Kellogg to split into three independent companies

The cereal maker, whose EU headquarters are located in Dublin, is to break up into three companies focused on snacks, cereals, and plant-based food, in an effort to promote growth

Kellogg expects to separate the cereal unit first, with both transactions completed by the end of 2023. Picture: Gabby Jones/Bloomberg.

Kellogg Co said it will split into three independent companies, sparking a rally in the food conglomerate’s shares.

The maker of Corn Flakes and other well-known breakfast cereals said the companies would focus on global snacking, cereals, and plant-based foods - giving each greater autonomy and room for growth. 

The breakup will occur through two tax-free spinoffs, said the US-based company, whose European headquarters are located in Dublin.

“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities,” Chief Executive Officer Steve Cahillane said in the statement.

The split reflects Kellogg’s expansion well beyond its roots as a maker of breakfast cereal. The pandemic drove heavier demand for packaged goods and snack foods, while plant-based foods also have gained in popularity in recent years. 

Kellogg expects to separate the cereal unit first, with both transactions completed by the end of 2023.

Shares in the company jumped as much as 5.5% following the announcement today - the most in more than a year. 

The stock had gained 4.8% this year through Friday’s close in New York, far outpacing the 23% decline in the S&P 500.

The global snack business had sales of about $11.4bn (€10.8bn) last year, while the young plant-based-foods operations - led by the MorningStar Farms brand - accounted for about $340m (€322m). 

“Kellogg’s decision to split into three companies certainly offers an opportunity for its snacks business, but it may be harder for a stand-alone, slower-growth cereal company to outperform in the long term," said Jennifer Bartashus, senior consumer-staples analyst.

"Creating a plant-based pure play is a bold move given the slower-than-expected expansion in 2021 and recent share performance of peers Beyond Meat and Oatly."

The three companies haven’t yet been officially named, and the managers of the cereal and plant-based-foods units will be announced at a later date, Kellogg said. Callihane will remain as the company's CEO.

In a call with investors on Tuesday, Cahillane said the company was focused on bringing back its cereal business following a plant fire and a lengthy strike last year. 

He said the split will let the cereal business allocate its own resources instead of competing with the high-growth snacking business.

Kellogg will also explore strategic transactions, including a possible sale, of its plant-based company, which is known for faux meat versions of burgers and chicken tenders. 

The category had seen major growth for several years, although it has grown more competitive.

• Bloomberg with additional reporting by the Irish Examiner