Cadbury integration "progressing well" - Rosenfeld

Cadbury integration "progressing well" - Rosenfeld

Kraft Foods chairman and CEO Irene Rosenfeld has insisted the US food group's first-quarter performance has "reinforced" the company's decision to buy Cadbury.

The world's largest confectioner yesterday (6 May) reported first-quarter net income of US$1.88bn for the three months to 31 March, compared with net income of $660m a year earlier.

Sales rose 26% to $11.3bn thanks to the first contributions from the Cadbury business it acquired earlier this year.

The combined companies' organic net revenues rose 3.9%, reflecting 3.3% organic net revenue growth in Kraft's base business and 8.2% growth from Cadbury. 

Operating income increased 2.6% to $1.21bn despite the negative impact of costs related to the acquisition and integration of Cadbury.

However, industry watchers are scrutinising how Kraft assimilates Cadbury into its business and the potential impact on how the business is run and on earnings.

Speaking to analysts, Kraft chairman and CEO Irene Rosenfeld said the integration was "progressing well", that the company had confirmed its "synergy targets" and the group was drawing up "three-year strategic plans" for each business unit.

Nevertheless, Rosenfeld said: "I want to emphasise cost savings are not the big story here. This combination is about growth. And over the next few weeks and months, you'll begin to see more evidence of how our integration plans are laying a solid foundation for the future.

"We're quite pleased with our first quarter results, both for the Kraft Foods base business and for the Cadbury business. Everything we've seen so far has only reinforced our decision to acquire Cadbury."

The Kraft chief reserved special praise for Cadbury's gum business, which Rosenfeld said the US group would use to drive "best practice" elsewhere in the company.

She added that Kraft was "very pleased" with the performance of the Cadbury gum business in the first quarter after a downturn that had dampened sales across the gum category.

"I think [Cadbury's] gum, the way they've approached gum innovation, for example, has been a best practice and we're bringing that learning back to our biscuit and to the chocolate business," Rosenfeld said.

She added: "We felt very good about the gum performance, particularly in the US in the first quarter and it was very much share driven. Actually, we're seeing the category has been a little bit soft. It looks like one of those categories that is impacted by the recession because it's a little bit more discretionary. But we're very pleased with the performance. We had a very solid pipeline of innovation coming from Trident Layers and the prelaunch shipments of Stride Shift."

For more from the Kraft conference call, please visit Seeking Alpha.