let's take a look at our stock of the week
, which is Kellogg as you know, the food
manufacturing company made a big announcement a few days ago
, Kellogg says they plan to split into three publicly
traded companies. Now, Kellogg's north american serial business
will become its own entity with brandy No, like
special k fruit loops, frosted flakes and rice Krispies
among many others. Next is a snacks brand which
includes Pringles cheez its carr's crackers and more in addition
to frozen breakfast foods like egg oh and it's growing
instant noodles business in africa. Now, the final
entity will house Kellogg's plant based business with brands like
Kashi, Incognito and morning star farms. So names
for the new companies have yet have been decided but
expects to be spinoffs will be done by 2023 you
can see shares on the five day have jumped more
than nearly 4.5% right there for you, interesting stuff
, It's really interesting Ken and Kellogg Ceo Steve Elaine
saying each of the businesses have quote significant standalone potential
. That company reportedly been exploring some type of spin
offs since 2018 but the momentum really starting in 2012
when it acquired Pringles from Procter and gamble for 2.7
billion. Now that immediately made Kellogg's a major player
in the global snacks business and did help profits cereal
business, however, has been slowing down recently despite
a momentary increase in sales during the pandemic. So
recently they've stagnated as people prefer to eat on the
go or look for greater variety in the morning and
serials, which were staples of the company for years
are no longer seen as key drivers of growth for
Kellogg's chameleon though, expecting that dividing up the business
will actually help streamline operations for the cereal division and
improve profit margins since it won't have to compete with
the stacks business for resources. The plan-based business will
be anchored by Morningstar farms and generates$340 million dollars
in sales just last year. So Kellogg's is one
of the rare stocks that's actually risen so far this
year as it's seen a big shift towards snack sales
. We can take a look here Ken at shares
of Kellogg, they are up 6.4% year to date
one of the few stocks, I mean very,
very few stocks that is actually up on a year
to date basis. And pretty optimistic obviously as we're
recovering all week on these three separate entities. It's
interesting too, because Kellogg's is one of those companies
that has been really fortunate to whether the kind of
not only the pandemic, but also where this inflation
is running red hot, they were able to obviously
have great margins when it came to that with them
increasing prices and folks Are not really cutting out on
their cereal when it comes to the grocery store shopping
. So they're in a pretty good place. And
although their forward thinking when it comes to their plant-based
selection, it's the smallest of the three entities that's
making the most money right now. But when it
comes to snacks, I think it's like 80% internationally
that it accounts for 80% of its revenue from international
snacks. So they're doing pretty well there. I
know I'm buying a lot of legos when I go
because my daughter loves him. What about incognito?
Are you a fan of that? You know,
I am not a big fan of the morning star
in incognito. I'm not, I'm not really big
on the plant based but like you know the egg
goes those, I'll reach for it. I can't
say actually that I've ever tried the incognito. That's
why I asked ken but look, Kashi cereal huge
moneymaker for this company as well, prices obviously increasing
. It's been interesting the few times that we've spoken
to Kellogg's chief, there is steve Hill Lane,
he has said simply, I mean on multiple occasions
prices continue to increase across the different brands now.
Cereal interestingly is what this company is known for,
but it's actually been I think the industry or the
unit actually struggling the most had that major strike workers
strike in the fourth quarter of last year and still
literally into like the middle of this year and earlier
this year, still having negative impacts because of that
. So we'll see whether or not the cereal business
can stand on its own snacks business, we know
, I mean just continuing to crush it and then
plant based is interesting, but Plant based is still
a growth business. So I don't know, you
know if we if we do have a recession whether
or not plant based is something that would be attractive
to people. It's also kind of helps with the
supply chain because if one business is faltering because the
materials and ingredients or whatever they need to, they
have others to fall back on because as you know
, supply chains right now are extremely fragile. So
this kind of gives them some wiggle room when it
comes to that. But I totally agree when it
comes to luxury at the at the grocery store,
Plant based is definitely on that list. Plant place
is definitely the way.