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Kellogg's to Split into 3 Separate Food Businesses

According to CEO Steve Cahillane, Kellogg has turned the plant-based food unit "back into a growth business by allocating the right resource, the right management team," despite the fact that the refrigerated plant-based meat patties market is still large.

Shivam Dwivedi
Kellogg's Company
Kellogg's Company

Kellogg's, an American multinational food manufacturing company, is considering divesting its plant-based business, which generated profits of US$50 million out of total revenue of US$340 million in 2021. The plans for divestment come shortly after the company announced its intention to split into three independent companies, segmenting its iconic brands into distinct snacking, cereal, and plant-based businesses, with tax-free spinoffs expected to be completed by the end of 2023.

The headquarters of both the North American cereal company and the plant-based food spinoff will be in Battle Creek, Michigan.

According to CEO Steve Cahillane, Kellogg has turned the plant-based food unit "back into a growth business by allocating the right resource, the right management team," despite the fact that the refrigerated plant-based meat patties market is still large.

According to Reuters, Kellogg Company's plan to spin off and potentially sell its profitable MorningStar Farms vegetarian patties and plant-based meat business could shake up the frozen aisle in supermarkets.

However, without Kellogg's support, the line of plant-based breakfast sausages, burgers, and faux chicken, which is significantly less expensive than premium brands such as Beyond Meat and Impossible Foods, faces a "tough environment."

MorningStar's profit margins of about 15% are expected to be impacted by any slowdown in demand, just as overall sales of meat alternatives have flattened.

Total meat alternative sales in the United States peaked in 2022, after pandemic stockpiling fueled strong growth in the previous two years. Sales rose just 0.3% in the 52 weeks ended May 28 compared with the prior year, according to data from NielsenIQ.

Gary Stibel, CEO of New England Consulting Group, stated that the short-term prospects for (plant-based) protein are very good, and Kellogg has one of the industry's best brand portfolios. He went on to say that Kellogg's has been at it for a long time, but the timing is perfect because the rate of growth in plant-based foods is slowing and will continue to slow.

The company's growth has slowed since rival Beyond Meat and privately held Impossible Foods first introduced their "burgers" - refrigerated plant-based patties that look and taste like meat - in 2016. The launches drew in more companies, who signed deals with restaurant chains to add plant-based burgers to their menus.

Impossible, for example, provides patties for Restaurant Brands International's Burger King's Impossible Whopper.

In addition, McDonald's announced in January that it would expand the U.S. test of its "McPlant" burger, which is made with Beyond patties, to 600 locations. However, sales have not met expectations, and according to BTIG analysts, McDonald's will not launch the sandwich nationally this year.

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