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

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)

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.

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.