Kellogg, best known for its cereals, is branching into three separate firms in a massive overhaul for the company, which has existed for 116 years.
The first firm will count the cereal unit of Kellogg’s in North America, such as Raisin Bran and Rice Krispies, while its snacking unit will be the second firm, counting Cheez-Its and Pringles. The new addition, a “pure-play plant-based foods company,” will be led by one of its brands, the MorningStar Farms.
There is no name for the new spinoffs announced yet, and the spinoffs are set to be fully established within 2023. According to approval from the board of directors, plans and base locations for the three units will stay the way and where they are.
“Kellogg has been on a successful journey of transformation to enhance performance and increase long-term shareowner value,” Kellogg Chief Executive Steve Cahillane said in a statement.
“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 the premarket trading, the company’s shares jumped over 8%, while its stock rose over 4% for the year.
Kellogg elaborated that spinning off the firms will “better position each business to unlock its full potential,” particularly as the firm has developed with acquisitions over the past years. In addition, centering the new firms will aid in growing them with “financial targets that best fit their own markets and opportunities.”
So far, the snacking spinoff will be the biggest new firm. Kellogg stated that it gathered over $11 billion in sales the previous year and is a “higher-growth company than today’s Kellogg Company.” Around 60% of its sales originate from Pop-Tarts, Nutri-Grain, Pringles, and Cheez-It.
Kellogg is among the huge companies taking a step back to help their long-term growth. The same measure was done by Johnson & Johnson, Toshiba, and GE.
“For survival and keeping up with market trends, companies do have to look at what their most profitable lines of business are and where they should spend most of their time and focus,” said SoFi’s head of investment strategy, Liz Young, in a previous interview with CNN Business.
“Competition is fierce. Sometimes you have to break it down to build back up.”
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