June 24, 2022

Why Kellogg’s is splitting into three

Kellogg’s has joined the wave of big companies of spinning off separate businesses (think Johnson & Johnson, GE and even Ford). As markets and tastes rapidly change, brands are doing their best to keep up. 1. Cereal killer Amid changing consumer tastes, Kellogg’s plans to split itself into three separate companies so as to focus…

By Jack Derwin

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Kellogg’s has joined the wave of big companies of spinning off separate businesses (think Johnson & Johnson, GE and even Ford). As markets and tastes rapidly change, brands are doing their best to keep up.

1. Cereal killer

Amid changing consumer tastes, Kellogg’s plans to split itself into three separate companies so as to focus on conquering the fast-growing snacks market. 

The company will spin-off its stagnant cereals business into a US$2.3 billion entity, removing Toucan Sam from the brand family. 

The profitable plant-based arm MorningStar Farms on the other hand could be sold off as the meat alternative market loses pace.

Yet while it makes sense for Kellogg’s, analysts are sceptical of how these latter two businesses will cope when separated from the pack.

2. Fast food

Woolworths is getting into the fast delivery game, promising to bring fresh food to your door in just one hour.

After watching a slew of startups like Milkrun and Voly pop up, the supermarket chain is launching Metro60 in capital cities.

Partnering with Uber, it will charge customers a flat $5 fee as it looks to cut upstarts out of the $100 billion market altogether. 

3. Missing persons

Amazon may have grown so quickly – and carelessly – that it actually risks running out of warehouse workers by 2024.

The labour shortage, documented by a leaked internal memo, is in part driven by the fact that Amazon’s headcount doubled to 1.6 million in the last two years.

But more significantly it is churning through hires three times quicker than rivals due in part to scale but also scandalous workplace standards.

A complete labour shortage might finally force Amazon to address some of these long-running issues.

4. Lithium lite

This week was meant to be a victory lap for Lake Resources as the lithium developer joined the ASX 200 index. Instead its stock fell by 50%.

On Monday, the company announced its CEO was inexplicably departing the company with 10.2 million shares in tow. 

One day later someone sold that exact number of shares, sparking fears bad news is due to emerge from the company. 

In brighter news for the industry, Pilbara Minerals says analysts are wrong that lithium has peaked as it breaks another price record for carbonate.

5. Humm along

Nearly all of the directors have resigned from BNPL platform Humm after a sale to Latitude Financial fell apart at the eleventh hour.

Despite the deal showing that the consumer finance arm was unprofitable, some within the company thought Humm was being undervalued.

Analysts however have suggested the odds are still in favour of a sale with it making “a lot of sense” for Latitude to acquire it.

 

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