By Max Clarke
Kraft Foods Inc. (NYSE: KFT), US-based transnational food conglomerate behind a dizzying array of household brands, has today announced its intentions to split the company into two independent, publically traded businesses.
The multi-billion dollar parent company to Philadelphia cream cheese, Oreo cookies, Vegemite spread, Toblerone and Cadbury’s chocolate, will split into a higher growth global snacks business, as well as a more stable American groceries company.
“We have built two strong, but distinct, portfolios,” explained Kraft chairman and CEO, Irene Rosenfeld. "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 Illinois company has been fiercely criticised by workers’ unions in the UK after what the deemed a hostile takeover of iconic British chocolate manufacturer, Cadbury’s, in a move that was seen to threaten workers’ rights.
“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."
Global snacks will consist of the current Kraft Foods Europe and Developing Markets units as well as the North American snacks and confectionery businesses. As an independent company, global snacks would have estimated revenues of approximately $32 billion and a strong growth profile across numerous fast-growing, attractive markets. Approximately 75 percent of revenues would be from snacks around the world, and approximately 42 percent would come from developing markets, including a diversified presence in numerous highly attractive emerging markets. The business would have a strong presence in the fast-growing and high-margin instant consumption channel. The non-snacks portion of the portfolio would consist primarily of powdered beverages and coffee, which have a strong growth and margin profile in developing markets and Europe. Key brands would include Oreo and LU biscuits, Cadbury and Milka chocolates, Trident gum, Jacobs coffee,and Tang powdered beverages.
The North American grocery business would consist of the current U.S. Beverages, Cheese, Convenient Meals and Grocery segments and the non-snack categories in Canada and Food Service. With approximately $16 billion in estimated revenue, this business would be one of the largest food and beverage companies in North America. Its portfolio would include many of the most popular food brands on the continent, with leadership positions in virtually every category in which it competes.
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