Kellogg is splitting up. What does that mean for Battle Creek?

BATTLE CREEK, MI – For 116 years, Kellogg Company has been headquartered in Battle Creek.

But the $14 billion cereal giant announced plans Tuesday to split into three companies and officially move a big chunk of business to Chicago.

“As exciting as this is, it creates uncertainty and we’re well aware of that,” said Kellogg’s CEO Steven Cahillane during a June 21 investor call.

Kellogg’s plans to diverge into three independent companies focused on snacks, cereals and plant-based foods. Corporate headquarters for the snack division will be based in Chicago while the other two companies will remain in Battle Creek.

“This is the cereal city. We need Kellogg,” said State Rep. Jim Haadsma, D-Battle Creek. “From what I understand preliminarily, Kellogg doesn’t intend to abandon Battle Creek but intends to continue to have a commitment here.”

Related: Kellogg to split into 3 companies: Snacks, cereals, plant-based food

Per Tuesday’s announcement, popular Kellogg’s brands like Pringles, Cheez-It and Pop Tarts will fall under Global Snacking Co. As the biggest spinoff—generating about $11.4 billion last year or 80% of total sales—the new company will locate its corporate headquarters in Chicago while keeping a campus in Battle Creek.

North America Cereal Co., which netted $2.4 billion in sales last year, will absorb the cereal brands like Frosted Flakes, Corn Flakes and Rice Krispies. And Plant Co., with its $340 million in annual sales, will be led by the Morningstar Farms brand.

Both these companies will be headquartered in Battle Creek.

“You don’t want to stagnate because of traditions. The tradition of being in southwest Michigan is great and I love it,” said Bob Samples, a former Hormel Foods executive who now teaches at Western Michigan University. “But at the same time, in order to grow, sometimes you got to think beyond your own borders. Kellogg’s is a massive international brand, not just a Michigan and not just a US brand, and so they need to think of a worldwide strategy.”

Kellogg’s reported 3% global growth last year even as North American profits dropped half a percent due to supply chain issues, a major labor strike and a plant fire, the company said in an earnings report.

Related: Sen. Bernie Sanders rallies in Battle Creek as Kellogg strike continues

The split follows other corporate break-ups like General Electric, IBM and Johnson & Johnson.

Samples says the move creates “huge upside growth potential” for Kellogg’s to focus on developing its individual brands.

“I think this is a great move to generate the type of strategy and focus that’s going to help them grow overall,” he said. “And that growth, whether it comes from the headquarters that’s here in Western Michigan or some of the things that they’re going to do in Chicago, outweighs anything else to try to bring more profit to the state and create a better opportunity for the company to grow.”

Following the announcement, Kellogg’s shares jumped nearly 8%.

But the news still raises concerns for Cereal City, USA.

Although no local jobs will be affected by the split, Calhoun County Commissioner Jake Smith says this follows Kellogg’s years-long trend of slowly pulling out of Battle Creek.

“The jobs heading up to Grand Rapids, Chicago, other metropolitan areas, even global areas has been happening for a very long time,” he said. “It’s been a drip, drip, drip.”

Related: We miss the heyday of Cereal City USA

With about 31,000 employees worldwide, Kellogg’s has about 2,000 Battle Creek workers across both its corporate headquarters at 1 Kellogg’s Square and the Porter Street plant.

With a skilled trade workforce and existing infrastructure like the Battle Creek Executive Airport, Smith believes the city can continue to attract investment from small and medium-sized businesses.

Auto manufacturer Denso Manufacturing Michigan is the city’s biggest employer with 2,500 jobs, according to economic development group Battle Creek Unlimited. Firekeepers Casino and hospitals like the Veterans Administration Medical Center and Bronson Battle Creek are also economic drivers.

“This is the breakfast capital of the world. Nobody can change that. We have that history and that’s not going anywhere,” Smith said. “But there are a lot of exciting opportunities to diversify our economy moving forward, and I hope Kellogg’s is a part of that.”

Kellogg’s expects the spin-offs to be completed by the end of 2023.

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