NEW YORK — Top executives at WK Kellogg Co cite a singular mission as a big reason they’re sanguine about the company’s future a year after its spinoff from The Kellogg Co.

“We have a job to do right now, which is to optimize cereal,” Gary Pilnick, chairman and chief executive officer, said in a Dec. 4 chat at the Morgan Stanley Global Consumer & Retail conference in New York.

Battle Creek, Mich.-based WK Kellogg marked its first full year as a stand-alone company when reporting fiscal 2024 third-quarter results early last month. The transaction split The Kellogg Co. into publicly traded WK Kellogg Co (the North American cereal business) and Kellanova (the global snacking, international cereal and noodles, plant-based foods and North American frozen food businesses). At the time, WK Kellogg accounted for less than $3 billion of the legacy company’s global sales of $15 billion.

“We’re really pleased with where we are right now,” Pilnick said. “If a year ago we would have said, ‘This is where you’d be one year from now,’ we would say, ‘You know what, that would be a successful year.’”

Why does WK Kellogg now stand better positioned on its own? “No. 1, focus,” Pilnick said.

“All we’re doing is thinking about cereal,” he explained. “Before, we were the seventh out of seven different categories, for all the right reasons. That’s not a criticism. I worked at The Kellogg Co.; it was the right decision. But for us, all we do is think about cereal. Cereal is undefeated at WK. We haven’t lost a debate yet about where to invest our money because everything we do is about cereal. We focus, we’ve integrated the business and our ability to invest behind enhanced marketing, enhanced sales and supply chain. We know we’ll drive the business.”

WK Kellogg has a simple plan: Shore up sales and optimize the supply chain and service levels to feed profits. Pilnick and chief financial officer David McKinstray, also at the conference, noted that retail sales in the ready-to-eat cereal category were down by low single digits pre-pandemic and thus far in 2024 are down about 1%, providing a good sales yardstick.

“That’s our strategy: stable top line, drive outsized margin expansion so the profitability and cash can rattle right through the P&L,” Pilnick said. “When we think about the category, what makes our model work is that stable top line. And what’s interesting for us is we believe the category is providing us the backdrop we need to create and deliver on that value. That’s not true about all categories right now. There are certain categories performing in a way where the trajectory needs to change for those participants to drive their strategy and deliver their algorithm.”

A linchpin of WK Kellogg’s strategy is a major supply chain modernization program unveiled in August. Plans call for the company to invest $450 million to $500 million in new infrastructure, equipment, technology and capabilities at its manufacturing plants in Battle Creek, Mich.; Lancaster, Pa.; and Belleville, Ont., with a goal of boosting production at those sites as well. In addition, WK Kellogg is slated to close its Omaha, Neb., plant by the end of 2026 and scale down production at its Memphis, Tenn., plant starting in late 2025 to create a more efficient facility.

“Our infrastructure is rather aged,” McKinstray said. “We have some plants in our network that we would call old, and we maintained those facilities over time. But we haven’t maybe moved them into the future at the rate we needed to.”

One thing that stood out to WK Kellogg was a large differential between its highest-cost and lowest-cost plants.

“Our lowest-cost plants run at about a 50% less cost than our highest cost plants, per pound, so that’s a significant gap,” McKinstray said. “It goes back to exactly what I said, the aged infrastructure, the inefficiency of those lines, all of those things. So you can see just by maximizing that new technology and making those investments how you’ll start to get the benefits from it.”

With supply chain optimization as the driver, WK Kellogg expects to achieve adjusted EBITDA margin expansion of roughly 500 basis points over three years and lift adjusted EBITDA margin from about 9% to 14% coming out of 2026.

“We knew we had to get the quick wins, the benefit of the smaller, focused company,” McKinstray said. “And then as we exit 2026, we’ll start seeing the real benefits of this investment after it has been made.”

In the third quarter ended Sept. 28, WK Kellogg said stand-alone adjusted net sales edged up 0.7% year over year, reflecting a sequential improvement in volume that benefited from a strong back-to-school season execution and improved supply. The year-to-date period also saw adjusted stand-alone net sales rise 0.7%.

“We had a supply challenge in Q3 of 2023,” McKinstray said. “What that led to was retail draw-down, because we could not ship the food. Now we’ve moved past that. This year, we had uninterrupted supply. And what that meant was we were able to hold more normalized levels of inventory in Q3.”

Through the end of the third quarter, five of WK Kellogg’s Core 6 largest cereal brands — Kellogg’s Frosted Flakes, Special K, Raisin Bran, Froot Loops, Frosted Mini Wheats and Rice Krispies, representing about 70% of sales — gained or held market share. Likewise, four of the five Next Core cereal brands — Kellogg’s Corn Flakes, Apple Jacks, Corn Pops, Krave and All-Bran — maintained or expanded share over that period. Pilnick said the Natural & Organic unit, including the Kashi and Bear Naked brands, was showing signs of sequential improvement as well.

Excluding Special K, market share for the Core 6 brands was up 30 basis points of share in the quarter and up 20 basis points year-to-date. Special K’s share fell 40 basis points in the quarter, but the company expects a fuller commercial plan for 2025 — led by the “Special for a Reason” marketing campaign — to give the health-oriented brand a lift.

“The great news is it’s a wonderful brand,” Pilnick said. “It has terrific positioning. It’s where you’d want to build a brand right now. We just need to use our marketing muscle, and that’s what we do. We’re the WK Kellogg Co. We should be very good at marketing, selling and supplying a food like Special K.”

Going forward, WK Kellogg expects its cereal-only sales force to be a game-changer.

“If you think about the sales force, the feet on the street, what would happen before (the spinoff) is you go into a store and you’re selling seven different categories,” Pilnick said. “Now all our salespeople are selling one category. Think about the depth of their knowledge, the relationships that they’re building and how they should understand our category better than anybody and drive that top line. (There are) other contributors, but that would be one that we look at and say, ‘That’s a unique capability for WK.’”

McKinstray also pointed to sales growth opportunities for WK Kellogg in the mass retail and club store channels and other geographies, not just in the contiguous United States but also Puerto Rico and Canada.

“There’s a decent portion of our business that is in the non-measured channels,” he said, adding that “in Canada, our business is performing very well.”

Pilnick expressed confidence that WK Kellogg is well on its way to stabilizing its top line.