Reuters — Kellogg Co. said Monday it would reorganize its North American division and explore a sale of its cookies and fruit snacks units, which include brands such as Keebler and Stretch Island, as it sharpens focus on its core businesses.
Like other packaged food makers, Kellogg has struggled to boost sales as consumers shift toward healthier alternatives, while competition from Amazon and other online retailers has resulted in intense pricing pressure.
The announcement comes less than two weeks after Kellogg cut its full-year profit outlook, citing increased spending on advertising and higher distribution costs.
“We need to make strategic choices about our business and these brands have had difficulty competing for resources and investments within our portfolio,” CEO Steve Cahillane said in a statement.
The company said it would consolidate its U.S. morning foods, snacks and frozen foods businesses into one unit, beginning next year. This unit will account for 80 per cent of the company’s North America revenue.
Cahillane told analysts in October that Kellogg was investing to stabilize the brands in its U.S. morning foods business, but acknowledged that the unit wouldn’t be a growth engine.
Analysts have long voiced their concerns that the “carb-centric” brands in Kellogg’s U.S morning foods business — which houses Corn Flakes and Froot Loops — are out of step with health-conscious consumers.
Other packaged foodmakers have been trying to offload some of their businesses. Kraft Heinz last week announced a deal to sell its Canadian cheese business to Parmalat and also announced the sale of part of its Indian business this year.
Campbell Soup has said it plans to sell its international and fresh refrigerated-foods units and left open the possibility of putting the whole company up for sale.
Kellogg, which said the restructuring is one of the final initiatives under its Project K program, will provide further details at the company’s investor day on Tuesday.
The Project K program, launched five years ago, aimed to slash costs through job cuts and supply chain optimization, among other things.
–– Reporting for Reuters by Soundarya J in Bangalore and Richa Naidu in Chicago.