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July 5, 2019, 7:50 a.m. EDT

Kellogg is sitting on a ‘fake meat’ gold mine bigger than Beyond Meat

Brett Arends says Kellogg should take MorningStar Farms public

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By Brett Arends, MarketWatch


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Beyond Meat went public in May, and the stock has soared.

BOSTON — Stockholders in Kellogg have been crying into their Corn Flakes for years.

Their investments have lost more than a third of their value in the last three years, while the rest of the stock market has boomed. Kellogg stock /zigman2/quotes/209631250/composite K -0.56% , which peaked at $87 in July 2016, is down to under $54 and recently touched a seven-year low after falling 6.4% just since the start of this year through Monday.

This is a dismal performance, even for a stock in the unfavored “value” half of the market. Kellogg is underperforming comparable staples like McDonald’s /zigman2/quotes/203508018/composite MCD -0.51% , General Mills /zigman2/quotes/206659526/composite GIS -0.13% , Campbell Soup /zigman2/quotes/202107764/composite CPB -0.63% , Procter & Gamble /zigman2/quotes/202894679/composite PG -0.12%   and Johnson & Johnson /zigman2/quotes/201724570/composite JNJ -0.24% .

And while Kellogg has slumped 23% in the past year through Monday, the Vanguard Value exchange-traded fund /zigman2/quotes/209486178/composite VTV -0.08%  has risen 7.4%. The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.08%  is up 8.7%

Given all these stock-market losses, why is the management letting free money go by?

I spoke to them and couldn’t get a straight answer. I also asked analysts, but they declined to comment, saying they haven’t written on the topic.

Anyone watching the stock market, reading the financial news, or even watching consumer news knows that there’s a sudden Wall Street mania for so-called “fake meat” burgers. Beyond Meat /zigman2/quotes/211617595/composite BYND +1.79%  has skyrocketed sixfold since its IPO two months ago, and its bigger rival Impossible Burger is rumored to be heading for its own listing sometime soon.

Yet Kellogg already owns the largest single “fake meat” operation in the country in MorningStar Farms, a brand that has been around since the 1970s. Where’s its IPO?

I asked Sara Young, one of the Kellogg executives running MorningStar Farms, if an IPO was on the cards. She laughed. “Not that I’m aware of,” she said.

Why not? She couldn’t comment further.

I tried MorningStar’s “Grillers” vegetarian burgers not long ago, on the recommendation of some friends. Frankly, I found them way better than Beyond Meat’s “Beyond Burgers” and not obviously worse than the so-called “Impossible Burger” that people are raving about. Everyone has their own preferences and I’m sure others will disagree. But they’re an excellent product. Broil them, stick them in a bun with ketchup and the other fixings, and you’re basically eating a burger that isn’t made out of dead animal. (The MorningStar Grillers are mainly made of soy.)

Young wouldn’t share any results of blind taste tests, but she said: “We’re the largest brand in the category, (and) we have the highest repeat rate in the category.”

I tried to get data on sales or market share, but Kellogg doesn’t break it out, Young wouldn’t disclose it, and market research people Nielsen wouldn’t hand it over.

However, Young admitted “we serve over 90 million pounds of food to consumers annually,” and added that about a third of sales were fake burgers, a third were fake chicken products, and a third were others, such as fake breakfast sausage.

/zigman2/quotes/209631250/composite
US : U.S.: NYSE
$ 64.05
-0.36 -0.56%
Volume: 1.60M
Nov. 14, 2019 4:10p
P/E Ratio
29.90
Dividend Yield
3.56%
Market Cap
$21.65 billion
Rev. per Employee
$398,441
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/zigman2/quotes/203508018/composite
US : U.S.: NYSE
$ 194.00
-1.00 -0.51%
Volume: 3.17M
Nov. 14, 2019 4:10p
P/E Ratio
25.48
Dividend Yield
2.58%
Market Cap
$145.08 billion
Rev. per Employee
$100,120
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/zigman2/quotes/206659526/composite
US : U.S.: NYSE
$ 52.53
-0.07 -0.13%
Volume: 1.85M
Nov. 14, 2019 4:10p
P/E Ratio
16.96
Dividend Yield
3.73%
Market Cap
$31.65 billion
Rev. per Employee
$414,842
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/zigman2/quotes/202107764/composite
US : U.S.: NYSE
$ 47.07
-0.30 -0.63%
Volume: 2.09M
Nov. 14, 2019 4:10p
P/E Ratio
53.28
Dividend Yield
2.97%
Market Cap
$13.88 billion
Rev. per Employee
$423,957
loading...
/zigman2/quotes/202894679/composite
US : U.S.: NYSE
$ 120.50
-0.15 -0.12%
Volume: 5.19M
Nov. 14, 2019 4:10p
P/E Ratio
80.33
Dividend Yield
2.48%
Market Cap
$297.59 billion
Rev. per Employee
$727,304
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/zigman2/quotes/201724570/composite
US : U.S.: NYSE
$ 130.96
-0.31 -0.24%
Volume: 4.21M
Nov. 14, 2019 4:10p
P/E Ratio
24.95
Dividend Yield
2.90%
Market Cap
$347.35 billion
Rev. per Employee
$603,509
loading...
/zigman2/quotes/209486178/composite
US : U.S.: NYSE Arca
$ 116.11
-0.09 -0.08%
Volume: 1.40M
Nov. 14, 2019 4:10p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,096.63
+2.59 +0.08%
Volume: 1.66B
Nov. 14, 2019 4:47p
loading...
/zigman2/quotes/211617595/composite
US : U.S.: Nasdaq
$ 80.43
+1.42 +1.79%
Volume: 5.53M
Nov. 14, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$4.65 billion
Rev. per Employee
N/A
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