FEATURE How food group Kellogg’s breakup provides a blueprint for unloved Unilever

FEATURE

How food group Kellogg’s breakup provides a blueprint for unloved Unilever

The cereal maker’s three-way breakup will give it more focus

Corn Flakes, Rice Krispies and Pringles maker Kellogg (K: NYSE) is to separate into three independently listed food businesses focused on snacks, cereals and plant-based food in a bid to unlock value for shareholders.

Kellogg’s break-up is following in the footsteps of corporate giants such as GSK (GSK), General Electric (GE:NYSE) and Toshiba (TYO:6502) and could create a blueprint for UK consumer goods giant Unilever (ULVR) to follow.

Set to complete by the end of 2023, Kellogg’s separation will see the food giant spin off US, Canadian and Caribbean cereal and plant-based businesses which collectively represented about 20% of Kellogg’s sales in 2021.

The remaining business, which accounted for roughly 80% of sales in 2021, will have a sharpened focus on global snacking, international cereal and noodles and North America frozen breakfast products.

Kellogg’s boss Steve Cahillane said all three businesses have ‘significant standalone potential’, though he is staying on as CEO of the faster growing and higher margin global snacking company which makes brands including Cheez-It and Pop-Tarts.

Interestingly, there was no activist investor pushing for the Kellogg’s split, as it typically the case with such demergers. It is a different story at Unilever where billionaire activist Nelson Peltz was recently appointed as a non-executive director after taking a stake in the business. Shares in the £92 billion cap are down 16.1% over one year.

Peltz’s arrival adds to the pressure on the Doveto-Marmite-maker’s beleaguered boss Alan Jope to come up with a market-pleasing strategy after the botched takeover of GSK’s consumer healthcare arm. UK investors will recall Peltz’s presence on Cadbury’s share register led to a break-up and eventual sale of that company.

How Unilever might be split up

Beauty Food Household products

Source: Sharesmagazine.co.uk

Breaking up Unilever, whose sprawling range spans everything from plant-based meats, mayonnaise and ice creams to deodorants, washing and bathing products and bleach, could make sense.

Unilever has an enviable collection of brands, but hard-nosed investors have urged the board to break the company up into three separate divisions, namely beauty, food and household products.

In January, Unilever presented its own plan for a ‘simpler, more category-focused business’ built around beauty and wellbeing, personal care, home care, nutrition and ice cream, with its new structure to generate around €600 million of cost savings over two years. Tellingly, food and refreshment was not mentioned as a key business area, implying this part of the business may have been earmarked for sale.

By James Crux Funds and Investment Trusts Editor