Will Kellogg’s Plan To Split Be The Right Move?

Iconic food manufacturer Kellogg’s has announced plans to split its company in three as it refocuses its best-performing segments.

If you’re anything like me, Kellogg’s (NYSE: K) played a massive part in your childhood. Corn Flakes was my family’s cereal of choice for years, with the occasional defection to Frosted Flakes whenever I managed to sneak them past my mother’s watchful eye during our weekly grocery run.

Kellogg’s is about to change forevermore, however, as it’s just announced that it’s planning to split in three.

Is Kellogg’s splitting up?

News broke yesterday that Kellogg’s is set to split its company into three separate publicly traded entities. The companies will each focus on a respective segment of Kellogg’s current offerings: namely snacking, cereal, and plant-based foods. Shares in the company initially spiked following the news but eventually settled to leave Kellogg’s up just 1.9% for the day.

Spinoffs and splits are often deemed a necessary evil. Large conglomerates that have operated for decades can become bloated by continuous acquisitions and expansions into new industries. Splitting the company allows each segment to refocus on a singular market and not have to worry about how it fits into the wider base of operations.

Similar spinoffs were announced last year by old-world titans such as General Electric and Johnson & Johnson. Investors greeted these announcements with fervor, as they anticipated these once world-leading companies could rediscover some of that spark.

Kellogg’s is in a slightly different position from both of those companies, however. Over the past five years, its stock chart reads relatively flat, and it’s even seen a 6.4% rise this year-to-date on the back of many of its products’ imperviousness to general economic decline — we all still need to eat, after all.

Each of these new companies requires a focus and direction that simply couldn’t be obtained operating under a singular umbrella. Snacking is continuing to go from strength to strength, but its cereal arm has lost ground to competitors. Will this split be enough to revitalize Kellogg’s fortunes? Only time will tell.