Kraft’s Splitting Reasons
"Over the past four years, we've fundamentally changed the face, footprint and prospects of Kraft Foods. We've successfully positioned our company to deliver sustainable top-tier growth by reinvigorating our iconic brands, transforming our portfolio and strengthening our presence in fast-growing developing markets," Rosenfeld said.
"But taking our performance to the next level requires a bold new approach: creating two great companies that can optimize value by focusing on their unique drivers of success," Rosenfeld added.
The Northfield, Ill.-based world's second largest food company had announced early last month its plan to create two independent public companies. The plan will create a high-growth Global Snacks company with estimated revenue of around $32 billion and a high-margin North American Grocery company with estimated revenue of around $16 billion.
Global snacks will consist of the current Kraft Foods Europe and Developing Markets units as well as the North American snacks and confectionery businesses. The business will drive margins higher by leveraging its cost structure through volume growth and improved product mix. Its powerful brands will include Cadbury chocolates, Jacobs coffee, LU biscuits, Milka chocolate, Nabisco cookies and crackers, Oreo biscuits, Tang drink and Trident gum.
The global snacks business sees more than 42% of its sales coming from developing markets, 36% from Western Europe and 22% from North America.
Meanwhile, the North American grocery business will comprise the current U.S. Beverages, Cheese, Convenient Meals and Grocery segments and the non-snack categories in Canada and Food Service. The company said it will deliver consistent growth of its high-margin iconic brands, with strong free cash flow that will enable competitive dividend payout and dividend growth. Its powerful brands will include Kraft, Maxwell House Coffee, Oscar Mayer meats and Philadelphia cream cheese.
According to Kraft, the spinoff will enable each business to focus on its distinct strategic priorities, with financial targets that best fit its own markets and unique opportunities. Each would also be able to allocate resources and deploy capital consistent with its strategic priorities to optimize total returns to shareholders.
From the September 9, 2011, Prepared Foods' Daily News.
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