Kellogg Cancels Plan To Sell Off Its Plant-Based Brands
In response to a market shift affecting plant-based food sales, Kellogg Co. has reversed course on its previously announced plan to sell that segment of the company. The products exist under the MorningStar Farms brand name and the relatively new Incogmeato, which sells partially in refrigerated rather than frozen grocery sections, according to Bloomberg.
Kellogg's plan to split from the MorningStar and Incogmeato brands was originally part of a much broader company reorganization announced in a June 2022 press release. The strategy was to create three separate company units and spin off the plant-based foods division. Now, less than eight months later, an about-face halts part of that plan.
In its Q4 2022 earnings conference call, held on February 9, the company reported a 12% overall increase in sales compared to the same quarter a year prior, along with Kellogg product price increases of 15.6%, per Food Dive. But, plant-based foods took a hit, and the division will now remain in-house.
Justifying the change
Prior to 2022, MorningStar Farms had been performing well. Motley Fool reports that the $340 million in sales Kellogg reported for the brand in 2021 marked a 37% jump compared to 2017. The outlook seemed so bright that the outlet declared in its headline that MorningStar "could eat Beyond Meat for lunch." The Kellogg spon-off was viewed as an opportunity for even greater growth.
But Food Dive notes that in 2022 market conditions became more challenging, and plant-based meat sales slowed down. Kellogg Chairman and CEO Steve Cahillane predicted more losses for the segment in the near future. The predicted consumer migration from traditional meat to "meat analogues" just hasn't materialized, Callihane explained to Bloomberg, and may never do so. With potentially reduced value, finding a new buyer for offloading the company's investment in plant-based foods could prove challenging.
Rather than sell the division, Kellogg now plans to restrengthen the MorningStar Farms frozen products, which have shown higher profitability and pull back on the fresh, refrigerated Incogmeato line. Data analytics from Information Resources, Inc. (IRI) show that it's not just the Kellogg brand. Grocery store sales of refrigerated meat alternatives overall declined in volume by 15% in 2022.
Making up roughly 2% of Kellogg's net sales, according to the earnings report, the plant-based food division still holds the company's confidence for long-term growth potential. It will remain in-house as part of the global snacking company.