The news: Kellogg Company will spin off its North American cereal business and plant-based brands into separate entities to focus on higher-margin snack food and international ventures, per a press release.
The rationale: Kellogg Co. claimed the split will let each company “pursue their particular strategic priorities” and operate with more flexibility and agility. But it’s also an opportunity for Kellogg Co. to separate its less profitable brands from the company’s fast-growing, higher-margin snack business.
Consumers get the munchies: While demand for certain grocery categories—including cereal and frozen foods—has dipped as consumers return to pre-pandemic habits, snack sales are unflagging.
But higher prices are fueling a significant portion of that growth: Mondelez, Kellogg Co., General Mills, and other packaged food companies are passing on higher commodity costs to consumers, resulting in higher sales—but not necessarily volume.
Appetites might change: As inflation weighs on consumers’ grocery bills, many are trying to curb unnecessary spending.
Looking ahead: Splitting Kellogg Co. up might be the best path forward to return value to shareholders and grow the company’s snack business, but its other two ventures will suffer without access to the larger corporation’s resources.
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