Despite WK Kellogg's Tepid Growth Prospects and Lack of a Competitive Edge, Profit Potential Remains

Despite the intended benefits more focus should unlock, we fail to see an enduring competitive advantage in WK Kellogg as a stand-alone business. For one, we surmise its leading market share position in the North American cereal aisle is diluted as its entire portfolio sits in a shrinking category. In our view, this dents its relationships with retailers that strive to stock their shelves with key traffic drivers. Further, without ties to the faster-growing snacks arm (which now sits inside narrow-moat Kellanova), WK Kellogg is left with a subpar scale (generating under $3 billion in annual sales), which likely weakens its bargaining power when sourcing key ingredients, negotiating slotting fees, and securing advertising placements.