WHEN: Today, Tuesday, June 21, 2022
WHERE: CNBC’s “Squawk Box”
Following is the unofficial transcript of a CNBC exclusive interview with Kellogg Chairman & CEO Steve Cahillane on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Tuesday, June 21st. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
SARA EISEN: Good morning, Becky and I just want to point out Kellogg’s stock which is sharply higher premarket, liking the news of the split. Joining me now in an exclusive interview with Kellogg Chairman and CEO Steve Kay Helene. Steve, great to have you here for the for this big news. So, I think the first question is why now are you deciding to go forward with breaking up the company?
STEVE CAHILLANE: Well, thanks Sara. Thanks for having me. You know right now is I think the opportune time to do this. We are coming from a position of real strength and great momentum. We have completely turned the business around from a top line and a bottom line perspective and we see the next step in unlocking our full potential in unleashing three new companies. So the plant co with, you know, just a pure play in the plant space, cereal co, allowing the management to focus 100% on the cereal, continue to turn around, and then the remaining company, global snacking company, which has a portfolio of absolute superstars in the snacking world. So we believe that splitting them into three different businesses is the right thing to do and this is absolutely the right time.
EISEN: And that’s the one that you’re going to be leading the snack co chairman and CEO Steve. The Kellogg name, you know, Joe Kernen was getting a little sentimental I know it you guys have some deep roots here. W.K. Kellogg, the the company’s founder does that, is that gonna go away?
CAHILLANE: Absolutely not, Sara. You know, the Kellogg tradition has been around for 116 years now. Mr. Kellogg started this great company. Of course, he didn’t know what Pringles was, but he started the cereal business and was a great entrepreneur and his name will live on in cereal boxes worldwide and I wouldn’t at all dismiss the possibility of one of the businesses carrying on the Kellogg tradition in terms of the corporate name. That’s work to be done, but the Kellogg tradition, the Kellogg legacy, the Kellogg philanthropic values will live on in all three companies. So he’ll have three companies rather than one company.
EISEN: Alright, so let’s talk about the growth businesses and what how investors should be looking at this the snacks and international business that you’re going to lead that as you say as some of the crown jewels like a Pringles or Cheez Its. What will this split allow you to do with that business? What’s the plan?
CAHILLANE: Well, it’s, you know, over an $11 billion business that will be the global snacking company, as you said great gems. And if you think about Pringles, it’s a worldwide brand and iconic brand, but think about brands like Cheez Its, Pop Tarts, Rice Krispies Treats, they’re principally domestic brands, but as we’ve, you know, tinkered with putting them in international markets, they’ve done extremely well. So the international expansion opportunities are absolutely great. The ability to to focus on just those brands and just in the snack, mostly the snacking space, is a tremendous opportunity and our developing markets become bigger as a proportion of our sales. So it’s a very growthy company. You know, if you think about it, it’s high single digit growth pro forma basis.
EISEN: It’s gonna look a lot like Mondelez, which actually just did a $3 billion deal over the weekend, and I’m curious Steve how you think about M&A. Is that something we’re going to see from your global snacking company?
CAHILLANE: It is absolutely going to be an area that we’re focused on. Our organic opportunities are extremely good. As I already pointed out, the international expansion of some of these brand brands a great opportunity for us, but we will absolutely be hunting for adding to the portfolio if it adds shareholder value, and we’re confident we’ll be able to find those opportunities.
EISEN: There’s also speculation that you’ve got three acquisition targets here more pure play companies on plants, especially with the smaller with a smaller company and cereal is that is that part of the thinking here? What does consolidation in this industry look like to you?
CAHILLANE: So when we made the announcement on the plant co, we said we’d also look at strategic alternatives which obviously that means something other than going all the way to spin. So there’s an opportunity there potentially to think about that. On the other two companies, I wouldn’t really think so. I think the value creation opportunity as independent companies is extremely good. I mean, extremely good. And I think both companies will value their independence and value the opportunities in front of them and so any kind of acquisition would obviously have to overcome that and I think that’s a very, very high bar.
EISEN: Cereal is the more tricky one. What is the future of that? It’s been in secular decline Steve for years. Young people just don’t want cereal. You’ve got the union issues, as we saw, which created a lot of problems for you in the past year. What is the future of that company?
CAHILLANE: I think the future is very bright Sara. I really do. You know, cereal has been around for as I already said over 100 years and it’s had its ups and downs for sure. It’s a pretty stable business, you know, somewhat declining. But I think when you have a Kellogg company that is 100% focused on cereal and just its cereal brands, doesn’t have to compete with Pringles or Cheez It for resources its management team is wholly focused on the industry and its place in the industry, I think you’ll see greater innovation, you’ll see more brand building, you’ll see bright days ahead of it because again you’re going to have a management team that is here today that is extremely talented, very dedicated, and they’re going to have all their resources and resource allocation and balance sheet and everything wholly independent, and they’re going to wake up every morning and think about how to win in cereal and they’re gonna end their day thinking about what am I going to do tomorrow to win in cereal so I think it’s going to help the industry and I think it will clearly help our brands.
EISEN: Not sure there is a pure play cereal company. General Mills has has a lot of the other big brands, Post has some, but but all of those have other portfolio companies so I think it’s it’s an interesting experiment. And so Steve, there’s no no leadership announce right? No CEO announce for these other two companies and also their names, correct?
CAHILLANE: Not, not as of yet. You know, we were going to take the time to go through, you know, a very thorough process. Our board of directors here will be making decisions on management teams and CEOs and we hope to have an announcement sometime and at least by the first quarter of next year.
EISEN: What does all this tell us, Steve, about the the environment we’re in, how strong the food consumer is because there’s a lot of concern now about recession, about a slowdown and of course, very high food inflation.
CAHILLANE: Yeah, it’s a tough environment to be sure and it has been for the last several years. You know, we’ve we’ve used the word unprecedented an unprecedented number of times, right? We had a pandemic. We have a war in Europe. We have shortages, bottlenecks. We have high inflation. No, you know, there’s no shortage of issues that we’re facing. But through all that our company has done extremely well by focusing on the consumer and focusing on the customer and doing our level best to keep our supply chain moving, keep food on the table. And that’s why, you know, this transformation initiative is being announced from a position of strength and we think it’ll actually, you know, improve our chances to continue this great momentum that we have despite the, you know, enormous challenges that we all face.
EISEN: And really quickly, Steve, a lot of people own your stock for the dividend. Well, it’s safe now in this kind of recessionary environment if we’re going into that and there’s a high dividend, what happens on that front?
CAHILLANE: So we’re still working through the capital structures of the three businesses, but you should think about the dividend in aggregate being intact, and how we divide that up between the three companies. There’s still work to be done, but those who value our dividends, you should have no worries at all that they’ll continue to enjoy a great dividend from the Kellogg company.
EISEN: Got it. Steve Cahillane, thank you for joining us fresh off of announcing that news splitting up the company, CEO and Chairman of Kellogg.
