When I first started digging into Ferrero Rocher’s purchase of W.K. Kellogg in July 2025, I didn’t expect to find a story this rich.
What began as a health crusade in a Michigan sanatorium, and then moved to a split into two halves, has become an interesting picture of Mergers & Acquisitions’ best practices.
But most importantly, this deal provides crucial insights into how they work, and when they don’t.
In this article, I’ll review Kellogg’s journey and explore what the future might hold.
The Sanatorium Cornflake
Kellogg’s history starts in 1876 in Battle Creek, Michigan (U.S.), where the brothers John Harvey (a physician) and William Keith Kellogg (a bookkeeper) worked at a sanatorium.
Some of their health views were controversial, to say the least. But their vision was clear: food should heal. Together, they created Corn Flakes—intended as bland, healthy food for mental health patients.
From those humble beginnings, Kellogg’s grew steadily. The company fed soldiers during World War II and became a household name in the 20th century. But the health-first origins didn’t last.
By the 1960s, we witnessed the birth of Apple Jacks and Froot Loops—bright, sugary cereals targeted at kids—a shift likely led by leadership changes.
The next step was expansion, and the 2000s brought an acquisition spree, which included Keebler (cookies), Morningstar Farms (vegetarian sausages), Bear Naked (granola), Gardenburger/Golden Burger (vegetarian burgers).
And the crown jewel: Pringles from Procter & Gamble in 2012 for $2.7 billion, a deal that positioned Kellogg’s as the second largest in the global snack food market, after PepsiCo Inc.
At this stage, Kellogg’s was no longer perceived as a health brand, but a mix of sugary cereals and snack foods with a side business of plant-based alternatives. I think the original brothers would be dismayed at what their Corn Flakes empire became.
The Split: Cereal vs. Snacks
Plant-based products seemed hot in 2020–21, but the enthusiasm fizzled quickly. Vegetarian consumers didn’t seem to embrace Kellogg’s products as widely as expected.
With results not going so well, Kellogg’s announced a breakup into three parts in 2022: snacks, cereals, and plant-based alternatives. It would allow each business to focus on its own products, as CEO Steve Cahillane stated, according to an Associated Press article.
Markets loved the idea at first. The stock jumped from US$62.54 to around US$67 on the announcement. But the breakup didn’t happen, and stock prices went down. By late 2023, Kellogg’s shares slid to US$55.88.
To overcome the situation, Kellogg’s created two separate companies instead:
- W.K. Kellogg would hold the U.S. cereals.
- Kellanova would hold snacks, international cereals, and plant-based products.
When the split was executed in October 2023, shareholders got one W.K. Kellogg share for every four Kellanova shares. On day one, Kellanova closed at US$50.43 and W.K. Kellogg at US$10.39. Together, that was about US$53—basically flat. A cautious market reaction.
By the end of the year, W.K. Kellogg closed at US$16.59 and Kellanova at US$55.91, resulting in a combined share price of US$59.20. Better numbers, but not impressive.
Still, overall, the split seemed to be a solid move. It enabled more focus and easier valuation of both new companies. Shareholders who bought in 2022 before the announcement made a 36% gain in 2025. A healthy return, especially when you consider the S&P 500’s robust 34% performance.
In 2024, Kellogg’s decided to sell Kellanova to Mars. And in 2025, they sold W.K. Kellogg to Ferrero Rocher. But before we discuss both deals, I’ll explain why mergers and acquisitions happen in the first place.
M&A in Theory and Practice
The process of Mergers and Acquisitions (M&A) typically follows two distinct playbooks: horizontal or vertical M&A.
Horizontal M&A
Same industry, combining competitors. A horizontal M&A builds market power and less competition. The new combined company can also raise prices and optimize supply.
In some cases, horizontal mergers and acquisitions are good for shareholders but bad for consumers. And this is why they tend to be investigated by the U.S. FTC and the European Commission.
Famous examples of horizontal M&A are Disney & Pixar, LVMH & Christian Dior, Facebook & Instagram.
Vertical M&A
Buying a supplier or distributor to cut costs or reduce risk. Vertical M&A can strengthen and simplify supply chains and reduce supplier/customer power.
They are also a good idea when they leverage a key asset. For instance, Caremark’s acquisition of CVS gave the company considerable pricing control over Walgreens. Likewise, a vertical M&A can stop competitors from gaining access to an asset that could harm your company.
Finally, a key motivator for vertical M&A is the belief that combining two companies will create more value than they could as separate entities. This concept, known as synergy, was a huge buzzword in the 1990s. Unfortunately, synergies rarely deliver on their promises, and the same outcomes can often be achieved through partnerships and other contracts.
Famous examples of vertical M&A are Ford & Autolite, Google & Motorola Mobility, Apple & Dialog.
When you shouldn't do an M&A
In contrast, there are valid reasons you might choose not to pursue a merger or acquisition. For instance:
(1) To diversify holdings — To achieve this goal, it’s easier and more effective for investors to invest in several businesses instead of buying them all and keeping them under a single holding. That enables their individual preferences instead of that of a conglomerated firm's.
(2) Empire building — Some owners want to have the largest sales figures, the largest head count, or worldwide influence. It becomes more about satisfying their personal needs than expanding the business.
Against this framework, the Mars–Kellanova and Ferrero Rocher–W.K. Kellogg deals tell very different stories, as I’ll explain next.
Mars and Kellanova: The Clean Fit
When Mars announced it would buy Kellanova for US$83.50 per share in 2024, their stock leapt to US$80.29. W.K. Kellogg’s share price also increased from US$13.14 to US$16.59.
No doubt here that the market wanted to see this deal go forward.
But regulators pounced. Both the U.S. FTC and the European Commission investigated the deal because of concerns about monopoly power.
The U.S. FTC eventually approved the purchase, but the European Commission froze it. Once that happened, markets priced a 4% chance of failure by mid-2025. Skepticism grew, and Kellanova’s stock sagged further.
The deal still might go through with some restrictions. Perhaps the EU Commission will ask Mars to divest certain business lines. But if it’s completely squashed, then I’d expect that Kellanova will look for another buyer—possibly PepsiCo.
Mars is a massive private company, and there isn’t much data available about them. But this merger makes sense, regardless. This is a textbook horizontal consolidation. Mars and Kellanova would be stronger together than apart:
- They would dominate shelf space and gain significant pricing power.
- They would face less competition, which is likely to generate more profits.
And Mars is willing to pay a substantial premium, which is great news for Kellanova. On the other hand, Ferrero Rocher’s decision to buy W.K. Kellogg is puzzling.
Ferrero Rocher and W.K. Kellogg: The Odd Couple
Ferrero Rocher’s purchase of W.K. Kellogg for US$23 a share was a windfall for cereal investors. Stocks jumped from US$16.59 to US$22.89 overnight.
But does chocolate plus cereal make sense?
I’m not convinced.
Ferrero Rocher’s US$3.1 billion acquisition of W.K. Kellogg has been hailed as a strategic milestone, yet the rationale behind the deal remains frustratingly vague.
I’ll now break down the potential explanations one by one:
U.S. Distribution
If this is about U.S. distribution—using Kellogg’s network to push Nutella, Kinder, and Ferrero Rocher chocolates—they could cross their products to the grocery stores and other places where you buy cereal. It makes sense to a point.
But I doubt that the distribution channel for cereals and chocolates is the same. And Ferrero Rocher could have accessed Kellogg’s supply chain through long-term contracts rather than buying an entire company.
M&A Framework
Ferrero Rocher’s acquisition of W.K. Kellogg is neither a vertical nor a horizontal merger. Ferrero Rocher operates primarily in the sweets and snacks segment, while W.K. Kellogg focuses on breakfast cereals.
These two companies serve different product categories and consumer occasions, meaning they don’t compete directly (horizontal M&A) nor operate along the same supply chain (vertical M&A).
A sign of this is that this deal wasn’t as closely scrutinized as Mars-Kellanova’s by the U.S. FTC or the EU Commission. They didn’t spark concern about a monopoly.
Synergy Theory
Bringing beloved brands together to expand the company’s reach loosely aligns with synergy theory. But the logic is tenuous. Does eating sugary cereal in the morning really make one crave chocolate in the afternoon? The complementarity between cereals and confectionery is questionable.
Food Powerhouse
One could say that turning Ferrero Rocher into a U.S. food powerhouse is more empire-building than business strategy. It seems to be growth for growth’s sake.
Diversification
Ferrero Rocher may want to branch out from their current focus on candy and snacks. Yet this is precisely the kind of diversification that merger theory warns against, as discussed. Companies should focus on as few as possible and on what they do best, unless there is a good reason for that.
Strategic Risks and Market Perception
Beyond the theoretical misalignment, this acquisition introduces additional risks. For instance, Trump’s proposed 50% tariffs on Brazilian sugarcane—a key Ferrero Rocher input—could create unwanted challenges. Previously, Ferrero Rocher might have benefited from falling sugar prices if U.S. demand dropped. Now, with Kellogg’s U.S. exposure, they are more vulnerable to American trade policy.
There’s also reputational risk. Ferrero Rocher chocolates are no longer considered high-end in many European markets. Meanwhile, Kellogg’s cereals—especially sugary ones like Coco Pops and Froot Loops—are often seen as snacks rather than proper meals.
One could argue that Ferrero Rocher’s brand identity is to become the one-stop shop for sugary snacks. But that’s a double-edged sword. By absorbing Kellogg’s cereal portfolio, they risk diluting their image further, from nicely wrapped good chocolates to outright junk food. It’s a trajectory not unlike Hershey’s in the U.S., which might not be what Ferrero Rocher is hoping for.
An Uncertain Outlook
If Ferrero Rocher were a public company, I’d expect their shares to dip because this acquisition is highly surprising, to say the least. But both Ferrero Rocher and W.K. Kellogg are private companies.
For the same reason, we don’t have access to enough information about their financial performance. We’ll need to wait and see the consequences of this deal for both companies over the next years.
Lessons for Managers in the Middle
Talking about wait and see, you might be wondering what you should do if you were working for one of these companies. But the implications of these deals will be different depending on who your employer is. Let’s discuss it case by case.
At Mars/Kellanova:
You’re in limbo, planning for integration while regulators stall the deal. Manage uncertainty.
You’ll be working on what the combined company will look like while addressing the required actions during the legal procedures. But you’re going to get to a place where you have done everything you could, and that’s it.
Regardless, make sure you’re prepared in case the deal doesn’t happen. Or it’s approved but with modifications. In both situations, you might need to rework all the planning you did before.
At Ferrero Rocher/W.K. Kellogg:
You’re trying to jam chocolate into cereal distribution channels. Creativity required.
If you work for Ferrero Rocher, evaluate your product portfolio to identify which items are suitable for distribution within the U.S. market. This involves determining which products will do well without changes and which ones will require them. For instance, McDonald’s hamburgers are often adapted for local tastes.
If you work for W.K. Kellogg, then your focus will be to warm up the distribution channels for Ferrero Rocher products. For instance, if you’re in charge of getting cereals into Kroger, you’re now expected to get chocolate into Kroger’s candy aisle. This includes managing promotions, discounts, and contracts, among other things.
At W.K. Kellogg’s plant-based unit:
You’re stranded in a shrinking business, watching investment dry up. Take a deep breath.
I suspect W.K. Kellogg has already cut a lot of plant-based investments down to size, which is hard to watch.
But they still own many healthy lifestyle brands. So maybe you should make a move into energy bars or other promising products. Otherwise, a career pivot may be smarter than waiting.
Closing Thoughts
Kellogg’s split was a good move for shareholders. But the recent deals differ greatly.
Mars’s purchase of Kellanova aligns with the concept of combining businesses horizontally, empowering both companies. But Ferrero Rocher’s decision to buy W.K. Kellogg is debatable.
One thing we know for sure: not all mergers and acquisitions are a good idea. And focus beats conglomeration.
In the end, strategic clarity—not sheer size—will determine which of these bets pays off.