According to CEO Steve Cahillane, splitting off its snacking division will help the Kellogg Company compete better against other food makers. Kellogg’s snacking division, which gets 80% of its sales from brands such as Cheez-It, Pop-Tarts, and Pringles, has not received recognition from investors despite growing sales by 26% year-over-year in its most recent quarter.
“I’m not happy with our stock price performance, but go back and look at our results; it’s been exceptional,” Cahillane said optimistically.
Since Cahillane took over as CEO in 2017, he’s been evaluating Kellogg’s portfolio. This led to the company’s announcement last June that it planned to split its business.
Kellanova, the new name of its snacks business, will focus on products with and without a health halo, such as Rice Krispies Treats and RXBar, for various consumer occasions. Kellogg previously said it relies on the strength of its iconic brands to grow in the space.
Cahillane emphasized the importance of maintaining margins at Kellogg. He said inflation during the last two years has prevented it from benefiting from its strong margin growth.
“We make no excuses or apologies for trying to protect our margins because the underlying health of a business can really be seen in its gross margin,” Cahillane said. He added that getting to an equation where volume and value are more balanced is a priority. Corn Flakes cost more than they did 50 years ago,” Cahillane said. “Inflation comes in cycles, and this is a cycle we haven’t seen for 40 years.”