The secret’s out: Kellogg is splitting its conglomerate into three separate businesses. While you bid farewell to the iconic brand name of your favorite childhood cereal, the company’s finance team is also facing a reckoning.
The Kellogg Company will become three separate businesses: snacks, cereal, and plant-based products. It’s even hinting at a possible sale of the plant-based business, as sales of meat alternatives in the US appear to have hit a plateau in 2022.
In such high pressure environments, companies often turn to or think about splitting up business units to generate a return or value, Hardik Sheth, partner and associate director at BCG's Center for CFO Excellence, told CFO Brew.
For example, earlier this year, Ford decided to split its business into two units, one for internal-combustion engine vehicles and one for electric vehicles. GE made a similar choice in early 2021, announcing plans to divide into three units focused on aviation, healthcare, and energy, and Johnson & Johnson stated in 2021 it would break its consumer and pharma businesses into separate units as well.
Executives used to report to CFOs on a growth plan and then ask finance to run the numbers. Now, CFOs are running the analysis and actually giving ideas to the board and executives, Sheth said.
In a webinar for stakeholders in June, Kellogg’s CFO Amit Banati said the split is to be completed by the end of 2023. While the executives’ teams and organizational structure will be hammered out in the coming months, the finance team is tasked with auditing the financials of the three companies and ensuring “solid balance sheets and return on capital profiles” across all three.
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Auditing companies takes around three months and Banati said the three companies will begin incurring pre-tax expenses.
Behind closed doors, there are likely other negotiations going on, Sheth told CFO Brew. Right now, executives are deciding who they can keep and who they’re vying for internally. If employees view one of the new companies as more attractive than the other two (Kellogg has made no secret that its snacks business is the favorite child), employees may prefer working for that option, regardless of where the company may want them.
Executives are saying, “I want this lawyer in my team, I want this strategy guy in my team, I want this data scientist in my team. I want this guy who really knows the ins and outs of how we process invoices, or this controller is really good,” Sheth said.
However, if someone in the finance organization shifts to the plant-based product company, there could be an opportunity to be a part of turning the organization to EBITDA positive, Sheth said, which could help boost the careers of employees who are part of the turnaround.
Talking points: When faced with changing jobs to work for a sub-company, employees are likely to question the new company’s value. But, Sheth said, working for a brand-new entity could bolster the careers of ambitious finance employees seeking to make a difference where they work.—KT