Organizations never sit still for very long. Before you know it, there is a new product/service rival, or new company, or change in supply chain, or change in consumer demands. Since we know change is inevitable, the challenge for marketers is to be aware of the environment and know where their company is strong and weak. Where are the opportunities? What are the threats? What companies want to take their market share?
Often these environmental changes, combined with revised corporate strategies, cause an old, established company to split into separate entities in order to better serve the market and shareholders. For example, last year, Johnson & Johnson announced it will break into two companies serving (1) consumer health products and (2) pharmaceuticals. General Electric will split into three companies to serve (1) healthcare, (2) power, and (3) aviation.
The most recent example of a large conglomerate breaking into separate companies is Kellogg. Kellogg is the latest large company to announce it is splitting businesses into separate entities. The North America cereal business will be around $2.4 billion in sales; the plant-based foods business at $340 million in sales; the global snacks business is the largest at $11.4 billion (and was 80% of Kellogg’s sales last year).
Each of these businesses faces different environmental factors, and of course markets its products to different segments. In this case, cereal is stable, plant-based is growing but with increasing competition, leaving snacks as a large and growing segment.
Breaking Kellogg into independent companies will help it focus on distinct strategic priorities and opportunities in each of the three markets. Snacking is a higher-growth market than is cereal. Plant-based foods are growing overall, but need attention. And all three companies face increasing competition not only from established companies such as General Mills and Mondelez, but also new companies building more plant-based and natural food products.
What would you do?
Group Activities and Discussion Questions:
- Show WSJ video on why companies split up: https://www.wsj.com/video/series/news-explainers/why-conglomerates-split-up/F7EF3E9D-2D5D-4732-AA79-F41889C7D039
- Discuss when breaking up a conglomerate makes good business sense.
- Review Kellogg’s products and overall company: https://www.kelloggs.com/en_US/home.html
- Show the company announcement of the split: https://investor.kelloggs.com/news-and-events/press-releases/news-details/2022/KELLOGG-COMPANY-ANNOUNCES-SEPARATION-OF-TWO-BUSINESSES-AS-BOLD-NEXT-STEPS-IN-PORTFOLIO-TRANSFORMATION/default.aspx
- Discuss the components of a situation analysis: company, general industry, trends, key competitors, technology, legal, etc.
- Ask students what data they would want in order to make a marketing decision for dividing Kellogg into separate companies.
- Divide students into teams. Have each team use laptops to do general research to answer the questions above. (ex: overview of industry, size, growth, new technologies, environmental impact, etc.)
- Debrief the exercise by compiling information on the white board. Does this give a good picture of the situation faced by Kellogg?
Sources: Gasparro, A. (21 June 2022). Kellogg splitting into three companies as it shifts focus to global snacks. Wall Street Journal.