Wall Street seems to be greeting the news of Kellogg Co.’s impending breakup as a positive thing, especially if it increases the company’s emphasis on snacks.
The company’s stock price rose more than 5% immediately following its announcement that it will be splitting into three companies, focused on snacks, plant-based foods and breakfast cereal. The stock has gone back down, but food stocks in general jumped in the wake of the Kellogg announcement, Wall Street analysts told Bloomberg.
Kellogg’s strategy ties into a growing trend of increased snack consumption. According to Mintel research cited by Bloomberg, half of consumers aged 35 to 54 said snacking throughout the day is healthier than eating three regular meals a day.
Kellogg’s snacks business had $11.4 billion in sales last year, well above the other two units to be formed in the spinoff. The new snack company will be headed by Steve Cahillane, current CEO of Kellogg.
Another effect of the Kellogg breakup has been to stimulate interest in similar moves among large food companies with diverse product portfolios. Such moves generally gain flexibility, as the smaller units become more nimble to respond to trends and conditions.
“It’s hard to pivot a behemoth,” a corporate advisor told the Wall Street Journal. The tradeoff is that in some cases, the smaller companies lose the economies of scale that the big one benefited from.