Kellogg Also Splits into Three Companies (Comprehensive)

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Kellogg, the American food company famous for Pringles and cereals, is splitting into three companies. The food industry, which has pursued growth strategies through mergers and acquisitions (M&A), is also evaluated to have jumped into high-intensity structural reorganization triggered by the pandemic (global outbreak).

According to the Wall Street Journal (WSJ) and others, Kellogg announced on the 21st (local time) that it will separate its snack business, North American cereal business, and plant-based food business into three independent corporations.

The company explained that this is a measure to strengthen the rapidly growing snack sector while enhancing the competitiveness of the cereal business, whose market share in the U.S. has declined. The plan is to create a more agile and focused organization that can quickly adapt to changes in the market environment based on efficient decision-making.

This decision is particularly noteworthy as it follows similar corporate breakups declared last year by General Electric (GE), Johnson & Johnson (J&J), and others.

Steven Cahillane, Kellogg’s Chief Executive Officer (CEO), confirmed that Kellogg has been studying effective split scenarios through examples from the same industry as well as from GE. Cahillane, who will lead the $11.4 billion snack business going forward, said, "We believe the split decision will maximize the potential of the business." Previously, GE also announced plans to split into three companies in aviation, healthcare, and energy sectors.

The WSJ evaluated this move as signaling a fundamental change in the food industry, which has been focused on growth through M&A for decades. Recently, competitors such as Kraft Heinz have also been concentrating on portfolio reduction by selling or discontinuing some brands. Moreover, the food industry is facing increased burdens from soaring inflation on raw materials, labor costs, packaging, and transportation.

Kellogg plans to complete the split process by 2023, starting with the North American cereal business and then spinning off the plant-based food business. The sale of the plant-based food business is also under consideration. The names of the new companies and the executives who will lead the spun-off companies have not yet been decided.

The market is also welcoming Kellogg’s split. On the day of the announcement, Kellogg’s stock price closed up 1.95% on the New York Stock Exchange.

This content was produced with the assistance of AI translation services.