Rumours of the Kraft confectionery unit sell-off come on the back of some disappointing sales results and reflect a broader strategy of focusing on a smaller number of stronger brands, something already being pursued by some of its major competitors. Kraft has seemingly had enough of maintaining underperforming parts of its business, and this move may only be the first in a series of disposals.

Kraft Foods, North America's biggest packaged foods producer, is reported to be considering the sale of its confectionery business, including the Altoids and Life Savers brands. The cereals division, which makes Shredded Wheat, Raisin Bran, Grape-Nuts and Honey Bunches of Oats, is also expected to be sold off.

News of the potential sale follows the company's announcement of a 3.8% drop in Q3 profits, down to US$779m compared with $810m a year earlier, with increased marketing spend to combat the negative impact of obesity fears, which are partly blamed for the group's current predicament.

With sales thought to be in excess of $600m, the Altoids and Life Savers brands are still likely to interest larger groups with a confectionery focus seeking to strengthen their position in the US market. A number of major confectionery companies, including Hershey, Wrigley and Cadbury-Schweppes have already been named in the media as potential suitors.

As with a number of other leading packaged goods producers, Kraft is keen to reduce the number of brands in its portfolio and focus only on those with the best geographical reach and growth prospects. The approach echoes Unilever's 'path to growth' strategy, which entails reducing its brand portfolio from 1,600 to focus on a more manageable and efficient 400 core brands.

However, regardless of the strategic moves by competitors, the sell-off seems more likely given that confectionery results are undermining the performance of its overall snacks business. In the most recent quarterly results the company identified that confectionery was largely responsible for stuttering revenues, with value growth of just 0.9% despite a 3.5% gain in volumes.

Given that these results were offset by the robust performance of the snacks arm, the company may well be shifting its view of where its core competencies lie. If that is the case, then this could be just the beginning of the acquisition battles as bidders start to circle other vulnerable limbs of the Kraft empire.

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