Kellogg’s to retain plant-based business; Posts better-than-expected results

Kellogg’s on Thursday (9) announced that it would retain the plant-based meat business it had planned to spin off, alongside announcing better-than-expected quarterly results. 

About seven months after the packaged-food giant said it was exploring a possible sale of its plant-based division MorningStar Farms, Kellogg said that it would hold onto it as the category’s performance erodes — potentially reducing the business’s value and appeal.

The move comes at a time when inflation-hit consumers curb purchases of pricier plant-based meat alternatives in favour of cheaper animal meat. As a result, the valuations of plant-based companies have collapsed since Kellogg’s mooted the spin-off. 

“Given current market conditions, as well as our confidence in this business as a long-term growth vehicle, we have decided to retain it as part of the global snacking company,” Kellogg’s CEO Steven Cahillane commented.

Kellogg launched Incogmeato, a more meat-like product line partly sold in the refrigerated section of grocery stores, in 2020. It has seen less success than the original MorningStar Farms lineup, which is found in the frozen section.

The company’s fourth-quarter results beat market expectations for sales and profits in spite of the challenging operating environment. Net sales increased by 12 per cent year-on-year as positive price-mix in all its four regions, sustained momentum in snacks and emerging markets, and lapping the year-ago fire and strike in its North America Cereal unit. On an organic basis, which excludes the impact of currency, sales increased by 16 per cent year-on-year. 

On an adjusted basis, Kellogg’s operating profit increased by 16 per cent, and by 20 per cent excluding currency, as strong, pricing-led sales growth offset supply disruptions and input cost inflation. 

For the full year, the company reported net sales up 8 per cent, with organic growth of nearly 12 per cent. On an adjusted basis, operating profit increased by 4 per cent, and by 7 per cent excluding currency. 

“Reflecting on 2022, I could not be more proud of our organisation’s focus and determination to work through challenges and deliver on our financial commitments,” Cahillane said. 

“Facing significant cost inflation, worldwide bottlenecks and shortages, and a significant inventory rebuild in North America cereal following last year’s fire and strike, the team executed with grit and agility to deliver another year of better-than-expected results, while at the same time making progress toward our planned transformation. 

“We enter 2023 in solid financial condition with strong momentum around the world. And we remain as convinced as ever that the pending separation of our company will create value for all stakeholders.” 

The company is forecasting organic sales growth of 5 per cent to 7 per cent in 2023, led by sustained momentum in snacks and emerging markets.