Some of the makers of our favorite snacks are shaking things up.  Kellogg recently announced it plans to separate its company into three independent businesses, with separate enterprises for its snacking, cereal, and plant-based products. 
 It comes as the company's legacy brands have been struggling -- and Kellogg is not alone.  Although the pandemic led to consumers revisiting pantry staples like cereal and soup, many are now returning to pre-pandemic diets; and food companies are once again seeing pre-pandemic trends of business being dragged down by their more traditional products and are being forced to find new ways to continue to grow.  Greg Portell, lead partner of the global consumer ind
joining now to discuss is greg portell, Lead Partner, Global Consumer Industries & Retail Practice at Kearney, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Kellogg Split Raises Questions About Future of U.S. Food Industry

and some of the makers of our favorite snacks are shaking things up. Kellogg recently announced it plans to snap its company into three independent businesses with separate enterprises for its snacking, cereal and plant based products. What comes as the company isn't seen much crackle or pop when it comes to its legacy brands. The catalog is not alone, although the pandemic led to consumers revisiting pantry staples like cereal and soup. Many are now returning to their pre pandemic diets. Food companies are once again seeing pre pandemic trends of business being dragged down by their more traditional products and are being forced to find new ways to continue to grow. So, joining me now, is Greg Portal lead partner of the global consumer industries retail practice at the global management consulting firm Kearney Greg thanks so much for coming on the show. Let's kick things off with Kellogg here, what do you think of this company's plan to split into three? A lot of the design of these companies really comes back to what level of transparency versus management influence do you want to see? And if you look at a company like Kellogg's or any of these big food conglomerates, they have exposure to a lot of different categories that have different growth rates. So, this type of split really gives investors clarity about what's driving growth versus what's driving cash flow. So this is really a move about transparency from an investor perspective, more than anything else at this stage. Mhm. So I'm some Jpmorgan analysts saying that profit margins could actually decline from losing the shared services, splitting up into three separate entities. Greg, I do agree with that. Well, there's going, there's always a dis synergies that happens when you split these companies off there, there's a sweet spot that companies try to maintain between this efficiency element versus becoming too generic. So when you have companies that are spread across as many categories as a company like Kellogg's is or some of their other peers, the question becomes, what is a differentiating shared service, such as procurement, for example, where they can use some scale and use some synergies for being a bigger company versus something that really is less less important in terms of driving the creative nature of the business, There have been other analysts on the street. Greg who have said, General Mills, also a cereal company, also snacks business like Kellogg might follow suit, see how it goes with Kellogg and actually split its own business. Do you think that might happen? And do you think it'd be a good idea? Well, what's happened in the last 10 years, is that not only do investors care what the outcome of a particular earnings quarter is they also care how management gets there. So, when you think about these multi portfolio, large portfolio based companies, there needs to be a management story that says why they work better together things such as scale, things that, such as leverage with the retailers the ability to drive innovation and branding across categories. Those are all incredibly valuable as a company becomes much more focused and narrowly defined, that gives investors that visibility they want. But it also limits the control that management has in terms of producing the outcomes. So really the question for all of these larger portfolio companies is how is management using the scale to its advantage? And as long as they can answer that question, investors should be satisfied with the results. I am interested though, speaking about Kela Greg, every business is dramatically different and I think about the cereal business which was so successful for so long. I had that major workers strike in the last three months of last year and that impacted sales here. It impacted profits certainly in the first quarter of this year and at the end of last year as well. So it seems like catalog might be sort of in this unique position. Whereas the serial business, do you think that it is strong enough simply to stand on its own after the strike that only recently happened? Well, any sort of discontinuity in terms of supply chain manufacturing recalls things like that are one time events that as long as the company can move through it, you end up with a stable ongoing business. The advantage of a company with a portfolio that is just singular category. Like the cereal category is it's fairly, it's fairly predictable that allows investors to put their money behind that predictability versus something like their Morningstar farms, which is all built on growth, where investors can take the money and put it on a growth stock that may or may not produce the type of results they want for 345, 10 years down the road. It's very different portfolio and allows the investors to invest where they are expecting a particular type of return, whether it's stability or growth. Okay, Greg portal, we gotta leave it there. Greg's the lead partner of the global Consumer Industries retail practice at Kearney. Thank you.