated the Pringles agreement over zero in 2012 would not be violated any more. It is a North American business legacy that did not fit the management’s plan, and today’s announcement makes it definitive,” wrote Consumer Edge analyst Jonathan Feeney. notice to customers.

Kellogg has been making spinoffs as a potential strategy since 2018, executives told investors in a conference call to talk about the announcement on Tuesday. CEO Steve Cahillane said the three businesses have “significant” stand-alone potential, although the company is looking at alternatives, including potential sales for the plant-based business.

Together, Kellogg’s plant-based division and North American cereal business accounted for about 20% of the company’s revenue last year. The rest of the business has its own snacks, noodles, international cereals and frozen North American breakfasts.

The tax-free spinoff is expected to be completed by the end of 2023.

The names of the new companies have not yet been decided, and the proposal for the two spinoff management teams will be announced in the first quarter of next year. Cahillane will continue to serve as CEO of Global Snack.

The business will take on brands such as Pringles, Cheez-It, Pop-Tarts and RXBAR and earned $ 11.4 billion last year. About 10% of these sales come from the growing noodle business in Africa, and another 10% comes from Eggo waffles and frozen breakfasts. In North America it will be almost half of the company’s revenue.

The snack-focused company will also be looking to add to its portfolio through shopping, according to Cahillan.

The North American cereal company had sales of $ 2.4 billion last year. In the short term, spin-offs would be aimed at returning from supply chain disruptions and regaining lost market share. Kellogg hopes to generate stable revenue over time as a self-employed company while improving profit margins.

“It’s a pretty stable business that’s going to decline a bit,” Cahillan told CNBC’s Sara Eisen on “Squawk Box.” following the announcement, he added that he expects innovation and brand building from the spinoff, as his brands will not have to compete with Pringles or Cheez-Ite for resources.

Kellogg’s plant division will use Morningstar Farms as its anchor brand. Last year, the business reported $ 340 million in sales. If it ends, the spinoff offers investors another game of plant-based stocks in addition to Beyond Meat, which hasn’t made a quarterly profit in nearly three years and has dropped its shares by 63% this year.

The headquarters of the three trades will not be changed. Battle Creek, Michigan will host a North American cereal and plant-based food spinoff. The global trading company will retain its corporate headquarters in Chicago, along with another campus in Battle Creek.

Kellogg has not yet decided how he will distribute his dividend among the three companies, Cahillan told CNBC.

Read the full press release here.

Kellogg is distinguished in 3 companies that focus on snacks, cereals and plant-based foods

Source link Kellogg is distinguished in 3 companies that focus on snacks, cereals and plant-based foods

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