Kraft to cut 1,600 jobs as part of realignment

by Eric Schroeder
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NORTHFIELD, ILL. — Kraft Foods Inc. plans to cut about 1,600 jobs in North America as part of its move to help ensure its North America-based snacks and grocery businesses are well-positioned to become two independent public companies before the end of 2012. Kraft said approximately 40% of the job cuts are due to realignment of the company’s U.S. Sales organization, with the rest the result of consolidation of U.S. management centers and streamlining of the corporate and business unit organizations.

“When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations,” said Irene Rosenfeld, chairman and chief executive officer. “For the past year, the North American team has been working to streamline operations to deliver sustainable top-tier performance and continue to invest in our iconic brands. We're confident that this transformational work will improve effectiveness and fuel the future growth of both companies.”

As part of the realignment of U.S. Sales, Kraft said it plans to create more focused teams, allowing each company to customize its approach to in-store sales and execution to maximize impact.

The snacks business will leverage a direct-store delivery model, with most U.S. retail sales employees shifting to the North American region of the global snacks company, Kraft said, while the grocery company will reorganize within the United States. Local retail support will be contracted to two sales agencies, with Kraft oversight and direction.

Kraft anticipates having both U.S. Sales organizations in place by April 1.

Additionally, Kraft said it will consolidate its U.S. management center locations from four to two.

“Consolidating our management locations is a sound business move,” said Tony Vernon, executive vice-president and president, Kraft Foods North America and c.e.o. of the future grocery company. “Having the majority of our business units together in one location will provide greater development opportunities for our people and will help us continue building our brands more efficiently and collaboratively.”

The Beverages business unit in Tarrytown, N.Y., and the Planters brand in East Hanover, N.J., will relocate to the Chicago-land area by December 2012. Most of the employees affected by these moves will have the option to transfer with their businesses to the future grocery company headquarters in Chicago-land. Kraft also will close its Glenview, Ill., management center by the end of 2013.

The future global snacks company also will have its headquarters in the Chicago-land area, with the choice of site currently under consideration. The North American region for the global snacks company will be based at the East Hanover campus.

In Canada, both companies will retain sites in the Greater Toronto area, Kraft said, with the Kraft grocery business remaining in the current Don Mills offices, and the snacks business moving to recently opened offices in Mississauga. The Madison, Wis., management center will remain the site for the Oscar Mayer business unit.

Elaborating on the planned reduction of the 1,600 jobs, Kraft cited its efforts throughout 2011 to lower costs to provide funds to invest in its brands. About 20% of the job eliminations are currently open positions.

“Making these tough choices is never easy, and we recognize the impact these changes will have on many of our people and their families,” Mr. Vernon said. “But our plan for a more nimble company, combined with the current economic and competitive pressures, led us to this point. Taking the necessary steps now will enable us to continue investing in our beloved brands to drive growth.”

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