N※N

Food Company Breakups: A New Old Trend?

Food Company Breakups: A New Old Trend

In the ever-evolving landscape of the global food industry, a familiar strategy is making a comeback: the corporate breakup. What was once a hallmark of the 1980s and 1990s conglomerates seeking to streamline operations and unlock shareholder value is now resurfacing amid economic pressures, shifting consumer preferences, and intense market competition. This "new old trend," as industry insiders are calling it, involves large food companies splitting into smaller, more focused entities. The rationale? To foster innovation, improve efficiency, and better cater to niche markets in an era where agility often trumps size. As we delve into this phenomenon, it's clear that while the tactic isn't novel, its application in today's food sector is driven by unique modern challenges, from supply chain disruptions to the rise of health-conscious eating habits.

To understand the resurgence of food company breakups, it's essential to look back at historical precedents. The food industry has long been prone to mergers and acquisitions, creating behemoths that dominate supermarket shelves. Think of the mega-mergers in the late 20th century, such as the formation of Kraft Foods through a series of consolidations, or the creation of ConAgra as a sprawling empire encompassing everything from frozen foods to agricultural products. However, by the early 2000s, many of these giants began to feel the weight of their own complexity. A pivotal moment came in 2012 when Kraft Foods split into two: Mondelez International, focusing on snacks and global brands like Oreo and Cadbury, and Kraft Foods Group, which handled North American grocery staples like cheese and macaroni. This move was hailed as a way to allow each entity to pursue tailored growth strategies without the drag of unrelated business units.

Fast-forward to the present, and we're witnessing a wave of similar decisions. One of the most notable recent examples is Kellogg Company's announcement in 2022 to divide into three separate companies: one centered on North American cereal brands like Corn Flakes and Special K; another on plant-based foods under the MorningStar Farms banner; and a third on global snacking, including Pringles and Cheez-It. The split, completed in late 2023, was motivated by the desire to capitalize on divergent market trends. Cereals, for instance, have faced declining sales due to consumers opting for quicker, healthier breakfast options, while snacks have boomed with on-the-go eating habits amplified by the pandemic. Kellogg's leadership argued that independent operations would enable faster decision-making and targeted investments, potentially boosting stock performance in a volatile market.

This trend isn't isolated. In 2024, General Mills explored spinning off its yogurt division, including Yoplait, amid sluggish growth in dairy alternatives and a pivot toward gluten-free and organic products. Meanwhile, across the Atlantic, Unilever announced plans to divest its ice cream business, home to icons like Ben & Jerry's and Magnum, to create a standalone entity better positioned to innovate in the premium frozen treats space. These moves echo earlier breakups, such as the 2015 separation of Heinz and Kraft into The Kraft Heinz Company, only for that merged entity to later face calls for further dismantling due to underperformance. What ties these cases together is a recognition that conglomerates, while offering economies of scale, often stifle creativity and responsiveness. As one food industry analyst put it, "In a world where TikTok trends can make or break a product overnight, being a jack-of-all-trades means mastering none."

The drivers behind this breakup trend are multifaceted. Economically, inflation and supply chain bottlenecks post-COVID have exposed vulnerabilities in diversified portfolios. When raw material costs soar—think wheat prices spiking due to geopolitical tensions—companies with broad exposure suffer more than specialized ones. Breakups allow firms to hedge risks by focusing on high-margin segments. For instance, snacking divisions often yield better profits than staple goods, which are more price-sensitive. Consumer behavior is another key factor. The rise of wellness trends, sustainability concerns, and personalized nutrition has fragmented the market. A company bogged down by legacy brands may struggle to pivot toward plant-based or low-sugar alternatives, whereas a nimble spinoff can chase these opportunities aggressively.

Moreover, activist investors are playing a starring role. Hedge funds like Elliott Management and Jana Partners have long advocated for breakups in underperforming conglomerates, arguing that the sum of the parts is worth more than the whole. In the food sector, this pressure has intensified as stock prices lag behind broader market gains. Take the case of Campbell Soup Company, which in 2023 faced shareholder demands to separate its soup and snack businesses. The snacks arm, bolstered by acquisitions like Snyder's-Lance, was seen as a growth engine, while traditional soups grappled with changing tastes. Although Campbell resisted a full split, it did divest non-core assets, illustrating how breakup threats can spur restructuring.

Yet, not all breakups are smooth sailing. Challenges abound, from the logistical headaches of disentangling shared supply chains and IT systems to the potential loss of synergies in marketing and distribution. Employees may face uncertainty, and there's always the risk that newly independent companies falter without the financial backing of a parent. Historical data shows mixed results: Mondelez has thrived post-split, expanding globally, while the grocery-focused Kraft merged with Heinz only to encounter integration woes. Critics argue that breakups can lead to short-termism, with executives prioritizing quick wins over long-term innovation. As food economist Dr. Elena Ramirez notes, "While splits can unlock value, they often ignore the interconnectedness of food systems. What happens when a snack company needs access to the same grain suppliers as its former cereal sibling?"

Looking ahead, the trend shows no signs of abating. With private equity firms circling undervalued assets and regulatory scrutiny on mega-mergers increasing—evidenced by the FTC's blocking of Kroger-Albertsons in 2024—more food giants may opt for voluntary breakups. Emerging subsectors like functional foods (e.g., protein-enriched snacks) and sustainable packaging could further encourage specialization. Imagine a future where a company like Nestlé spins off its water business to focus solely on ethical sourcing amid climate concerns, or PepsiCo separates its beverage and snack arms to double down on zero-sugar innovations.

Industry experts predict that by 2030, the food landscape could feature a proliferation of mid-sized specialists rather than a few dominant players. This shift might benefit consumers through more innovative products and competitive pricing, but it could also lead to market fragmentation, making it harder for smaller brands to scale. For investors, the allure is clear: breakups often result in immediate stock pops, as seen with Kellogg's shares rising 10% post-announcement. However, sustainable success depends on execution. As veteran food executive Mark Thompson observes, "Breakups aren't a panacea; they're a tool. The real trend is toward purpose-driven companies that know their lane and dominate it."

In conclusion, the resurgence of food company breakups represents a strategic pivot in an industry at a crossroads. By shedding excess weight, these firms aim to navigate the complexities of modern consumerism, from e-commerce dominance to global supply shifts. While echoing tactics from decades past, today's iterations are infused with data-driven insights and a focus on sustainability. Whether this "new old trend" leads to a healthier, more dynamic food sector remains to be seen, but one thing is certain: in the quest for relevance, sometimes less truly is more. As the dust settles on these corporate divorces, the winners will be those that emerge leaner, meaner, and ready to feast on new opportunities.

(Word count: 1,048)

Read the Full Forbes Article at:
[ https://www.forbes.com/sites/louisbiscotti/2025/07/23/food-company-breakups-a-new-old-trend/ ]