Kraft-ing a new company
by Dan Malovany
Kraft Foods will split into two companies sometime in 2012 when it officially separates its $32 billion global snacks operation from its $16 billion North American grocery business. The global snack company will consist of current Kraft Foods Europe and Developing Markets units along with its North American snacks and confectionery business. About 75% of the global snack business will be from snacks around the world and 42% from its rapidly growing operations in developing countries.
The exception will be the Planters snacks line, scheduled to remain with the grocery business because the brand is mainly concentrated in the US. Additionally, Planters nut and snack sales to supermarket chains and other channels within the company’s supply chain align much better with a warehouse network than with the direct-store-delivery business model used by the cookies and crackers operation, noted Irene Rosenfeld, chairman and CEO of the Northfield, IL-based company, during a November conference call.
Through the fiscal 2011 third quarter, ending Sept. 30, Kraft Foods’ global biscuit sales increased 9% on a constant-currency basis. In developing countries, sales of biscuits jumped 26% with China reporting 55% growth, Brazil up 23% and Russia soaring 59%, Ms. Rosenfeld said. In some of these markets, as well as in Europe, Kraft Foods benefited from distribution synergies with Cadbury, which the company acquired last year, and a broader network of independent distributors.
In Europe, Kraft Foods is the leader in biscuits with a 15% share of the market. Its biscuit sales in Europe grew more than two times faster than the overall biscuit market, with revenue driven by new products and mega brands such as LU, Oreo and Belvita. This fall, the company officially opened its European Biscuit Research and Development Centre in Saclay, France, near Paris. The center houses 120 researchers, engineers, nutritionists, baker-pastry cooks, and product and packaging developers.
Ms. Rosenfeld told analysts the North American grocery company will remain as Kraft Foods because of the strong brand recognition in the US and Canada. However, the company is still working on a name for its separate global snack business. “I promise you it will be a delicious name,” Ms. Rosenfeld said.