The chief executive of Kraft Foods has asserted that the planned split of the company into two separate units is vital to face the “new reality” of the food industry.
Kraft chairman and CEO Irene Rosenfeld said yesterday (7 September) that creating a North American grocery unit and a global snacks business would allow both to focus on growth in their respective fields.
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Kraft last month surprised industry watchers when it announced plans to split itself into two companies, a fast-growing global snacks business that includes Oreo cookies and Cadbury, which it acquired in 2009, and a North American grocery unit with brands like Oscar Meyer and Philadelphia.
Rosenfeld, speaking at a Barclays Capital investor conference yesterday (7 September), said slow growth in the US and the opportunities offered by developing global markets required different approaches.
“When we considered the success of the last few years, the current operating environment and what it would take to accelerate our performance, it became clear a new approach was needed,” she said. “Simply put, we have now reached a point where North American grocery and global snacks will each benefit from standing on its own and focusing on its unique drivers for success.”
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The North American business is expected to operate more effectively in the “new normal” of stagnant growth in the US food industry, down to 0.3% from 5% in 2007-2009, by leveraging its competitive advantage and “revitalised brands”.
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By GlobalDataRosenfeld said: “The North America grocery business will be a pure-play, mean, lean centre-of-the-store machine in the most profitable market in the world.”
Meanwhile, the global snacks unit will be better placed to take advantage of developing markets, which generate approximately 42% of Kraft’s revenue, by redeploying capital to support future growth.
She added: “We have successfully built two strong portfolios and we are now in a position to seize the opportunity to create two great companies, each will have the leadership, resources and mandate to realise it’s full potential.”
