Kellogg stock slides as iconic company breaks up

Kellogg stock slides as iconic company breaks up | The Enterprise World

Kellogg (K) has officially undergone a split into two separate companies. The renowned 117-year-old company, known for its popular products like Pringles and Frosted Flakes, has completed this division after months of preparations since June 2022.

Kellanova, the newly formed entity, will house well-known snack brands such as Pringles, Cheez-It, Pop-Tarts, and the company’s plant-based food business, Morningstar. Former Kellogg CEO Steve Cahillane will lead the Kellanova business, and it will continue trading under Kellogg’s previous stock ticker symbol, “K,” on the New York Stock Exchange.

Aims to honor the company’s heritage

The choice of the name “Kellanova” aims to honor the company’s heritage while symbolizing a fresh phase of growth in the thriving snacks industry. However, shares of Kellanova experienced a 7% decline during the session.

On the other hand, the traditional cereal business, which includes brands like Froot Loops and Corn Flakes, has been named WK Kellogg Co in homage to the company’s founder, William Keith Kellogg. The business’s stock symbol, “KLG,” will also be traded on the New York Stock Exchange, although its shares dropped 9% during the session.

The decision to split the company was initially announced in 2022, with Cahillane expressing the belief that the market undervalued Kellogg’s rapidly growing snacks business and the cost-saving initiatives they were implementing. This view was reiterated in a recent conversation.

Cahillane, during his tenure as CEO, oversaw another significant transformation: the sale of Kellogg’s Keebler cookie business in 2019.

Kellogg’s announces split into Kellanova and WK Kellogg Co. by end of 2023

Enhance its margins by implementing cost-cutting measures

Despite a generally well-received investor day a few weeks ago, Wall Street is adopting a cautious approach toward both businesses.

Concerning Kellanova, industry experts have pointed out that the company needs to boost sales growth in its core business segments and expand its international presence. Jefferies analyst Rob Dickerson noted, “While management guided to +3-5% long-term organic growth at the investor day, from our perspective there could be potential risk to that in the near term given North America still accounts for ~50% of pro-forma Kellanova revenues and year to date U.S. tracked channel retail volumes are down ~9%, a pace that has sustained in recent months.” He further added that the company might need to reinvest to stimulate growth, considering higher prices and a strapped U.S. consumer.

As for WK Kellogg Co, it is perceived that the company must enhance its margins by implementing cost-cutting measures in a cereal industry characterized by sluggish growth.

Read More: How McDonald’s became the World’s Largest Food Chain, a Case Study?

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