Kellogg will not split off its plant-based brands


Dive Brief:

  • Kellogg will not split off its plant-based brands, CEO Steve Cahillane said on the company’s latest earnings call. Its decision not to sell off the segment, which includes the MorningStar Farms brand, comes as product sales in the plant-based category continue to stagnate.
  • The company as a whole beat Wall Street expectations in its last quarter, with sales increasing 12% compared to the year-ago period, reaching $3.83 billion. Prices of Kellogg’s products increased 15.6% compared to a year before.
  • After facing labor and supply chain challenges in its cereal business and announcing its intention to split into three companies last year, Kellogg is changing course to manage the struggling parts of its portfolio as it reaps the rewards of high inflation in others.

Dive Insight:

Kellogg’s past year was defined by significant decisions about its future. Halting its initial plan of splitting into three units highlights how the company is changing strategy in a fraught economic environment.

On the earnings call, Cahillane said finding a new owner for its largest plant-based brand could prove challenging. When the company first explored a divestiture of MorningStar Farms, he told investors, valuations of CPG assets in the plant-based meat space were “stratospheric.” This has significantly changed as sales have stagnated in the segment. Kellogg, he said, remains the best parent for MorningStar Farms.

“The environment has clearly changed. And when we look at what’s on the horizon for this category, we see an imminent shakeout coming. It’s happening already,” Cahillane said on the earnings call.

MorningStar Farms products account for 2% of Kellogg’s total sales, the company said in its earnings report. Sales of refrigerated plant-based meat fell 15% for the year ending Jan. 1, according to IRI data cited by Bloomberg.

The brand known for veggie burgers and meat alternatives also faced operational issues last year. In the first half of 2022, sales of MorningStar Farms products fell 10% due to a supply disruption with a co-manufacturer, causing Kellogg to reduce its commercial activities.

Cahillane told Bloomberg the company’s refrigerated Incogmeato products, which launched in 2020, have performed worse than MorningStar Farms’ frozen foods. Despite these weaknesses, the CEO said the company still sees long-term growth potential in the brand.

“MorningStar Farms still has some of the highest household penetration, highest name recognition, fantastic foods, strong in the freezer space where this consumer is migrating back to, and profitable, unlike many of the peers,” Cahillane said on the earnings call.

In the year ahead, Kellogg anticipates strong momentum in its snacks division, as well as supply recovery in its cereal and frozen product lines, Cahillane told investors. The company expects organic sales growth between 5% and 7% in 2023, and up to 9% growth in operating profit, it said in the earnings report. 

The initial decision for Kellogg to split into three companies was intended to drive growth in each. Its snacks division, buoyed by brands like Pringles and Cheez-It, makes up 80% of its total sales and will be helmed by Cahillane once the split occurs.

Cahillane said on the earnings call that Kellogg’s pursuit of greater market share in the snacking space — currently dominated by competitors like Nestlé, PepsiCo and Mondelēz International — may include the acquisition of new brands.

“Where we can supplement our portfolio with additions, we’ll definitely look to that because we do have great capabilities in snacking, great route-to-market, and bolt-ons or bigger will be part of our considerations going forward,” he said.

Related Posts Plugin for WordPress, Blogger...

About the Author

Jervie David Montejar
A food lover who wants to try every delicious dishes around him and spread the news to everyone to try it as well. Finding the latest trends about food and restaurants around Cebu and the rest of the world :) "Life is uncertain. Eat dessert first." -Ernestine Ulmer
Loading Facebook Comments ...

Be the first to comment on "Kellogg will not split off its plant-based brands"

Leave a comment

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.