Kraft Foods to split into two separate companies

By Caroline Scott-Thomas

- Last updated on GMT

Related tags: North american grocery, Kraft foods

Kraft Foods has said it intends to split into two companies, in a move that would create a global snacks powerhouse separate from its North American grocery business.

Kraft noted that it had made a number of strategic acquisitions in the snacking sector over the past several years, including that of Danone’s LU biscuit brand and UK-based confectionery maker Cadbury. It estimated that as an independent company its global snacks business would generate revenue of about $32bn. Key brands would include Oreo and LU biscuits,​Cadbury and Milka chocolates, Trident gum, Jacobs coffee, and Tang powdered beverages.

Meanwhile its North American grocery business, which includes brands such as Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia​cream cheese, and Maxwell House coffee, would have estimated revenue of about $16bn, the company said.

Chairman and CEO Irene Rosenfeld said in a statement: "We have built two strong, but distinct, portfolios. Our strategic actions have put us in a position to create two great companies, each with the leadership, resources and strong market positions to realize their full potential.

“The next phase of our development recognizes the distinct priorities within our portfolio. The global snacks business has tremendous opportunities for growth as consumer demand for snacks increases around the world. The North American grocery business has a remarkable set of iconic brands, industry-leading margins, and the clear ability to generate significant cash flow."

The company said that 18 months after its acquisition of Cadbury, its global snacking business and North American grocery business differ in their strategic priorities and focus. Kraft said that while its snack business was focused on expanding in developing markets, for example, its North American grocery business was focused on investing in product innovation and marketing in traditional grocery channels.

Principal market analyst at Leatherhead Food Research Jonathon Thomas agreed that in light of Kraft’s recent acquisitions in the snacks arena, the decision to create two separate companies potentially made sense.

“This would also enable Kraft to target high-growth snacks markets throughout the less developed parts of the world – for example, Cadbury was particularly strong in parts of Latin America and Africa prior to its takeover by Kraft,”​ he said.

The global snacks business will bring together the current Kraft Foods Europe and Developing Markets units, as well as the North American snacks and confectionery units, Kraft said, while the North American grocery business will include the current US Beverages, Cheese, Convenient Meals and Grocery segments and non-snack categories in Canada and Food Service.

The company said it aims to launch the two new companies by the end of 2012.

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1 comment

Splitting Kraft into Two Coys.

Posted by Stan Saacks,

Way to go!
Makesmuch sense. However, strong leadership is needed. Clear vision and ongoing monitoring could be key prerequisites. The market doesn't always welcome having to respond to a split of one supplier.

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