The Big Split: How Kellanova & WK Kellogg Co’s Decision Could Shape the Future of Consumer Goods

By Christian Barley

April 24, 2023

5 min read


The Big Split: How Kellanova & WK Kellogg Co’s Decision Could Shape the Future of Consumer Goods

By Christian Barley

April 24, 2023

5 min read


Following an announcement in June 2022 from Kellogg that it was dividing into two publicly-traded companies, the consumer packaged goods (CPG) company has now named the two separate divisions of its future business. Its global snacking business, which includes brands such as Pringles and Pop-Tarts, will soon sit under the name of Kellanova (an amalgamation of Kellogg and the Latin for ‘new’). Whereas, the North American cereal business will now be named WK Kellogg Co. and retain iconic brands such as Frosted Flakes, Corn Flakes, and Froot Loops. 

 

It is important to note that while the company names will change, the “Kellogg’s” brand will remain on product packaging of both companies around the world, suggesting the tangible change for consumer experience will be negligible.

 

Where have similar situations happened before in the CPG world?

 

  • In the early 2000s, Danone sold a number of its brands in the beer, confectionary and ready meal space (including Heineken and Belin biscuits) to focus on dairy and bottled water products. This allowed them to build their reputation as a ‘hyper-healthy’ company and better cater to their specific audience needs – becoming a market leader.

 

  • In 2016, Procter & Gamble (P&G) announced that it would spin off its Duracell battery business into a separate company. The move was part of P&G’s ongoing efforts to streamline its operations and focus on its core businesses, which included brands such as Tide detergent and Pampers diapers. The markets reacted favourably to the announcement as it allowed P&G to better allocate resources to the core business, rather than the stagnating battery business.

 

  • In 2021, Johnson & Johnson (J&J) announced plans to split its consumer products business from its pharmaceutical and medical device operations, creating two publicly traded companies. Similar to Kellogg, the leadership identified an opportunity to unlock growth through splitting the safer, traditional CPG business away from the riskier (but more innovative) pharmaceutical and medical device business. Contextually, this split was announced at the end of the Covid-19 pandemic which would have had a significant impact on the decision.

 

 

What does this mean for the future of Kellogg?

 

When a CPG business divides into two companies, it typically means one of two things: the company is either looking to sharpen internal focus on specific areas of its business or it needs to streamline its operations by removing non-core businesses that are not as profitable. For Kellogg it appears to be the former, where they believe greater growth can be achieved by focusing on innovating non-cereal products under the new Kellanova name. Steve Cahillane, the future Chief Executive Officer of Kellanova, said that the name choice “signals our ambition to continuously evolve as an innovative, next generation, global snacking powerhouse”. 

 

On the other hand, the choice to name the other half of the business WK Kellogg Co appears to be based more on nostalgia. Gary Pilnick, Chief Executive Officer Designate of WK Kellogg Co, explains that “the name […] honours the legacy of founder W.K. Kellogg, celebrating his spirit of innovation and entrepreneurship”.

 

The choice to divide Kellogg’s brand portfolio into two distinct businesses suggests there is an internal need to better focus on each company’s unique market position and target audience. From the statements, it appears that Kellanova will cater for ‘future-focused’ consumers and WK Kellogg for the more ‘traditionalist’ consumer, demonstrating how they are shifting towards a more consumer-centric approach to product innovation. It will be interesting to see how this impacts the internal product innovation process in each of the companies, and their global positioning in the CPG marketplace. 

 

The move also highlights Kellogg’s commitment to its workforce as the names were created using suggestions from an internal survey (of which 1,000 people submitted naming ideas). This highlights the importance of aligning your internal workforce behind a large scale strategy shift to ensure they are bought into the change early. 

 

What are the potential downsides of the split?

 

By dividing into two, Kellogg could run the risk of actually reducing their understanding of the consumer. As discussed in our recent thought leadership piece (Reframing Marketing for Growth), Manifesto identified that companies can potentially achieve a better understanding of consumers by consolidating data and insights from across the brand portfolio to develop a single view of the consumer. The difficulty behind this is it requires internal alignment from leadership across the business but could deliver greater benefits in the long run than dividing into smaller business units. 

 

So, what can other companies learn from this?

 

  • Stay hyper-focused on the consumer experience. Through the split, Kellogg has potentially identified two distinct consumer segments in the market: ‘future-focused’ Kellanova consumers and the more ‘traditionalist’ WK Kellogg Co consumers. By splitting the company, Kellogg believes they can better cater to the specific needs of the consumers through a more targeted marketing and product development process. However, it is important to assess whether the business would instead benefit more from consolidating data across their existing brand portfolio to develop a single view of the consumer.

 

  • Target the key growth opportunities. As shown in past successful examples (Danone, P&G and J&J), these companies identified where growth could be unlocked in their business and then targeted these areas – either by selling off specific brands or dividing in two. Kellogg appears to be signposting they will be focusing on Kellanova to drive new innovative sources of value moving forward, however only time will tell whether this is a good strategic shift.

 

How can Manifesto help?

 

Manifesto are experts in building future-proof strategies for businesses that deliver a better experience for consumers, drive consumer-lifetime-value and are deliverable. We have worked with a number of leading businesses across the CPG sector and have a proven track record of accelerating ongoing enterprise-wide change. Contact us to find out more.

 


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