Italian confectioner Ferrero, renowned for its popular brands such as Nutella and Kinder, has officially announced its acquisition of the storied U.S. cereal company WK Kellogg. This move, aimed at bolstering Ferrero's presence in the North American market, is valued at approximately $3.1 billion, with Ferrero set to pay $23 for each Kellogg share.
The acquisition encompasses WK Kellogg Co.'s six manufacturing plants and the marketing and distribution of its breakfast cereals throughout the United States, Canada, and the Caribbean. Following the announcement, WK Kellogg’s shares surged by 31% during mid-afternoon trading on Thursday, reflecting investor optimism regarding the deal.
Founded in 1906 in Battle Creek, Michigan, WK Kellogg has a rich history that began with an accidental discovery of flaked cereal during granola experimentation. Today, the company produces an array of beloved cereals, including Corn Flakes, Froot Loops, Special K, Frosted Flakes, and Rice Krispies. Currently, Kellogg operates four manufacturing plants across the U.S. in states such as Michigan, Pennsylvania, Tennessee, and Nebraska, along with additional plants located in Mexico and Canada, employing approximately 3,000 workers.
In 2023, Kellogg underwent significant restructuring, spinning off its snack brands—including Cheez-Its and Pringles—into a separate entity named Kellanova. This strategic move comes on the heels of a plan announced by Mars Inc., the maker of M&M’s, to acquire Kellanova in a deal valued at nearly $30 billion.
The Ferrero Group, a family-owned company established in Italy in 1946, has been actively working to expand its footprint in the U.S. market. In recent years, Ferrero has made significant acquisitions, including the purchase of Nestlé’s U.S. candy brands in 2018, which encompassed popular products like Butterfinger, Nerds, and SweeTarts. Furthermore, in 2022, Ferrero acquired Wells Enterprises, a company famous for its ice cream brands such as Blue Bunny and Halo Top.
Giovanni Ferrero, Executive Chairman of Ferrero, expressed enthusiasm about the acquisition, stating, “Over recent years, Ferrero has expanded its presence in North America, integrating our well-known global brands with local treasures rooted in the U.S. Today’s announcement represents a significant milestone in that journey, reinforcing our confidence in the opportunities ahead.”
Gary Pilnick, WK Kellogg’s chairman and CEO, noted that the merger would provide Kellogg with the necessary resources to grow its brands and explore new opportunities beyond cereals. He also highlighted Ferrero's commitment to supporting the communities in which it operates.
Despite the potential advantages of this acquisition, Kellogg has been grappling with a long-term decline in U.S. cereal consumption as consumer preferences shift towards protein bars, shakes, and alternative breakfast options. Although cereal sales saw a temporary boost during the pandemic, they have since continued to decline, with U.S. cold cereal sales dropping by 6% compared to the same period in 2022, according to Nielsen IQ. Kellogg reported a 2% decrease in net sales, totaling $2.7 billion in 2024.
Brad Haller, a senior partner for mergers and acquisitions at West Monroe, emphasized that Kellogg’s extensive distribution network and established relationships with grocery chains in North America are particularly appealing to Ferrero. This strategic acquisition not only allows Ferrero to expand its offerings beyond snacks and sweets into the meal category but also positions it for better negotiation of pricing and product placement.
However, some analysts suggest that Ferrero may consider cutting underperforming Kellogg brands or closing manufacturing plants, a decision that could impact the legacy of these iconic American brands. Haller noted, “As Americans, these brands are iconic and beloved by us, but a European company buying these wouldn’t carry the same nostalgia.”
Kellogg has faced additional challenges, including a nearly three-month strike by workers at all its U.S. cereal plants in late 2021, which negatively impacted sales. Moreover, there have been public outcries demanding Kellogg remove artificial dyes from its cereals, leading the company to announce earlier this year that it would reformulate its cereals sold to schools to eliminate artificial dyes and refrain from including them in any new products starting January.
The acquisition of WK Kellogg by Ferrero is a significant development in the food industry, with potential implications for both companies and the cereal market at large. While the deal requires approval from Kellogg shareholders, it is expected to close in the latter half of the year. Upon completion, Kellogg’s stock will cease trading on the New York Stock Exchange, marking the transition of Kellogg into a subsidiary of Ferrero.
