Kellogg's sales and profit beat estimates, to retain plant-based meat business

Reuters

Published Feb 09, 2023 08:05AM ET

Updated Feb 09, 2023 09:31AM ET

By Mehr Bedi

(Reuters) -Kellogg Co surpassed market expectations for quarterly sales and profit on Thursday and said it would retain the plant-based meat business it had planned to spin-off.

The Pringles maker had last year announced plans to separate the MorningStar Farms unit, representing 2% of the group's sales, to focus on its mainstay cereal business. Kellogg (NYSE:K) said on Thursday the plant-based segment would remain in house after exploring strategic options for the profitable business.

The move comes at a time when inflation-weary consumers curb purchases of pricier plant-based meat alternatives in favor of wallet-friendly animal meat, which has hurt demand at competitor Beyond Meat (NASDAQ:BYND). Still, Kellogg has said its plant-based business offers strong long-term growth prospects.

"Kellogg's plant-based business has faced a slowdown over the past year, similar to what other plant-based manufacturers are experiencing ... It is probably not the best time to be searching for a buyer since the valuation will probably be low," CFRA analyst Arun Sundaram said.

Shares of the Michigan-based company rose about 2% before the bell as it benefits from resilient demand for its cereals and snacks despite multiple rounds of price hikes.

Americans have so far taken price hikes for snacks and breakfast cereals in stride even as decades-high inflation forces consumers to dial back spending.

Kellogg joins other major food and beverage companies, including Oreo maker Mondelez International Inc (NASDAQ:MDLZ), Coca-Cola (NYSE:KO) Co and Hershey, in using its brand power and distribution scale to pass on price increases to consumers while seeing little pushback in demand.

The company forecast organic sales growth of 5% to 7% in 2023, as it sees sustained demand for its snacks and the emerging markets region.