Kellogg plans to split its business as consumer staple stocks outperform
Major consumer product goods brands are making moves, with Kellogg (NYSE:K) announcing plans to split itself into three businesses.
What’s the big deal? Amid the market chaos, consumer staple brands — which have outperformed the S&P 500 — are flexing their stability. Kellogg is up 6.9% in 2022 — and now it wants investors to know it’s more than just a cereal brand.
- Company 1 (global snacks): Pop-Tarts, Pringles, RXBAR and other snack brands.
- Company 2 (North American cereals): Corn Flakes, Rice Krispies and other cereals.
- Company 3 (plant-based products): MorningStar Farms.
Incentive to split: When companies get too large, the weight of slow-growth parts can often drag down the higher growth areas with internal brands competing for resources.
- 80% of Kellogg’s business comes from its snacks business, 17% from the cereal business and 2.4% from its plant-based foods business.
- The plant-based business is the smallest part of Kellogg and would compete against plant-based companies like Beyond Meat (NASDAQ:BYND).
Divvy the dividend: Kellogg’s 3% dividend was a major attraction to investors, and it’s uncertain how the dividend will be split between the businesses.
The split is expected to occur by the end of 2023 — but Kellogg may evaluate other options for some parts, including a sale. After the split, different Kellogg’s flavors will be available to both growth and value investors.
Other news: Mondelez (NASDAQ:MDLZ) — is also prioritizing its snacks business — announcing yesterday plans to buy Clif Bar for $2.9B.
