Kellogg breaks up and relocates his snacking headquarters to Chicago

The Kellogg Company announced plans to split on Tuesday, saying it will split into three separate companies focused on cereal, plant-based foods and snacks. The snack company will be based in Chicago, the company said in a press release, with campuses in the city and in Battle Creek, Michigan.

The news comes a week after mining and construction equipment maker Caterpillar announced plans to move its corporate headquarters from Deerfield to Irving, Texas, and less than two months after Boeing said it plans to move its headquarters from Chicago to Arlington, Virginia.

Chicago’s corporate headquarters will be located at 412 N. Wells St., where Kellogg’s offices are already located. The company also has offices in Naperville and currently employs over 300 people in the Chicago area.

Kellogg’s snack division, which includes brands such as Pringles and Rice Krispies Treats, accounted for 80% of Kellogg’s net sales in 2021, the company said. The cereal and vegetable companies, which together accounted for 20% of net sales, will be based in Battle Creek. All three companies will be publicly traded. The names of each company have not yet been announced.

“All of these businesses have significant standalone potential, and an enhanced focus will allow them to better direct their resources to their distinct strategic priorities,” Kellogg President and CEO Steve Cahillane said in a statement.

“In turn, each business is expected to create more value for all stakeholders and each is well positioned to build a new era of innovation and growth.”

In a tweet on Tuesday, Mayor Lori Lightfoot said she spoke to Cahillane and was “thrilled” that the snack company’s headquarters will be in its existing Chicago offices “around the end of 2023.”

In an interview, Cahillane said that Kellogg’s presence in Chicago, the city’s infrastructure for international travel, and its culture of food innovation all came into play when deciding where the snack company’s corporate headquarters would be located.

He said that from now on, the company will not require the relocation of employees.

“After 18 months, when the business is up and running and new people are joining the organization, there is a very real likelihood that they will want to be located in Chicago,” he said.

Michael Fassnacht, CEO of World Business Chicago, the city’s public-private economic development agency, echoed Cahillane’s comments about the city as a center for food innovation.

“This just reconfirms Chicago’s position as the global food innovation capital,” he said. “I think it’s the result of all our focus on food and (agriculture). It is one of our key industry sectors.”

In the past five years, the number of Chicago-based food or agriculture-related companies has increased from less than 100 to more than 400, Fassnacht said.

The new headquarters could have ripple effects on the industry, Fassnacht said, encouraging more businesses and jobs in Chicago.

One of the main benefits companies bring to a city or state is jobs, and the location of a corporate headquarters doesn’t always translate to a large number of functions, said Harry Kraemer, clinical professor of management and organizations at the Kellogg School of Management. at Northwestern University and former CEO of Baxter International. He noted that Kellogg already has an office in Chicago.

But he agreed with Fassnacht that moving the snack company’s headquarters to the city could have positive effects on other companies.

“It’s not so much the direct impact of what they do, but the potential signal it brings to other people who are trying to figure out what to do,” he said.

Likewise, he said, the departures of Boeing and Caterpillar shouldn’t mean the loss of thousands of Illinois jobs, but they could make other companies think twice about moving to Illinois.

Fassnacht said the departures of Caterpillar and Boeing do not represent a trend of corporate exits from Chicago and Illinois, but rather exceptions that reflect specific decisions by those companies.

“We’ve had a lot of victories and we’ve also had a few defeats,” said Fassnacht. “Boeing and Caterpillar were not good news. But overall, I think this year looks like a very strong year, and today’s Kellogg news shows that.”

Fassnacht said no city tax breaks were given to attract the snack company, and he was not aware of any state incentives. Spokespeople for Lightfoot and Governor JB Pritzker’s offices did not immediately respond to questions about whether there were any incentives.

Kellogg shares rose more than 2% in market trading on Tuesday.

Cahillane will remain president and CEO of the snacking company, which had estimated net sales of $11.4 billion last year, Kellogg said. The company said management teams for the vegetable and cereal derivatives will be announced at a later date.

Cahillane said that going forward, the snack company will “continue to innovate” around its big brands. The acquisitions will be part of the company’s strategy, he said. Pointing to the company’s introduction of Cheez-Its in Canada and Brazil, Cahillane said the company would be looking for “increasing opportunities” for the international expansion of its major American brands.

The Associated Press contributed.

tasoglin@chicagotribune.com

sfreishtat@chicagotribune.com

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