08 Aug 2011 Kraft to split into two companies
US food giant Kraft has announced plans to split into two independent companies by the end of next year.
A global snacks business, with estimated revenues of $32bn (£19.6bn), will include Trident gum, Oreo biscuits and Cadbury.
The other company, a North American food business with revenues of $16bn, will take in brands including Kraft and Philadelphia cheeses, and Capri Sun.
Kraft also reported a rise in profits for the second quarter to $976m.
This is 4% higher than the $939m the company made a year earlier. Revenues for the quarter rose 13% to $13.9bn.
Kraft said its business had naturally grown in two different directions, that “now differ in their future strategic priorities, growth profiles and operational focus”.
It said its snack food business was focused on fast-growing, developing markets, while its grocery business was primarily focused on growing revenue in North America.
It said that creating two independent companies was the “next logical step”.
“We have built two strong, but distinct, portfolios,” said Kraft’s chief executive 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 realise their full potential.”
Kraft has made a number of acquisitions in recent years, including LU Biscuits from French food group Danone and the controversial takeover of Cadbury in the UK.
The plan to split into two companies needs to be approved by the board. If agreed, Kraft said it would take at least 12 months to restructure.
Source: Reuters/BBC
COMMENT: Kraft split revives Cadbury’s belief in focus
Kraft Foods’ decision to split itself in two has surprised industry watchers, not least because the US food giant believes the two companies – a North American grocery business and a global snacks maker – will benefit from greater focus. However, as Dean Best of www.just-food.com writes, we have had that argument before – when Cadbury tried to fend off Kraft’s takeover bid in 2009.
At the height of its takeover defence in the final weeks of 2009, we heard a lot about Cadbury’s “strong position as a unique, pure-play confectionery business”.
Then Cadbury chairman Roger Carr, as he tried to fend off the hostile bid from Kraft Foods, attempted to win over the UK company’s investors by pointing to its “iconic brands, sharp category focus and enviable geographic footprint”.
“Pure-play” and “focus” were oft-repeated reasons why Cadbury should remain independent and not be sold to Kraft, a company Carr derided as having a “low-growth conglomerate business model”.
We all know what happened next. Kraft sweetened its takeover bid, Carr surrended and the US food giant won the battle. Irene Rosenfeld, Kraft’s chairman and CEO, insisted Cadbury would benefit from being part of a larger business…..