Plant-Based Brands to be Sold off By Kellogg Have Been Canceled

It has been decided by Kellogg Company to reverse its previously announced plan to sell the company's plant-based food segment in response to a shift in the market that has affected sales of the product. As reported by Trade Algo, the products are available under the MorningStar Farms brand name and the relatively new Incogmeato brand, which can be found in refrigerated grocery sections rather than frozen ones.

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As part of a much broader company reorganization that was first announced in a June 2022 press release, Kellogg plans to split off the MorningStar and Incogmeato brands from the company. As part of the strategy, a number of company units were created as well as a division dedicated to plant-based foods was spun off. Less than eight months after the plan was conceived, a sudden reversal put an end to some of its components.

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Based on Kellogg's Q4 2022 earnings conference call, which was held on February 9, the company reported a 12% overall increase in sales over the same quarter last year, as well as an increase in Kellogg product prices of 15.6%, according to Food Dive, during its earnings conference call. The plant-based foods division, however, took a hit, and it will now remain in-house for the time being.

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Justifying the change MorningStar Farms

In the years leading up to 2022, MorningStar Farms had been performing well. Motley Fool reports that Kellogg reported $340 million in sales for the Kellogg brand in 2021, marking a 37% increase in sales over the $310 million reported in 2017. In its headline, the outlet declared that the outlook for Beyond Meat looks so promising that MorningStar "could eat it for lunch." The Kellogg spin-off was viewed as a potential stepping stone to even greater success.

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In 2022, however, the market conditions became more challenging, and sales of plant-based meat began to slacken, according to Food Dive. Steve Cahillane, Chairman and CEO of Kellogg Company, predicted that there would be more losses for this segment in the near future. Despite Callihane's assertion to Trade Algo that it was predicted that consumers would migrate from traditional meat to meat analogs, this hasn't happened yet, and Callihane believes it will never happen. Considering that the company's investment in plant-based foods may have reduced value as a result of the potential reduction in value, finding a new buyer may prove to be difficult.

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This decision by Kellogg will result in a restretching of the MorningStar Farms frozen product line, which has shown much higher profitability, rather than selling the division, and a reduction of fresh, refrigerated Incogmeato products. The data analytics provided by Information Resources, Inc. (IRI) show that it's not just the Kellogg brand that is responsible for this trend. A decline of 15% in volume was observed in the retail sale of refrigerated meat alternatives by grocery stores in 2022 as a whole.

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Providing roughly 2% of Kellogg's net sales, according to the company's earnings report, Kellogg's plant-based food division is still believed by the company to have strong growth prospects over the long term. There will be no outsourcing of this project as it will remain in-house as a part of the global snacking company.