Why The Kellogg Company Is Splitting Up Its Business
The Kellogg Company is synonymous with some of your favorite breakfast cereals, from Frosted Flakes to Rice Krispies. But the company's brand portfolio extends far beyond the cereal aisle. Kellogg's is behind countless popular products, including snacks (like Pringles and Cheez-Its), plant-based proteins (under the MorningStar Farms brand name), and other breakfast items (such as Pop-Tarts) (per the Kellogg Company website).
However, according to a Tuesday, June 21 press release (per PR Newswire), Kellogg's will soon separate into three separate companies; each with a distinct focus. Broadly speaking, the original Kellogg's brand will focus on the global snacking market, while the two tax-free spin-off companies will encompass North American cereals and plant-based foods, respectively.
Kellogg's is just the latest company to announce a split. In November 2021, Johnson & Johnson decided to separate into two different companies, reported CNBC, with one focusing on consumer goods and the other encompassing pharmaceuticals. That same month, General Electric (GE) announced it would be splitting into three companies, noted Investopedia.
Why is Kellogg splitting up into three separate businesses?
According to the press release, the decision to separate Kellogg's into three companies is a strategic one designed to maximize growth within each category. "These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities," explained Kellogg's Chairman and CEO Steve Cahillane in the press release. "In turn, each business is expected to create more value for all stakeholders, and each is well positioned to build a new era of innovation and growth."
The yet-to-be-named "Global Snacking Co." — which will also include international cereals and noodles along with North American non-cereal breakfast foods — represented 80% of Kellogg's net sales in 2021, or $11.4 billion. Cereals and plant-based foods, in contrast, earned the company $2.4 billion and $340 million, respectively (per the press release).
Currently, Kellogg's is hoping to launch the two spin-offs by the end of 2023, as noted the press release.