Kraft Foods has refused to be drawn on claims in the US that the company could consider selling its cheese business.
The US food giant stayed tight-lipped after a report earlier this week on The Financial Times website that quoted sources close to the business saying a sale could be considered.
“We don’t speculate on rumours about mergers, acquisitions or divestitures,” a Kraft spokesman told just-food last night (11 July).
The speculation comes after activist investor Nelson Peltz bought a small stake in Kraft, a move that industry watchers believe could spark the disposal of some of its operations.
Peltz, for instance, has been linked to the decision from Cadbury Schweppes to spin off its drinks arm from its core confectionery business. Cadbury announced its intention to restructure its business in March just days after Peltz amassed a stake in the UK firm. The confectioner has denied Peltz was involved in the decision but the investor has been widely seen as the catalyst behind the move.
The rumours surrounding Kraft’s operations also come just days after the company agreed a deal to buy the biscuits and cereals business of Groupe Danone.
The Financial Times said that sources close to Kraft claimed the company could sell its cheese operations – which includes brands like Philadelphia – if growth from the business failed to hit expectations. One source told the FT that the growth potential of Kraft’s cheese business might not be as high as the company’s other operations.
The Kraft spokesman declined to comment on the future direction of its cheese business. “We don’t speculate on future business decisions.”
One analyst told just-food that a sale of Kraft’s cheese business is unlikely, although she earmarked other parts of the business that the company could look to offload.
“I don’t necessarily believe that anybody could run that cheese business better than Kraft,” Alexia Howard, an analyst at US bank Sanford C. Bernstein, said.
“The cheese business is generally viewed as unattractive; block cheese, for instance, is seen as very commoditised and as therefore being a bad business. However, if you look at brands like Philadelphia cream cheese and the cottage cheeses Kraft has, it’s a fairly decent business, with high margins, genuine growth and that over-indexes with health-conscious consumers.”
Howard argued that Kraft could look to sell parts of its business in which it lags behind industry rivals. “If I were in Irene’s (Kraft CEO Irene Rosenfeld) shoes, I’d look at the areas in which Kraft does not have a competitive advantage,” Howard said.
“If you look across the Kraft portfolio, with its Post cereal business, it is a distant number three behind Kellogg and General Mills. Its European chocolate business has some good brands – look at Milka – but I don’t necessary believe that Kraft is capable of managing fast-moving confectionery products The chocolate business is a difficult business for it to manage.”