'I asked one of the Kellogg executives running MorningStar Farms if an IPO was in the cards. She laughed.'
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 K, -0.23% 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.
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 BYND, -1.33% 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.
Young wouldn’t share any results of blind taste tests, but she said: “We’re the largest brand in the category, we have the highest repeat rate in the category.” From this, it’s possible to start sketching out some rough numbers. MorningStar Grillers sell for about $6.50 a pound at Walmart WMT, +0.62% where gross margins average about 25%. That suggests the wholesale price is about $5.20 a pound. Grillers sell for about $5.76 a pound in at privately owned BJ’s Wholesale Club. Based on numbers from publicly traded rival Costco COST, +0.35% the gross margins in wholesale clubs are around 10%. So these numbers, too, suggest a wholesale cost of $5.
Dress up the MorningStar Farms operation for “growth,” do some repackaging and rebranding, make it trendier, then launch an IPO and raise a ton of money.How big a deal is a value of $5 billion or $10 billion? Kellogg’s market value is now $18 billion. Throw in debt and the total enterprise value is $28 billion, says FactSet.
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