🥣 Kellogg splits up

Wednesday, June 22, 2022 by Robinhood Snacks |
Tony the Tiger’s going public (Bill Pugliano/Getty Images)

Tony the Tiger’s going public (Bill Pugliano/Getty Images)

Tony the Tiger’s going public (Bill Pugliano/Getty Images)

Tony the Tiger’s going public (Bill Pugliano/Getty Images)

Yesterday’s Market Moves
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Hey Snackers,

Dave & Buster’s, the Chuck E. Cheese of the adult world, wants you to sleep over. D&B is giving away a one-night stay in a custom arcade suite feat. Pac-Man and a private bartender.

Stocks rebounded to kick off the short week, with the S&P 500 rising 2.5% after its worst week in two years. Today, Fed Chair Powell is due on Capitol Hill for his semiannual congressional testimony. Investors will have their ears peeled for any July rate-hike updates.

Flake

1. Kellogg plans to split into 3 companies to unleash the power of its snack biz — and reinvigorate its cereal

Pringle and ready to mingle… Frosted Flakes and Pringles are breaking up. Cereal icon Kellogg said it’s splitting into three publicly traded companies: snacks, cereal, and plant-based meat (think: MorningStar patties). Kellogg became a snack giant thanks to faves like Cheez-Its and RxBars. Now it’s spinning off categories in hopes that specificity will boost profitability. The three biz lines are expected to go solo next year.

  • Pop Tart-ed: Kellogg stock popped 2% yesterday and is up 6% this year as shoppers keep buying Rice Krispies despite inflation and smaller boxes (#shrinkflation).

Cereal killer… Kellogg’s cereal sales have been slipping for years as Americans ditch Fruit Loops for less neon-colored options. But snacking is on the up and up after spiking during lockdowns. Now:

  • Snacks make up 80% of Kellogg’s sales and are growing faster than cereals and plant-based foods. Snacks boosted Kellogg’s profit last quarter, so it’s spinning them off to double down.
  • Solo snacks have succeeded before: A decade ago, Kraft spun off its snack brands (Oreo, Triscuits) into a new public company called Mondelez: today Mondelez’s market cap is twice Kraft-Heinz’s — and now it's buying Clif Bar for nearly $3B.
THE TAKEAWAY

Broader isn’t always better… Sometimes cereal problems should stay in the cereal aisle. With the split, Kellogg hopes to boost cereal margins (by fixing supply issues), expand plant-based market share (by attracting pure-play investors), and boost snack profits (by investing in new varieties). The strategy’s taking off: GE and Johnson & Johnson are breaking up biz categories in an attempt to boost profits, and Ford and Volvo plan to spin off their EV businesses.

Late

Camping out at the airport Starbucks... Your plane might not arrive, but at least there are cake pops. A new federal holiday + Father's Day + national labor shortage = the perfect recipe for a travel-pocalypse. US airlines have canceled or delayed 35K+ flights since Thursday, a #fail that’s becoming a theme as travel rebounds.

  • Nearly a third of scheduled flights on Thursday and Friday were delayed (and 3K+ were canceled). Delta, American, and Southwest experienced the most disruption.
  • Airlines mostly blamed staffing shortages. After offering pilots and flight attendants buyouts or early retirements mid-pandemic, they're struggling to staff up again.
  • Meanwhile: TSA traveler volumes are cruising near pre-pandemic levels, and notched a pandemic high over the weekend.

Postponed till next summer... Yesterday was the first day of summer, but airlines have been feeling the heat for a while. Back in April 2020, airlines got $25B in bailouts from the US gov't so they could continue paying their hundreds of thousands of employees. Under the terms, airlines couldn't make any job cuts until October 2020. Cue October, and tens of thousands were furloughed or cut.

  • Many are frustrated that after nearly three years and billions in government aid, airlines can't get their shifts together to serve returning travelers.
  • Transportation Secretary Pete Buttigieg is considering punishments (think: fines) for airlines that don't stick to their summer flight schedules.
THE TAKEAWAY

Ramping up’s harder than ramping down… When demand was corona-crushed, airlines skimmed their workforces too much. Now they’re offering incentives to get people back: American has offered rounds of raises and bonuses to regional employees, while Alaska and United are offering aspiring pilots financial aid at newly opened flight-training schools. But it could be too little too late: airline staff shortages could last well into next year.

What else we’re Snackin’

  • Pool: Uber's carpooling option is returning to cities like NY and LA after shutting down in 2020 over pandemic germ fears. While it isn’t a profit puppy, Pool could gain traction as gas prices soar.
  • Slip: Ex-Tesla workers are suing the company, alleging it didn’t give 60 days' notice before announcing layoffs, which Elon said would affect 3.5% of Tesla’s workforce.
  • Replay: Snap is testing a $5/month subscription called Snapchat Plus (of course). As ad sales slow, social biggies like Snap and Twitter are looking for stickier revenue streams.
  • Jolt: GM’s electric-van unit BrightDrop delivered 150 of its vans to FedEx, and is prepping more for Walmart. E-fleets could be key as ecomm giants like Amazon look to reduce emissions.
  • Swap: The Trump-era TikTok saga isn’t over yet: after a fresh data-privacy scandal, TikTok says it’s moved all its US user data to Oracle servers in the US.

Snack Fact of the Day

Marilynn “Lynn” Malerba is set to become the first Native American US Treasurer

Wednesday

  • Earnings expected from KB Home and BlackBerry

Authors of this Snacks own: shares of Starbucks, Snap, Tesla, GM, Amazon, Walmart, Ford, Twitter, Delta, and Uber

ID: 2255521