WSJ US BusinessKellogg to Separate Into Three Businesses

June 21, 20220
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Kellogg Co. K 4.81% is splitting off its slower-growing North American cereal business and smaller plant-based food brands into two separate companies, leaving a faster-growing food company focused on selling snacks around the world.

The plan would shift some classic American food brands, from Corn Flakes and Rice Krispies cereals, to Eggo waffles and Pop-Tarts, and Cheez-It and Pringles snacks, to new homes.

The snacking business would keep around 80% of the combined Kellogg’s $14.2 billion in sales last year, housing the company’s faster-growing snack brands, frozen breakfast brands such as Eggo and overseas sales of cereals.

Another company would include the ready-to-eat cereals in the U.S., Canada and the Caribbean, and the third would contain Kellogg’s plant-based foods business, including the MorningStar Farms brand. Kellogg said it is exploring alternatives for that business, including a sale.

The company on Tuesday said its board approved the plan.

“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities,” Chief Executive Steve Cahillane said in a statement.

Shares of Kellogg jumped 6.6% in premarket trading to $72.

Kellogg has yet to name the three stand-alone businesses. The split-up is expected to be complete by the end of 2023, with the North American cereal business possibly separating ahead of the plant-based foods business.

By far, the largest would be the global snacking business, which had $11.4 billion in sales last year. It would include snacks such as Pringles and Cheez-Its, international sales of Kellogg’s cereals such as Special K and Coco Pops and frozen breakfast items, including Eggo waffles. It would also include Kellogg’s international operations, including a fast-growing noodle business in Africa.

Mr. Cahillane would head up that unit, which aims to be a higher-growth company than the combined Kellogg and would focus on expanding overseas and in emerging markets.

Kellogg’s North American cereal business, which had estimated 2021 net sales of $2.4 billion, will house brands such as Frosted Flakes, Froot Loops and Raisin Bran. It is expected to have stable sales over time and would focus on restoring profit margins after recent supply-chain disruptions. The company’s North American cereal business suffered from a factory worker strike and a plant fire last year.

The plant-based foods business, with estimated 2021 net sales of $340 million, will focus on capitalizing on category growth, first in North America and eventually on a global basis, Kellogg said.

The North America cereal and plant-based foods businesses would both remain based in Battle Creek, Mich. The global snacking business would be based in Chicago, Ill., with dual campuses in Battle Creek and Chicago.

Kellogg said the spinoffs are intended to result in tax-free distributions of shares in the North American cereal company and plant-based food company to current shareholders. Capital structures and dividend payments, which Kellogg expects would be competitive with similar companies, will be announced later.

The breakup follows similar moves last year from General Electric Co. and Johnson & Johnson. Other major food companies, including the company formerly known as Kraft Foods Inc., have also broken up in recent decades.

Write to Will Feuer at will.feuer@wsj.com

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