Battle Creek’s Kellogg Co. today announced that its board of directors has approved a plan to separate its North American cereal and plant-based foods businesses, via tax-free spin-offs, resulting in three independent public companies, each better positioned to unlock their full stand-alone potential.
The three companies — the names will be determined later — include:
— Global Snacking Co., with some $11.4 billion in net sales, will be a leading company in global snacking, international cereal and noodles, and North America frozen breakfast.
— North America Cereal Co., with about $2.4 billion in net sales, will be a cereal company in the U.S., Canada, and Caribbean.
— Plant Co., with about $340 million in net sales, will be a pure-play plant-based foods company, anchored by the MorningStar Farms brand, with a significant opportunity to capitalize on strong long-term category prospects by investing further in North America and future international expansion.
“Kellogg has been on a successful journey of transformation to enhance performance and increase long-term shareowner value. This has included re-shaping our portfolio, and today’s announcement is the next step in that transformation,” says Steve Cahillane, chairman and CEO of Kellogg Co.
“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities. In turn, each business is expected to create more value for all stakeholders, and each is well positioned to build a new era of innovation and growth.”
In recent years, the company has transformed its portfolio into one that has expanded geographically and shifted toward growing businesses, particularly in snacking categories.
To achieve this, it has directed resources and investments toward growth categories and markets around the world, made several acquisitions and partnerships in emerging markets, and strengthened its snacks business through acquisitions, divestitures, and the freeing up of resources by exiting from direct-store delivery.
As independent companies, all three businesses will be better positioned to focus on their distinct strategic priorities with financial targets that best fit their own markets and opportunities; execute with increased agility and operational flexibility, enabling more focused allocation of capital and resources in a manner consistent with those strategic priorities; and realize improved outlooks for profitable growth.
More details about the split, include:
Global Snacking Co.
Kellogg’s three international regions — Europe, Latin America, and Asia Pacific, Middle East, and Africa (AMEA) — will remain almost entirely intact within Global Snacking Co. Steve Cahillane will remain chairman and CEO of this business.
Global Snacking Co. had estimated 2021 net sales of $11.4 billion and estimated EBITDA of approximately $2.0 billion on an adjusted basis, based on preliminary allocation assumptions. Nearly 60 percent of its net sales come from global snacks, participating in growing categories and led by brands including Pringles, Cheez-It, Pop-Tarts, Kellogg’s Rice Krispies Treats, Nutri-Grain, RXBAR, and more.
Less than a quarter of its net sales come from cereal in international markets, featuring brands such as Kellogg’s, Frosties/Zucaritas, Special K, Tresor/Krave, Coco-Pops, Crunchy Nut, and more. By remaining with Global Snacking Co., this international cereal business provides scale, continuity, and growth for the company’s Europe, Latin America, and AMEA Regions.
About 10 percent of its net sales come from noodles in Africa, a rapidly expanding business.
The remainder, less than 10 percent of its net sales, comes from frozen breakfast brand Eggo. Geographically, North America will represent just under half of net sales, emerging markets about 30 percent of net sales, and developed international markets more than 20 percent of net sales.
North America Cereal Co.
The company plans to separate North America Cereal Co. as an independent business through a tax-free spin-off. North America Cereal Co. will be a leader in cereal in the U.S., Canada, and Caribbean, with more than a century of operational success.
The proposed management team for North America Cereal Co. will be announced at a later date.
North America Cereal Co. had estimated 2021 net sales of $2.4 billion and estimated EBITDA of approximately $250 million on an adjusted basis, based on preliminary allocation assumptions. The business is focused on ready-to-eat cereal in the U.S., Canada, and Caribbean
North America Cereal Co.’s portfolio is comprised of brands such as Kellogg’s, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi and Bear Naked.
Anchored by the MorningStar Farms brand, Plant Co. will offer a full portfolio of plant-based offerings across multiple product segments and eating occasions. Kellogg has grown MorningStar Farms steadily since its acquisition over 20 years ago, and the brand now has the highest share and household penetration in the frozen vegetarian/vegan category.
The proposed management team for Plant Co. will be announced at a later date.
Plant Co. had estimated 2021 net sales of $340 million and estimated EBITDA of approximately $50 million on an adjusted basis, based on preliminary allocation assumptions. The business is currently focused on the U.S., Canada, and Caribbean.
All net sales and adjusted-basis EBITDA figures are based on the Company’s 2021 unaudited results derived from internal management reporting, further adjusted for splits by brands and markets, as well as preliminary cost and expense allocations, including corporate expenses. These figures will be refined prior to the transactions.
North America Cereal Co. and Plant Co. will both remain headquartered in Battle Creek. Global Snacking Co. will maintain dual campuses in Battle Creek and Chicago, with its corporate headquarters located in Chicago. Kellogg Co.’s three international regions’ headquarters in Europe, Latin America, and AMEA will remain in their current locations.
The company will provide updates throughout the process leading to the transactions. A dedicated website providing ongoing information about the transaction is available at unleashingourpotential.com.