Kellogg Company announced plans to split up Tuesday, saying it will spin itself off into three separate companies focused on cereal, plant-based foods and snacks. The snacks company will be headquartered in Chicago, the company said in a news release, with campuses in both the city and Battle Creek, Michigan.
The news comes a week after Caterpillar, the mining and construction equipment maker, announced plans to move its corporate headquarters from Deerfield to Irving, Texas, and less than two months after Boeing said it plans to move its headquarters from Chicago to Arlington, Virginia.
The Chicago corporate headquarters will be located at 412 N. Wells St., where Kellogg’s offices are already located. The company also has offices in Naperville and currently employs more than 300 people in the Chicago area.
Kellogg’s snacks division, which includes brands such as Pringles and Rice Krispies Treats, accounted for 80% of Kellogg’s net sales in 2021, the company said. The cereal and plant-based companies, which together accounted for 20% of net sales, will be headquartered in Battle Creek. All three companies will be publicly traded. Names for each company have not yet been announced.
“These businesses all have significant stand-alone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities,” Kellogg chairman and CEO Steve Cahillane said in a statement.
“In turn, each business is expected to create more value for all stakeholders, and each is well positioned to build a new era of innovation and growth.”
In a tweet Tuesday, Mayor Lori Lightfoot said she had spoken with Cahillane and was “thrilled” the snack company’s headquarters would be in its existing Chicago offices “around the end of 2023.”
In an interview, Cahillane said Kellogg’s footprint in Chicago, the city’s infrastructure for international travel and its food innovation culture all came into play when deciding where the snack company’s corporate headquarters would be located.
He said that as of now, the company will not require employees to relocate.
“After 18 months, when the businesses are up and operating and new people are joining the organization, there’s a very real likelihood that they would want to be located in Chicago,” he said.
Michael Fassnacht, CEO of World Business Chicago, the city’s public-private economic development agency, echoed Cahillane’s comments on the city as a center of food innovation.
“It just reconfirms Chicago’s position as the global capital of food innovation,” he said. “I think it’s the result of all of our focus on food and (agriculture). It’s one of our key industry sectors.”
Over the past five years, the number of food- or agriculture-related companies headquartered in Chicago has risen from fewer than 100 to more than 400, Fassnacht said.
The new headquarters could have ripple effects in the industry, Fassnacht said, encouraging more Chicago companies and jobs.
A key benefit companies bring to a city or state is jobs, and the location of a corporate headquarters doesn’t always translate into a large number of roles, said Harry Kraemer, a clinical professor of management and organizations at the Kellogg School of Management at Northwestern University and former CEO of Baxter International. He noted that Kellogg already has an office in Chicago.
But he agreed with Fassnacht that the relocation of the snack company’s headquarters to the city could have positive ripple effects on other companies.
“It isn’t so much the direct impact of what they do, but the potential signal that brings to other people who are trying to figure out what to do,” he said.
By the same token, he said, the departures of Boeing and Caterpillar are not expected to mean the loss of thousands of jobs in Illinois, but they might make other companies think twice about moving to Illinois.
Fassnacht said the departures of Caterpillar and Boeing don’t represent a trend of corporate departures from Chicago and Illinois, but rather exceptions that reflect decisions specific to those companies.
“We had a lot of wins, and we also had some losses,” Fassnacht said. “Boeing, and Caterpillar, was not welcome news. But in totality I think this year looks like a very strong year, and today’s Kellogg news shows that.”
Fassnacht said no city tax incentives were given to draw the snacks company, and he was not aware of any state incentives. Spokespeople for Lightfoot and Governor J.B. Pritzker’s offices did not immediately respond to questions about whether there were any incentives.
Kellogg shares climbed more than 2% in market trading on Tuesday.
Cahillane will remain chairman and CEO of the snacks company, which had an estimated net sales of $11.4 billion last year, Kellogg said. The company said the management teams for the plant-based and cereal spin offs would be announced at a later date.
Cahillane said that going forward, the snacks company will “continue to innovate” around its big brands. Acquisitions will be part of the company’s strategy, he said. Pointing to the company’s introduction of Cheez-Its to Canada and Brazil, Cahillane said the company would be looking for “more and more opportunities” for international expansion of its large U.S. brands.
The Associated Press contributed.
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