It's good to be king. But, if you can't be king, then it's good to be associated with the king. Kellogg (NYSE:K) has decided to go for the latter.
Kellogg has hooked up Burger King in a deal that will see its Morningstar Farms brand vegetarian patties sold at the drive-thru. The sandwich is dubbed the BK Veggie, and the press release says that this will be the first fast-food offering of its kind executed on a national level. Competitor McDonald's (NYSE:MCD) offers vegetarian grub only in certain areas of the country.
Brian Gorman covered Kellogg's latest earnings report, and found it to be hearty (though he did question the valuation of the stock). Even with the expensive nature of commodity materials these days, the famous cereal seller drove earnings into double-digit-increase territory. Brian pointed out that some of the credit rested with the company's frozen segment, which includes the notable Eggo and the Morningstar Farms products, among others.
Burger King represents a major distribution channel for Kellogg's specialty foodstuffs. The Morningstar Farms brand will benefit from increased exposure and sales opportunities, helping Kellogg grow revenues from a part of its portfolio that aids the company in diversifying its growth. Burger King gets a product with a trusted brand name behind it, which will aid in its marketing efforts and perhaps encourage otherwise skeptical consumers to give the BK Veggie a try.
Burger King obviously believes this will add value to its menu paradigm, but I find myself wondering whether the demand is really there. Obviously healthier fare at the fast-food complex is all the rage these days, but Burger King seemed determined to buck the health trend with its recent introduction of the Enormous Omelet Sandwich.
So it will be interesting to see how the BK Veggie plays with the Whopper crowd -- how competitors react if it takes off.
More takes on Kellogg:
- Kellogg's Hearty Results
- Kellogg Shelves Elves
- Kellogg: Healthy but Plain
- Have breakfast at the Kellogg discussion board.
Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
