Kellogg announced Tuesday that it plans to separate into three independent public companies, sectioning off its iconic brands into distinct snacking, cereal and plant-based companies.
Shares of the company rose 8% in premarket trading on the news.
Kellogg’s North American cereal business and plant-based division together accounted for about 20% of its revenue last year. The remaining business includes its snacks, noodles, international cereal and North American frozen breakfast brands, which altogether represented about 80% of its 2021 sales.
“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities,” CEO Steve Cahillane said in a statement.
The company said it would also explore other strategic alternatives, including a potential sale, for its plant-based business, beyond the planned spinoff.
Kellogg said it expects the tax-free spinoffs will be completed by the end of 2023. Names for the new companies have not been decided yet, and proposed management teams for the two spinoffs will be announced at a later date. Cahillane will stay on as chief executive of the company focused on global snacking.
Headquarters for the three businesses will remain unchanged. Both the North American cereal company and the plant-based food spinoff will be located in Battle Creek, Michigan. The global snacking company will keep its corporate headquarters in Chicago, with another campus in Battle Creek.
Cheez-It, Pop-Tarts and RXBAR are among the brands that will be housed under the global snacking company, which had $11.4 billion in sales last year. About 10% of those sales come from its growing noodle business in Africa, while another 10% comes from Eggo waffles and the rest of its frozen breakfast business. North America will represent nearly half of the company’s revenue.
Kellogg’s plant-based division reported $340 million in sales and roughly $50 million in earnings before interest, taxes, depreciation, and amortization last year. The planned spinoff would use its Morningstar Farms brand as its anchor. The spinoff offers investors another plant-based stock play besides Beyond Meat, which hasn’t turned a quarterly profit in nearly three years and has seen its shares tumble 63% this year.
The proposed North American cereal company will include Froot Loops, Special K and Rice Krispies. Last year, the business saw sales of $2.4 billion. In the near term, the spinoff would focus on bouncing back from supply chain disruptions and regaining lost market share. Kellogg expects it would generate stable revenue over time as a standalone company while improving profit margins.
Read the full press release here.
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