over 1 year ago • 3 mins
Food giant Kellogg announced on Tuesday that it’s planning to split into three separate companies.
What does this mean?
Americans have been starting their days right with a frosty bowl of Corn Flakes since 1894. But given that their expectation of flavor back then was limited to mildew, rickets, and cod liver oil, the cereal was always going to fly off the shelves. Americans today, however, have a lot more choice available to them, and they’ve been turning to snacks and fast-food chains for breakfast instead. That’s caused sales growth of Kellogg’s North American cereal segment – and cereals more generally – to drop off.
Still, the food giant has kept up with the times, focusing on building out a faster-growing snack business that includes brands like Pringles, Cheez-Its, and Pop-Tarts. The segment made $11.4 billion last year, representing 80% of the company’s total sales. Kellogg, then, is doubling down, with plans to spin off its North American cereal and plant-based segments – which make up the other 20% – to create three independent companies by the end of 2023.
Why should I care?
For markets: It’s a win-win.
The move should allow each company to innovate more and grow faster, since they won’t have to compete with one another for internal resources. What’s more, it’ll create an already-profitable plant-based play for investors – a nice change from Beyond Meat, which hasn’t turned a profit in nearly three years. The prospect went down like a warm bowl of milk, with investors sending Kellogg’s shares up 7% after the news.
Zooming out: Snacktion stations, everyone.
Kellogg isn’t the only one capitalizing on this unsung snack boom: Mondelez International – maker of Oreos and Cadbury chocolates – announced this week that it’s agreed to buy energy-bar maker Clif Bar for $2.9 billion. The move will expand Mondelez’s global snack business even more, and marks the company’s ninth deal since 2018.
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A series of European countries announced in the last week that they’re turning to coal to replace Russian natural gas.
What does this mean?
The EU has emergency steps in place to respond to a falling supply of gas, including energy-saving measures and prioritizing which industries get dibs. But those measures are a drop in the ocean now that Russia has slashed capacity of the Nord Stream 1 – one of the main pipelines between Russian and Europe – by nearly two-thirds, sending European gas prices up 50% since it pulled the trigger last week. Russia, for its part, says the move is down to “technical issues”, but technically the issue is probably Europe’s ongoing support for Ukraine.
So with officials worried that Russia could cut supplies even more going into winter, some member nations are taking action: Germany and Austria just announced they’d be firing up previously defunct coal plants, the Netherlands said it’s planning to rewrite restrictive laws on its plants, and countries like Italy are expected to follow suit.
Why should I care?
Zooming in: Europe asks for patience.
Europe is clearly prioritizing present demand over the future climate for now, but the region’s green ambitions have been amped up by the conflict: it’s aiming to invest more in renewables, as well as streamline regulations to accelerate the construction of wind farms and the like. That would kill two birds with one windmill, helping Europe both reach its climate goals and secure its energy independence.
The bigger picture: Stubborn steelmakers.
Steelmakers have no such qualms over the state of the planet, pushing ahead with the construction of coal-powered blast furnaces. But with the industry responsible for an estimated 8% of all fossil fuel emissions, it’s only a matter of time before governments step in. And according to one independent energy organization, that’s going to hurt: Global Energy Monitor said on Tuesday that the industry could be left with as much as $518 billion in useless assets.
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