Food giant Kellogg to split into three separate companies

US food giant Kellogg is to split into three public companies, it announced today (June 21).

The group, based in Battle Creek, Michigan, operates its UK base at MediaCity in Salford, as well as production facilities in Trafford Park, and Wrexham, North Wales.

It said the diversification will not affect its HQ locations.

North America Cereal Co and Plant Co will both remain headquartered in Battle Creek. Global Snacking Co will maintain dual campuses in Battle Creek and Chicago, Illinois, with its corporate headquarters located in Chicago. Kellogg Company’s three international regions’ headquarters in Europe, Latin America, and AMEA will remain in their current locations, it said.

Kellogg’s opened its first British factory in Trafford Park, on May 24, 1938, when the UK head office also moved from London to Manchester.

The factory cost $2m to build and covered 130,000 sq ft, and was situated within a 75-mile radius of the highest population density in the country, at the time. It also had great road and rail links and the Manchester ship canal for transportation.

Kellogg employs 31,000 staff worldwide, with around 900 based in MediaCity and Trafford Park. It opened its biggest UK warehouse in Haydock in January 2020, creating 70 jobs.

The group said it will spin off its North American cereal and its plant-based food businesses, which together account for about a fifth of sales.

The cereal branch is expected to spin off first, but it hopes to complete the full transformation by the end of next year.

It is estimated that the plant-based business generates about $340m in sales. The remaining 80% portion of the group, which generated about $11.4bn in 2021 net sales, focuses on snacking, international cereal and noodles, as well as frozen breakfast products in North America.

Nearly 60% of net sales are from global snacks, such as Pringles, Pop-Tarts and Cheez-It.

Steve Cahillane, Kellogg Company’s chairman and chief executive, said: “Kellogg has been on a successful journey of transformation to enhance performance and increase long term shareowner value.

“This has included re-shaping our portfolio, and today’s announcement is the next step in that transformation.”

He added: “These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities. 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 three companies will be global snacking, North American Cereal Co, and Plant Co. Their new names will be determined at a later date.

As independent companies the group said all three businesses will be better positioned to:

• Focus on their distinct strategic priorities, with financial targets that best fit their own markets and opportunities;
• Execute with increased agility and operational flexibility, enabling more focused allocation of capital and resources in a manner consistent with those strategic priorities;
• Realise improved outlooks for profitable growth; and
• Shape distinctive corporate cultures, rooted in Kellogg Company’s strong values, and rewarding career paths for employees of each company.

Net sales for the group in 2021 were nearly $14.2bn, comprised principally of snacks as well as convenience foods like cereal, frozen foods, and noodles.

The proposed spin-offs are intended to result in tax-free distributions of North America Cereal Co and Plant Co shares to Kellogg Company shareowners. Shareowners would receive shares in the two spin-off entities on a pro-rata basis relative to their Kellogg holdings at the record date for each spin-off.

Goldman Sachs is serving as lead financial advisor, along with Morgan Stanley & Co, and Kirkland & Ellis is acting as legal advisor.

Danni Hewson, a financial analyst with Manchester investment platform AJ Bell, said: “Kellogg’s plan to split itself into three has gone down well with investors.

“The company is a behemoth, possibly better known by some consumers for its products than the company name which used to be the byword for breakfast.

“Habits have changed, little bowls of golden flakes topped off with ice cold milk just don’t have the same universal appeal they once did. Focus in on the business case for the split and whilst there may be security in size and savings to be made by sharing backroom operations strategically once you get past the fact that it’s all food there’s a gulf between family favourites and pushing plant-based boundaries.

“Sometimes scale isn’t an asset, sometimes a business needs to be fleet of foot to stay ahead of the competition and there’s plenty of competition.”