The manufacturer of Frosted Flakes and Rice Krispies is separating into three firms, reflecting the latest corporate trend away from large conglomerates in favor of streamlined enterprises that react to consumers' changing tastes.
Kellogg stated on Tuesday that it will break off its North American cereal and plant-based food operations into separate companies, leaving its most successful division to focus on the sale of snacks such as Pop-Tarts and Pringles that have become entrenched in American popular culture.
Around 80% of Kellogg's sales comes from overseas snacks, noodles, frozen breakfasts, and other commodities that comprise the "Global Snacking Co."
Kellogg highlighted the performance of its worldwide snacking business, emphasizing its expansion in emerging regions.
The second-biggest corporation, named "North America Cereal Co.," will become the largest cereal company in the United States, Canada, and the Caribbean.
The new publicly traded firms have not yet been identified, but the split is likely to be finalized by the end of 2023.
The smallest organization will create only plant-based meals, such as MorningStar Farms products, in an effort to capitalize on the long-term growth possibilities for vegan and vegetarian cuisine in the United States and internationally.
Michael Farr of the investment firm Farr, Miller & Washington stated, "Simply put, each of these businesses has different priorities, and separating them allows the respective management teams to focus solely on achieving the long-term goals, with the potential to deliver more value to its shareholders."
Some investors and management teams favored large conglomerates in the past, citing the advantages of merged operations and personnel.
But the anticipated corporate "synergies" - a boardroom jargon that is now frequently mocked - frequently fell short of expectations.
In addition, Farr stated that since the outbreak of the coronavirus pandemic, the significance of supply chains has been intensively investigated, compelling executives to reevaluate how to function in the most effective manner. This might result in the separation of business lines.
The company anticipates its snacks division to grow even faster than the legacy company, which helps to explain why investors may perceive the snacks business as a more valuable standalone company.
In the meantime, the cereal and plant-based operations are at different stages of expansion: stable sales with the aim of increasing profit margins, and the emergence of a food category with enormous potential.