Earlier this week Kellogg announced plans to break itself into 3 companies.
It seems that Kellogg is no longer doing breakfast, at least in North America where its cereal business is to be renamed and spun off.
Although cereal sales slowed some of their downward trend during Covid, sales were still down 13% in 2021 according to Kellogg’s latest annual report (globally).
Instead Kellogg is refocusing on snacks as its future growth engine, specifically brands like Pringles and Cheez-its. In 2021 Kellogg’s grew its snacks business at just 5%
Actually, and don’t shout this too loud, neither of these brands were conceived by Kellogg. Pringles was previously with P&G and Cheez-its has had a succession of parents including Sunshine Biscuits and Keebler.
Cereal consumption has been falling, especially in developed western markets and retailers are reducing physical or digital shelf space for the category. It’s important to state that snacking is not immune from headwinds either. Highly processed snacks were once at every supermarket’s check-out but no longer as Governments wage war on sugar. It’s difficult to see any reversal in the foreseeable future.
If one was cynical, one may argue that innovation, especially category development, is the real challenge which Kellogg has been unable to grasp. I would like to know in more detail where and how Kellogg plans to drive snack volumes.
Whilst Kellogg ploughs into snacks, let’s not forget others have exited. Nestlé which was once known as a chocolate company, sold its entire US confectionery business to Ferrero in 2019 for a tidy US$2.8bn in cash.
Similarly Kellogg has also made some disposals to Ferrero, it previously sold a cookies, ice cream cone and fruit flavoured snack business for $1.3bn.
I am finding the logic behind this ‘break-up’ hard to follow. Management’s version is that the (legacy) cereal business is competing for valuable resources which would be better utilised in snacking.
Then there is plant foods, Kellogg’s third business. This has sales of $340m and is branded Morningstar Farms. Whilst plant foods were presumed to be the next frontier in food as we all stopped eating meat, the reality is many consumers simply don’t repeat purchase.
Is this break up a Grrreat strategy and the right roadmap? I’m unconvinced.