WK Kellogg Co. outlines 3-prong strategy to grow after spinning out iconic cereal business

By Elizabeth Crawford

- Last updated on GMT

Source: Getty/	laartist
Source: Getty/ laartist

Related tags WK Kellogg Co Breakfast cereal Kellogg Cereal

As Kellogg Co. moves forward with spinning out its $2.7bn iconic cereal business under the new WK Kellogg Co., it is embracing a three-prong strategy that will enable it to rebuild market share lost in recent years and seize a larger portion of the $10.4bn North American cereal category, according to top company executives.

“Our business has experienced significant disruption from material one-time events over the last few years,”​ including a significant fire​ at the Memphis facility and a strike ​at all of the US cereal plants, Gary Pilnick, CEO of WK Kellogg Co, acknowledged last week during the company’s investor day.

But, he added, “the team responded well, with resiliency and agility you would expect and we’re recovering, we’ve been able to replenish our supply and relaunch the business.”

As such, the company’s adjusted net sales are steadily climbing closer to the $2.8bn sold in 2020 during the peak of the pandemic with 2022 sales reaching $2.7bn after dropping to $2.4bn in 2021.

“We still have room to grow and regain our share position, but we’re on our way and the business is gaining momentum,”​ he said.

By adopting at three-prong plan focused on integrating its global cereal business under one umbrella, modernizing its supply chain and “unleashing an energized and winning culture,” Pilnick said the company will “regain share and capture the sizeable margin opportunity that’s ahead of us, bringing us more in line with our peers”​ and ultimately unlocking future growth potential.

An integrated and focused commercial plan to grow share, expand margins

Under the first prong, WK Kellogg Co. will integrate and focus its currently disparate global cereal businesses to take advantage of economies of scale.

“Key parts of our business had been run separately as part of the Kellogg Co. Caribbean is part of Latin America, Canada and the US are distinct businesses. Away from home is scaled beyond cereal. Bear Naked operates separately from the balance of the US business. That was certainly the right decision for the global Kellogg Co., but it will be very different for us. All of that will be integrated now,”​ Pilnick said

He explained the most “tangible example of what’s going to be different is our sales force,”​ which will now focus solely on selling cereal, rather than being divided to include snacks and plant-based offerings.

This “should enable us to grow share and expand margins,”​ he said.

A modernized supply chain

The second prong in WK Kellogg’s strategy is to modernizing its supply chain by investing in technology and automation to prove its plants’ reliability and agility, Pilnick said.

“We’re going to realign our manufacturing network and optimize our processes. So our plants operate with that agility efficiency. And we’re going to drive high performing teams to execute on all of it,”​ he said.

This should allows the company to boosts gross margins “significantly” – bringing them back to previous levels and seizing a sizable EBITDA margin opportunity, he said.

Building an ‘energized and winning culture’

The third and final prong of the company’s overarching strategy is to “unleash WK’s winning culture,”​ Pilnick said.

He praised the company’s employees as “bold, entrepreneurial and connected”​ and as “hungry and ready to win.”

They will follow a ‘make it better’ mindset and as one company to achieve its goals and generate significant cash flow, leading ot attractive returns for shareholders, he concluded.

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