Kraft Splitting Into Two Entities

Articles
August 05, 2011

Kraft Splitting Into Two Entities

Northfield, Illinois-based Kraft Foods Inc. unveiled its intent to split into two independent public companies recently: a global snacks business with estimated revenue of approximately $32 billion and a North American grocery business with estimated revenue of approximately $16 billion. This happens at a time when merger and acquisition activity in the food processing sector has ramped up again, noted The Food Institute.

Northfield, Illinois-based Kraft Foods Inc. unveiled its intent to split into two independent public companies recently: a global snacks business with estimated revenue of approximately $32 billion and a North American grocery business with estimated revenue of approximately $16 billion. This happens at a time when merger and acquisition activity in the food processing sector has ramped up again, noted The Food Institute.

During the first half of 2011, food processors were involved in over 45 deals according to the association’s merger and acquisition database – one-third more than the prior year. Back in 2009, Kraft Foods acquired control of Cadbury PLC for $19.5 billion expanding its presence in the confectionary market globally.

“Kraft has been a very active factor in food industry mergers and acquisitions over the past decade,” noted Brian Todd, President of The Food Institute, “having been involved in over 25 deals, on the both the buying and selling side.”

Last year however, Kraft peaked the interest of several investors who bought significant stakes in the food processor. These included Nelson Petlz’ Trian Management Fund, as well as Pershing Square Capital who joined Warren Buffet as investors in the company. Buffet is said to be Kraft’s largest shareholder with a six percent stake. 
 
“We have built two strong but distinct portfolios," stated Chairman and CEO Irene Rosenfeld.

The global snacks will consist of the current Kraft Foods Europe and Developing Markets units as well as the North American snacks and confectionery businesses. Approximately 75% of revenues would be from snacks around the world, and about 42% would come from developing markets. Key brands would include OreoLU biscuits, Cadbury and Milka chocolates, Trident gum,Jacobs coffee and Tang powdered beverages. The North American grocery business will consist of the current U.S. Beverages, Cheese, Convenient Meals and Grocery segments and the non-snack categories in Canada and Food Service. Key brands would include Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese, Maxwell House coffee, Capri Sun beverages, Jell-O desserts and Miracle Whip salad dressing. 

Kraft, with 2010 revenue of $49.2 billion, expects to launch the new companies before the end of 2012.