Home Lifestyle Receipes ‘Global Snacking Co. is higher growth’: Kellogg wants to accelerate international expansion after splitting business into three

‘Global Snacking Co. is higher growth’: Kellogg wants to accelerate international expansion after splitting business into three

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‘Global Snacking Co. is higher growth’: Kellogg wants to accelerate international expansion after splitting business into three

Kellogg Company approved the plan to separate its North American plant-based food and cereal businesses. The result will be three business units: ‘Global Snacking Co’ with US$11.4bn in sales; ‘North American Cereal Co’ with $2.4bn in revenue; and ‘Plant Co’ with around $340m in sales.

“This is a big announcement,” Chairman and CEO Steve Cahillane said on a conference call today, describing the proposal as the ‘next step’ in the company’s portfolio transformation. He stated that each company is more well-positioned to generate shareholder value, and “build a new age of innovation and growth”.

Accelerating international expansion

Global Snacking Co will consist of ‘world class brands’ in ‘attractive categories’. It will primarily be selling snacking products, including brands such as CheezIts, RXBar, and Pringles. The facility will house Kellogg’s global cereal portfolio, its African noodles business, and the US Eggo division.

Around 80% will generate net sales in snacking markets with higher growth and emerging geographies. 20% sales come from Europe, and 30% revenue comes from AMEA or Latin America.

It is a company that’s ‘geared toward growth geographically,’ Cahillane, who will continue to be Chairman and CEO at Global Snacking Co. insisted. “Based on the company’s track record in sales growth and profit growth, and by leveraging its portfolio as well as geographical diversification and diversification, it will become a higher-growth company ,”. This will be possible by maintaining top-line momentum, brand building and innovation, as well as international expansion.

Detailing the strategic rationale for the plan, the chief executive also suggested the international snacking business will be able to boost its ‘solid’ margin performance with expected expansion from operating leverage, productivity, revenue growth management, and emerging-markets scale.

“Global Snacking Co is a higher growth, higher margin company with strong financial flexibility,” Cahillane said.

Why did Kellogg decide to retain international cereals and Eggo rather than creating a snacking company? Cahillane stated that scale is the answer.

“Scale is very important and when we look at our international business. He stated that it is important ,” to have a symbiotic relationship with our snacking and [global] cereal businesses.

“What was best for the brands was also another component,” the CEO continued. “Eggo we believe also has other international expansion opportunities.”

The spin-offs: US cereal and plant-based

When spun-off into a stand-alone unit, it seems likely that the US cereal business will not be the same growth story as the international operations. Management maintained that the US cereal business will be better off focusing on its core competencies and not competing for resources in the international areas.

Although the unit is smaller than the other units, it’s clear that its top-line goals are much more ambitious. Morning Star Farms will manage the business. While the company’s current focus is in the US and Canada, Cahillane suggests that plant-based can grow internationally. ” This business can take an aggressive approach to growth ,”, he said. “Resources can now be directed towards these opportunities.”

More resources for global brands?

Kellogg suggested it expects to accelerate its global businesses by placing more resources behind its brands.

When quizzed on how this would be achieved – particularly when the argument for US cereal’s spin-off is that it currently struggles to compete for resources when it’s up against the higher growth global snacks portfolio – Cahillane elaborated: “It is about focused resources and dedicated resource.”

“The remaining [global snacking] businesses all have terrific scale… with margin expansion opportunities,” he continued, while more resource will be unlocked through growth and margin expansion.

“Global Snacking Co is a high single digit growth company. This is attractive regardless of peer group. When you look at the brands, we are confident it’s a terrific portfolio.”

Transaction timing

The proposed spin-offs are intended to result in tax-free distributions of North America Cereal Co. and Plant Co. shares to Kellogg Company shareowners.

The company stated that the North America Cereal Co. spinoff could be prior to the Plant Co. one. Both are currently scheduled for completion by 2023..

“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities. Each business will create greater value for everyone involved and is well-positioned to help build an era of innovation ,” Cahillane said.

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