Here's a takeaway from the unexpected news that Kellogg Co. is splitting itself into three businesses: The U.S. breakfast cereal business is not so great.
Tony the Tiger and his pals (Snap, Crackle, Pop and Toucan Sam among them) are a very small part of the Battle Creek, Mich.-based giant these days, with Kellogg's snack foods division making up the vast bulk of its annual sales.
In fact, when the company splits, the global snack foods unit — including the Pringles, Cheez-It and Pop-Tart brands (if you ever wondered if Pop-Tarts are a breakfast food or a snack, there's your answer) — will be worth $11.4 billion in annual sales, or 80 percent of the current Kellogg revenue stream.
The "legacy" business, including the Corn Flakes brand introduced in 1894 by W.K. Kellogg, will be worth about $2.4 billion and cover only cereal business in the U.S., Canada and the Caribbean. The snack food division will oversee cereals in the rest of the world and frozen breakfast foods like the Eggo waffle brand.
Kellogg's plant food business, which covers the Morningstar Farms brand, will be worth $340 million.
The corporate giant doesn't have its own plastics operations, but obviously is a big customer for plastics packaging, so the maneuver will have a ripple effect. The company also is facing pressure to use more recycled content in its packaging.
The move is, as all these corporate decisions seem to be, about adding "shareholder value," CEO and Chairman Steve Cahillane said in a news release.
Cahillane will remain CEO of the new snack company, which Kellogg said has the highest growth potential. The new breakfast cereal business will, among other things, focus on the "restoration of inventory," which should mean fewer empty shelves due to supply chain issues.
