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Kraft’s snacks spin-off targets Asia and Latin America as Rosenfeld appointed head

By Oliver Nieburg , 06-Dec-2011
Last updated on 06-Dec-2011 at 14:52 GMT

Developing markets are to make up almost half of revenues for Kraft’s global snacks business as the spin-off business announces Irene Rosenfeld as its head.

Michael Mitchell, vice president for corporate external communications at Kraft Foods told BakeryAndSnacks.com that developing markets will account for around 42% of the new global snacks business as Kraft prepares to split its operations.

Developing markets

“Developing markets have been a growth engine for Kraft Foods, delivering double digit growth through the third quarter (Q3) this year,” he said.

“Growth in Asia and Latin America has been particularly robust this year,” he added.

The company recently oversaw solid performance in developing markets in its third quarter (Q3) results.

Overall net revenues grew 11.5% to $13.2bn (€9.6bn) on the same quarter last year with a staggering 45% growth in developing markets, led by performance in India, Russia, Brazil and China.

Jonathan Thomas, principal food analyst at Leatherhead Food Research told this site that he expected Kraft to look to large developing markets, such as Mexico and Brazil.

"There would appear to be opportunities opening up in Brazil in particular, since more people are moving towards more premium and healthier biscuits, which might suit Kraft," he said.

"It has already made inroads into the savoury biscuits market in this country, and may seek to increase its share of the sweet biscuits market via brands such as Oreo," he continued.

However, Thomas did not expect further penetration of the Brazillian chocolate market and said the focus would primarily be on biscuits.

Indian investment.

Reports circulated yesterday said that Kraft had upped its annual investment in India in the past year by 70% to tap into strong growth in the chocolate market.

Financial newswire Bloomberg quoted Anand Kripalu, Kraft president, South Asia and Indo-China as the source for its article. (see here )

Mitchell said: "As a matter of practice, I’m not able to confirm forward-looking growth targets, but we see tremendous opportunity ahead for our India business."

"India is one of our top 10 priority markets within our Developing Markets region. We have invested behind marketing, innovation and quality, and this has resulted in strong growth – the best in recent memory of that business," he said.

The company introduced Oreo cookies to the Indian market last year, which was said to help performance in the last quarter, according to Kraft Foods executive vice president David A. Brearton.

India saw the strongest chocolate, growth in Q3 with revenue increases of around 50%. Brazil, Argentina, Russia and Ukraine also performed well in this category.

Heads of independent companies

Yesterday, Kraft Foods chairman and CEO Irene Rosenfeld was announced as chairman and CEO of Kraft’s global snacks company, while W. Anthony Vernon, currently Kraft Foods executive vice president and president in North America, was announced as the CEO of Kraft’s North American grocery company.

Kraft said it estimates revenues of $31bn for the snacks business in the coming year, and $17m for the North American grocery business.

Despite the major gulf in projections, Mitchell said: “The naming of Irene to lead the global snacks company does not imply that one company is ‘better’ than the other”

European strategy

He said that Kraft Foods Europe would become part of the global snacks company.

“We continue to see good opportunities in this market from growth platforms (e.g. Belvita breakfasts biscuits) and taking products like Oreo into new markets where the product is not currently sold today,” he said.

Net revenues in Europe increased 16.1% to around $3bn (€2.1bn) in the last quarter and profit was also up 18% with Ukraine and Russia leading the way.

Leatherhead analyst Thomas said: "At present, it [Kraft] is particularly strong in the chocolate markets in the eastern parts of the region, e.g. Poland, Bulgaria. Further west, market shares are lower on account of competition remaining strong from multinational rivals such as Nestle, Ferrero and Mars. As such, it is difficult to see the company focusing upon western European countries – so the focus on developing markets appears set to continue."

The spin-off companies are expected to be fully operational by the end of this year.

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