Supply Chain Investments Stand to Buoy WK Kellogg's Profits Over Time Even as Sales Growth Stagnates

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 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 subpar scale (generating less than $3 billion in annual sales), which likely weakens its bargaining power when sourcing key ingredients, negotiating slotting fees, and securing advertising placements.