The cookie crumbles: Kraft set to split in two
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Friday 05 August 2011
Less than 18 months after fattening up with the acquisition of Cadbury, Kraft plans to slim back down by jettisoning scores of its older food brands. The split, announced by Kraft chief executive Irene Rosenfeld yesterday, puzzled many analysts, but it sent Kraft shares sharply higher.
Kraft's traditional grocery brands in North America, including Maxwell House coffee, Philadelphia cheese, Jell-O and its famous own-brand macaroni and cheese, will be spun off into a new company designed to appeal to value investors. It will pay a large dividend, and could be loaded with much of the group's debt.
What remains, including the operations acquired with Cadbury, will be a "truly ubiquitous snacking powerhouse", Ms Rosenfeld said. "We have now reached a stage in our development with a global snacks and grocery businesses in North America in which each benefit from standing on their own and focusing on their unique drivers of success."
The snacks business has been growing sales at a much faster rate and shows more promise in emerging markets in the developing world, leading Kraft to believe that a standalone business will be valued more highly by investors than the current group. The portfolio of brands spans Trident gum, Oreo cookies, Cadbury Creme Eggs, Milka chocolate bars and Tang juice drinks.
Kraft shares jumped almost 10 per cent in the wake of the announcement, and remained up 3 per cent in lunchtime trading in New York. Warren Buffett, the billionaire Kraft shareholder who voiced his displeasure at the $19.5bn takeover of Cadbury, was briefed earlier in the week and backed the new strategy publicly yesterday.
As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”
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