Why Is Kellogg Becoming Three Companies?

Aron Solomon

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Why Is Kellogg Becoming Three Companies? - by Aron Solomon

Last week, we learned that Kellogg, the massive cereal company, is going to legally become three separate companies. One of those companies will be focused on cereal, one on snack foods, and one on plant-based foods.

Michael Epstein, a New Jersey lawyer, explains that this is absolutely a good news story for Kellogg’s shareholders:

“How this all affects current Kellogg’s shareholders is fairly simple: shareholders in the existing company will receive a pro-rata percentage of shares in both of the new companies. So, assuming that someone owned shares worth 0.000032% of Kellogg, they would receive shares in each of the two new companies that would give them the same ownership stake.”

But what’s really compelling to current Kellogg shareholders is that it’s not only innovative to break Kellogg into three companies, it’s going to be a catalyst for growth in each of these verticals. While Kellogg is obviously doing remarkably well in the snack food vertical, a new company uniquely focused on snack foods is a superb foundation to build upon current successes.

Kellogg already has so many snack food brands that we know and love, including Pringles, Cheez-It, Carr’s, and Town House crackers. A uniquely focused snack food company under the Kellogg umbrella is sure to gain an even larger market share. People love snacking and there’s absolutely no indication that our spend on these comfort foods is going to slow down anytime soon.

Yet the most exciting future vertical for Kellogg in this company split is plant-based foods. Like them or not, it’s impossible to deny the importance of plant-based foods.

The plant-based food market is massive and will soon hit $10 billion per year, almost doubling since 2019. Historically, we thought of plant-based foods as being primarily for vegans, but the consumer market is now infinitely larger than this original group.

More Americans than ever are including plant-based options in their diet with two-thirds of American families buying plant-based products. But the major changes that I predict will come to the plant-based food vertical are the most exciting for companies such as Kellogg.

While years ago, plant-based milk was very hard to find, in some cities it’s close to becoming the rule rather than the exception. The quality of plant milks today is infinitely better than it was even three years ago. As someone who enjoys both regular and plant milk, I’m shocked to say that while plant milks are obviously different from dairy milk, some are now actually better.

Along with that comes a change in consumer behavior. In the big city I live in, so many people enjoy plant milk that when you go to a reasonably nice cafe and order a milk coffee drink, the barista asks some variation of “Cow or plant?”

And plant milk is only the beginning for plant-based foods. As the U.S catches up to countries such as Germany in plant-based food consumption, a company with Kellogg’s reach can introduce and support new plant-based foods on a scale that other companies couldn’t dream of.

By dividing itself as it has, what Kellogg is really doing is making sure the company, ironically, doesn’t end up eating itself. By clearly delineating these Kellogg divisions into new companies, Kellogg ensures that it doesn’t eat its own talent or make any short-term shifts of focus and resources that can harm any of these three key areas of the business.

Done well, Kellogg will show that this is a business model that should be more frequently considered by companies that are trying to scale.

About Aron Solomon

A Pulitzer Prize-nominated writer, Aron Solomon, JD, is the Chief Legal Analyst for Esquire Digital and the Editor of Today’s Esquire. He has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in Forbes, CBS News, CNBC, USA Today, ESPN, TechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Fortune China, Yahoo!, ABA Journal, Law.com, The Boston Globe, NewsBreak, and many other leading publications.

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Aron Solomon, JD, is the Chief Legal Analyst for Esquire Digital, who has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world.

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