Even as Kellogg Looks to Slim Down, Management Prudently Focused on Investing for the Long Term

While we've long held Kellogg's strategic playbook (increasing investments in capabilities and brands while extracting inefficiencies) is on point, we question the rationale underpinning its decision to spin off its North American cereal and plant-based alternative arms, leaving it with its global snacking brands. Despite the increased focus management claims this affords, we fail to see how this strategic action enhances its competitive position or financial prospects, given the reduced scale and added administrative costs that are likely to ensue. In our view, the motivation leans more toward unlocking a higher multiple for the faster-growing snack business once it's unencumbered by the more mature North American cereal brands.