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It’s Planning a Spin-Off of the Legacy Cereal Business as Kellogg’s Pops

It’s Planning a Spin-Off of the Legacy Cereal Business as Kellogg’s Pops

Iconic breakfast food brand Kellogg’s became the latest US corporate giant to announce a breakup, unveiling plans on Tuesday to split into three companies, pushing its share price up.

The company — known for ubiquitous brands like Corn Flakes and Pop-Tarts — will transform its North American cereal business into a new company, while the second venture will be home to Kellogg’s plant-based businesses.

The rest of the corporation will be positioned as a high-growth snacks business with exposure to emerging markets. The unit — which will also house the international cereal operation — accounted for about 80 percent of Kellogg’s $14.1 billion in 2021 revenue.

“It will unlock and create opportunities for all three businesses,” Kellogg’s chief executive Steve Cahilla said on a conference call with analysts.

The entities so far named will initially be known as Global Snacking Company, North America Cereal Company and Plant Company. The latter two will be created through a tax-free spin-off.

North American Cereals, covering the United States, Canada, and the Caribbean, “will be entirely dedicated to winning cereals and not competing for resources with the rapidly growing snack business,” said Cahillaine, who is the founder of New Snacks. will lead the company.

The North American Cereals and Plants Company will be headquartered in Battle Creek, Michigan, while Global Snacking will have dual headquarters – in Battle Creek and Chicago.

Leadership for the other two ventures has not yet been announced.

Kellogg’s announcement comes on the heels of an earlier corporate break-up, including General Electric’s announcement of a split into three ventures in November 2021, weeks later and Johnson & Johnson saying it would break into two. .

growth market

The company’s origins date back to 1894 when WK Kellogg made Corn Flakes breakfast cereals, 12 years later launching the Kellogg Company in Battle Creek, Michigan.

Subsequent products included Rice Krispies and Frosted Flakes, released in 1928, which was unveiled in 1952 with the character Tony the Tiger on the box, reciting his “They gr-r-rit!” became famous for Tagline.

But the bulk of the company’s revenue now comes from global snacks, where about 50 percent of sales come from emerging markets and developed international markets.

Snack brands include Pringles, Pop-Tarts and Rice Krispie Treats, while the group also has products such as Eggo’s and other frozen breakfasts and noodles in Africa, which Kellogg describes as a “rapidly expanding business.”

Kellogg is aiming to complete the divestiture by the end of 2023, subject to approval by US regulators.

Chief Financial Officer Amit Banti said Kellogg will continue to report as a company through 2022.

The company expects to produce the required three years of audited financial statements for each enterprise in the second half of 2023.

Cahilla said it will be “business as usual over the next 18 months” while the company moves through the process.

He added that the plant company, which will house Morningstar Farms’ alternative meat products, may also be acquired by another company if such an option arises and is better than the initial public offering.

The stock rose 2.9 per cent to $69.60 in morning trade.

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