Kellogg’s is Spinning Off Its Plant-Based Division Into New Company

Kellogg's is breaking up. Or at least it's spinning off its plant-based division into a whole new company. The reason: To allow its diversified portfolio of brands and products to all thrive and serve their consumers better. Actually the company announced it will become three separate entities dedicated to 1. snacks, 2. cereals, and 3. plant-based foods. The food giant announced that it was diving its businesses into these three sectors to promote innovation.

“Kellogg's has been on a successful journey of transformation to enhance performance and increase long-term shareowner value,” The Kellogg Company’s Chairman and CEO Steve Cahillane said in a statement. “This has included re-shaping our portfolio, and today’s announcement is the next step in that transformation.”

Kellogg’s will operate the three companies as independent operations, which will allow each brand to better market its products, after the company has struggled to best expand its plant-based and cereal brands due to its focus on global snack sales. The separate companies will provide more adaptability for each category.

The plant-based company will temporarily be titled “Plant Co.” and will specifically work to expand its MorningStar and Incogmeato brands. Kellogg’s first acquired the plant-based brand 20 years ago and due to a recent spike in plant-based interest, the company has shifted its resources to expand its product selection. The company currently values its plant-based brand at $340 million.

“Kellogg's has grown Morningstar Farms steadily since its acquisition over 20 years ago, and the brand has the highest share in household penetration in the frozen veg/vegan components category,” Cahillane said. “This is clearly a world-class brand, and it is supported by innovative and proprietary processes and technology in a world-class manufacturing network, and it has tremendous long-term growth potential in a category that benefits from rising consumer interest in plant-based foods, both for nutrition needs and environmental reasons.”

Kellogg’s aims to bolster the MorningStar brand for a potential sale in the future. The split will allow Plant Co. to maximize its production capabilities, better catering to the large influx of plant-based consumers within the United States.

Three Highly Focused Kellogg's Companies

Cahillane revealed these plans during a June 21 conference call, following the company’s announcement. The food giant will separate these brands so that, for example, plant-based food brands will not need to compete with snack brands such as Pringles for resources.

Beyond the plant-based company, Kellogg’s two additional offshoots will focus on global snacking and North American cereal. The global snacking business will include international cereal, noodles, frozen breakfast products, and the beloved snack brands such as Nutri-Gran and Eggo. The spin-off businesses will be operational by 2023.

“This may include investing more in brand building to build consumer awareness and increase household penetration,” Cahillane said. “It may include investing more in emerging food technologies, new supply chain capabilities, extended distribution across channels, and expansion into international markets. We see this business accelerating its sales and profit growth over time, while an unleveraged balance sheet will give it the financial flexibility to pursue investments.”

 Major Food Giants Bet Big on Plant-Based

Major food corporations similar to Kellogg’s have acknowledged the potential of the plant-based sector in recent years. Reports project that the vegan food market could reach $1.4 trillion by 2050 with the help of food giants such as Tyson, Nestle, Cargill, and others. To compete with growing plant-based brands like Impossible Foods and Beyond Meat, long-standing food brands have introduced vegan brands, acquired smaller plant-based companies, or both.

Dairy giant Danone has made significant strides in the plant-based sector over the last decade. The company purchased the famed vegan brand Follow Your Heart last February. The company continues to widen its plant-based selection to feature vegan ice creams, milk, yogurts, and now, mayonnaise. Last November, Danone converted a French dairy plant into an oat milk factory, investing nearly $50 million to promote its dairy-free sector. Now, several major companies such as Danone and Kellogg’s will work to adjust to rising plant-based demands.

For more plant-based happenings, visit The Beet's News articles.