Kellogg's is creating shareholder value
I'm surprised that I haven't seen anyone on CommonStock talk about Kellogg's $K plan to separate into 3 different companies.

These 3 companies are:
  • snacking
  • cereal
  • plant-based

The company that Kellogg's current CEO will run will be the CEO of the snacking business.

Why the spin-offs? It's because the company's growth in other sectors isn't being reflected well when its largest business, cereal, continues to hamper the growth numbers. Also, it unlocks value for shareholders and shareholders can choose which business they want to invest in.

Some are concerned that spinning off the young plant-based brands into their separate entity would cause them to not perform well both financially and in the stock market as $BYND and $TTCF, two pure-play plant-based meat players, have seen their share prices plunge significantly compared to its IPO.

Luka 🦉's avatar
I still have a to document about it. It’s very interesting for me cause I had K in my watchlist but now everything changes…
Joey Hirendernath's avatar
Would be great to have the perspective of @conorvalue @fatcatinvesting on $K's future plans.
Conor's avatar
@joeyhirendernath I was honestly not surprised they did this. If you look at $MDLZ and $KHC you can see how well it worked out for Mondelez and how poorly for Kraft. That is why the cereal business could be feeling a little down about this surprising split.

Part of the reason I invested in $K was for all of their brands I felt were being undervalued but would be worth more if they split off such as Pringles, RX bar, and Cheez-It.

The plant based split will be interesting since the public market for plant based food is basically $BYND which is unprofitable and becoming more unprofitable. I could really see the Kellogg plant based company doing very well.

My final thought, will other companies who decided not to split up their companies into separate units now be pressured to do a split? $PG ended up not splitting which was a wise move in hindsight. You could argue not splitting allows the company to use cash flow from older existing products to help grow the newer growth products. The ironic part for $K is the cereal business was getting resources from their faster growing snacking business. At least that is what Steve Cahillane basically said on the call yesterday.
Stanley's avatar
Good morning everyone!

Quite an interesting development with the proposed separation of $K into three companies. A lot can happen in the next year and a half before this is all said and done, and the individual management teams are announced.

IMHO, this is all about being able to focus on growing their most profitable division -- snacks -- as the cereal and plant-based divisions account for only about 20% of Kellogg's revenue combined.

And as investors we will be able to concentrate on those aspects of the business that we have the most conviction in - for myself that means the new stand-alone snack division as the cereal division is 'mature' and I don't anticipate much growth in that area, and while there is admittedly enormous potential in plant-based products it's just not something I am interested in as an investor.

Another question I have, as primarily a dividend investor, is will the new companies all pay a dividend? ...I can definitely see at least the plant-based division, being small and growth oriented, eliminating any dividend payments allowing them to allocate those funds for growth.
Josh Rozin's avatar
Part of me wonders if this has to do with the strikes last year. Not sure!
Dissecting the Markets's avatar
@josh that could be a reason

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