US – Kellogg’s, an American multinational food manufacturing company, is considering divesting its plant-based business, which generated profits of US$50 million in 2021 out of the total revenue of US$340 million.

The divestment plans come shortly after it announced it was separating into three independent companies, sectioning off its iconic brands into distinct snacking, cereal, and plant-based businesses, and tax-free spinoffs are expected to be completed by the end of 2023.

Both the North American cereal company and the plant-based food spinoff will be located in Battle Creek, Michigan.

CEO Steve Cahillane said Kellogg has turned the plant-based food unit “back into a growth business by allocating the right resource, the right management team, considering the refrigerated plant-based meat patties market remains to be big.

According to Reuters, Kellogg Co’s plan to spin-off and potentially sell its profitable MorningStar Farms vegetarian patties and plant-based meat business could shake up the frozen aisle in grocery stores.

But the line of plant-based breakfast sausages, burgers, and faux chicken, priced significantly less than premium brands such as Beyond Meat and Impossible Foods, faces a “tough environment” without Kellogg’s support, it added.

It is speculated that the MorningStar profit margins of about 15% could get hit by any slowdown in demand just as overall sales of meat alternatives have flattened.

Total U.S. sales of meat alternatives have plateaued in 2022 after pandemic stockpiling helped drive strong growth in the past two years. Sales rose just 0.3% in the 52 weeks ended May 28 compared with the prior year, according to data from NielsenIQ.

Gary Stibel, the CEO of the New England Consulting Group commented that the short-term prospects for (plant-based) protein are very good, and Kellogg has one of the better portfolios of brands in the industry.

He added that Kellog’s has been at it for a long time, but it is brilliant for getting out now because the rate of growth in plant-based is slowing and will continue to slow.

The plateaued growth has been witnessed since its rival Beyond Meat and privately held Impossible originally launched their “burgers” – refrigerated plant-based patties that look and taste like meat – in 2016.

The launches attracted more companies that have joined the fray and signed deals with restaurant chains to add plant-based burgers to menus.

A case in point is Impossible company which supplies Restaurant Brands International’s Burger King with patties for its Impossible Whopper.

Also, McDonald’s, in January, said it would expand the U.S. test of its “McPlant” burger – made with Beyond patties – to 600 locations. But sales have not met projections and McDonald’s will not launch the sandwich nationally this year, according to BTIG analysts.

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