Iconic breakfast brand Kellogg became the latest US corporate giant to announce a dissolution and on Tuesday revealed plans to split into three companies, sending its stock price higher.
The company — known for such ubiquitous brands as Corn Flakes and Pop-Tarts — will spin off its North American cereal business into a new company, while a second company will house Kellogg’s plant-based businesses.
The remaining company will be positioned as a high growth snack company with exposure to emerging markets. That unit — which will also house its international grain operations — accounted for about 80 percent of Kellogg’s $14.1 billion in 2021 revenues.
“This will create new possibilities and opportunities for all three companies,” Kellogg chief executive Steve Cahillane said on a conference call with analysts.
The companies, yet to be named, will initially be known as Global Snacking Co., North America Cereal Co. and Plant Co. The latter two are established through tax-exempt spin-offs.
North American Cereal, which covers the United States, Canada and the Caribbean, “will be dedicated solely to grain extraction and will not have to compete for resources with a fast-growing snack food business,” said Cahillane, who will lead the new snack food company.
North American Cereal and Plant Co. would retain its headquarters in Battle Creek, Michigan, while Global Snacking will have dual headquarters – in Battle Creek and Chicago.
Leadership for the other two companies has not yet been announced.
Kellogg’s announcement follows previous corporate breakups, including General Electric’s November 2021 announcement of a three-company split, which followed a few weeks later, and Johnson & Johnson, which said it would break in two.
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The company’s origins date back to 1894 when WK Kellogg created breakfast cereal from corn flakes and 12 years later founded the Kellogg Company in Battle Creek, Michigan.
Subsequent products included Rice Krispies, released in 1928, and Frosted Flakes, introduced in 1952 with the Tony the Tiger character on the box, who became famous for saying “They’re gr-r-reat!” Slogan.
But the bulk of the company’s revenue now comes from global snack foods, where about 50 percent of sales come from emerging and developed international markets.
Snack brands include Pringles, Pop-Tarts and Rice Krispies Treats, while the group also offers Eggo and other frozen breakfasts and products like noodles in Africa, which Kellogg described as a “rapidly expanding business.”
Kellogg aims to complete the split by the end of 2023, subject to US regulatory approvals.
Kellogg will continue to report as one company in 2022, said Chief Financial Officer Amit Banati.
The Company expects to file the required three-year audited financial statements for each of the ventures in the second half of 2023.
Cahillane said it will “continue as usual for the next 18 months” as the company moves through the process.
He said Plant Co., which will house MorningStar Farms’ alternative meat products, could also be acquired by another company if such an option arises and is better than an IPO.
Praising the move, Briefing.com said the cereal business had “burdened” the higher-margin snack food business, adding, “We also believe that Kellogg’s promising plant business has kind of been buried.”
Shares rose 2.0 percent to end the day at $68.86.
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