Kellogg to split into 3 companies, move corporate HQ from Battle Creek
Kellogg Co., the maker of Frosted Flakes, Rice Krispies and Eggo, will split into three companies, and the largest focused on snack foods will move its corporate headquarters to Chicago from its historic home of Battle Creek.
It's another loss for Michigan of the prestige and jobs created by the main offices of an international company. Companies focused on North American cereals and plant-based products will continue to be based in Battle Creek, but the new snack business, which makes up 80% of sales, will have a dual campus in Chicago and Battle Creek. The decision marks the challenges for Michigan in retaining even heritage industries.
Shares of Kellogg Co. jumped 2.5% to $69.35 in early afternoon trading Tuesday.
Kellogg's, which also owns and MorningStar Farms, the plant-based food maker, said the spinoff of the yet-to-be-named cereal and plant-based foods companies should be completed by the end of next year.
Kellogg’s had net sales of $14.2 billion in 2021, with $11.4 billion generated by its its snack division, which makes Cheez-Its, Pringles and Pop-Tarts, among other brands. Cereal accounted for another $2.4 billion in sales last year while plant-based sales totaled around $340 million.
“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities,” CEO Steve Cahillane said.
U.S. cereal sales have been waning for years as consumers moved to more portable products, like energy bars. They saw a brief spike during pandemic lockdowns, when more people sat down for breakfast at home. But sales fell again last year. Kellogg has been sharpening its focus on snacks for years. In 2019, the company sold its cookie, pie crust, ice cream cone and fruit business to the Ferraro Group.
The split follows a lengthy strike at its U.S. cereal plants, including in Battle Creek, last fall amidst a surge in union activity across the country dubbed "Striketober." A contract covering 1,400 workers with wage increases and enhanced benefits was ratified on Dec. 21 after the work stoppage began Oct. 5.
Shareholders will receive shares in the two spin-offs on a pro-rata basis relative to their Kellogg holdings. Its three international headquarters in Europe, Latin America and Asia will remain in their current locations.
Kellogg will mark the latest exit of a corporate headquarters from Michigan. After Detroit-based TCF Financial Corp. last year merged with Huntington Bancshares Inc., the new Huntington remained domiciled in Columbus, Ohio, with the holding company and retail bank headquarters, though a "dual headquarters" strategy left the commercial bank based in Detroit.
Foreign mergers for the maker of Jeep, Chrysler, Dodge and Ram vehicles now have parent company Stellantis NV domiciled in the Netherlands. Auto supplier Delphi Corp.'s split in 2017 created Ireland-based Aptiv PLC and London-based Delphi Technologies PLC, though Delphi today is owned by BorgWarner Inc. in Auburn Hills.
Comerica Inc. in 2007 left Detroit for Dallas. Acquisitions also took headquarters of Gerber Products Co. from Fremont and Upjohn Co. from Kalamazoo.
Nationally, companies have begun to split up at an accelerated pace, including General Electric, IBM and Johnson & Johnson, but such splits are more rare for food producers. The last major split in the sector was in in 2012, when Kraft split to create Mondelez. Michigan's own Midland-based Dow Inc. spun off in a three-way split from DowDuPont Inc. in 2019.
This is a particularly perilous time in the food industry due to rising costs, both for labor and for material. Russia's invasion of Ukraine has pushed grain prices higher and this month, the U.S. reported that inflation is hitting four-decade highs.
Staff writer Breana Noble and the Associated Press contributed.