Kellogg’s is entering its snacks era

Kellogg’s finalized its planned stock split yesterday, officially dividing the company into two publicly traded businesses:

• WK Kellogg Co: This biz houses the Kellogg’s cereal brands regularly associated with Saturday morning cartoons, including Frosted Flakes, Froot Loops, and Rice Krispies. The name is an ode to the company’s founder, William Keith Kellogg.
• Kellanova: This side houses all the company’s snack brands, such as Cheez-It, Pringles, and Pop-Tarts, as well as its plant-based food business Morningstar.

Execs first announced the planned split in June 2022, due to cereal sales stagnating and their belief the market wasn't properly valuing the company’s fast-growing snacks business.

Put another way: cereal = a slow-growth area; snacks = a fast-growth area. The global snack food products market size was valued at ~$585 billion in 2022, and is projected to reach ~$839 billion by 2029.

But that type of growth could be in jeopardy. As major food brands are making bets on the snacks industry – J.M. Smucker also recently bought Twinkie maker Hostess Brands for $5.6 billion to expand its snack lineup – the use of anti-obesity drugs like Wegovy and Ozempic is rising, which could negatively impact the market.

Research from Morgan Stanley indicates the number of patients taking anti-obesity drugs could reach ~7% of the US population by 2035. And if that occurs, consumption of baked goods and salty snacks could fall 3% – or even more if the new eating habits of the people using the treatments extend to their broader households and friends.