Kellogg Rebrand and Spinoff Flops as Shares Fall Under New Name
Key takeaways
- Food titan Kellogg has split itself into two companies and rebranded
- The move came as the business announced a restructure last year
- Kellanova shares were down over 7%, and WK Kellogg Co. saw an 11% drop
We guess Kellanova had more of a ring to it than an internationally recognized household name brand — right? That’s the path the snacks and food company, formerly known as Kellogg, has taken. It’s completed its plan to split itself into two companies to better focus its increasingly divergent businesses, but the stock market reaction hasn’t been favorable so far.
With both businesses after increased profits in the coming months, tanking stock prices are the last thing Kellanova needs. Here’s everything you should know about the newly rebranded companies and how the markets reacted.
Why has Kellogg rebranded?
Last year, Kellogg revealed its plans to separate into three separate companies: one for snacks, one for North American cereals, and the final for its plant-based meat business. Having completed that transition, the cereal company is now called WK Kellogg Co.; the remaining is called Kellanova.
Confusing? Yep, but Kellanova must have had a reason for it. Under the separation agreement, Kellanova shareholders got one share of WK Kellogg Co. stock for every four Kellanova shares they held as of September 21. It’s been structured this way so the two businesses don’t need to compete with one another for resources.
Kellanova will stay in the S&P 500 benchmark, but WK Kellogg Co. shares will be included in the S&P SmallCap 600 index from Tuesday onwards. The cereal company is anticipated to generate $2.7 billion in annual sales over the coming year, while the snacks company is after $13.6 billion from selling its popular brands like Pringles and Pop-Tarts. Both companies will still use the Kellogg branding.
What was the stock market reaction?
Kellanova shares dropped as low as $51.83, down by 7.2%, having opened for the trading day at $55.70. WK Kellogg Co. suffered a more drastic downfall with an 11% drop in its stock price.
The reason is that investors don’t know what to make of the split or how much they’re worth. The cereal sector has declined for some time, making it an unattractive option for traders: retail sales volume for cereal products was down 2.4% annually between 2019 and 2022.
At a recent investor day in August, WK Kellogg Co.’s CEO Gary Pilnik said the brand could move “beyond cereal with the brands that we have in the foundation.” But in the short-term, investors aren’t exactly thrilled with the spinoff.
The bottom line
There’s no going back now. The Kellanova and WK Kellogg split is complete, and Wall Street is frowning at the move. The two companies will need to work hard to win over investors on two points: that the split was good and that both companies have solid growth prospects in the short and long term.
