Food Business News - September 13, 2011 - (Page 26)

Kraft’s split on schedule Slower growth in North America cited as one reason for split Continued from Page 1 to deliver sustainable top-tier growth by reinvigorating our iconic brands, transforming our portfolio and strengthening our presence in fastgrowing developing markets. But taking our performance to the next level requires a bold new approach — creating two great companies that can optimize value by focusing on their unique drivers of success.” In the presentation, Ms. Rosenfeld said many of the changes the Northfield, Ill.-based company has made during the past four years, ranging from the acquisitions of Cadbury and LU Biscuits, to decentralizing decision-making, a focus on what she described as “power brands,” and a focus on innovation and marketing have fundamentally changed the company. “But as the company changed, our outlook has also changed,” she said. “When we considered the success of the last few years, the current operating environment and what it would take to accelerate our performance in each part of the portfolio, it became clear that a new approach was necessary. “To better appreciate the distinct opportunities and critical success factors for each, it is instructive to highlight just what those differences are. First, our grocery brands, despite their universal household penetration, are primarily focused in North America with a limited global presence. By contrast, the bulk of the Global Snacks business is made up of global platforms and brand icons such as Oreo, Cadbury and Trident. “Our North American Grocery products are primarily sold in the center of the store. The executional focus is on managing the shelf. This makes them best suited to go through warehouse distribution with a low variable cost structure and modest selling expense. “By contrast, our Global Snacks products are highly impulse-driven, found in multiple locations around the store, including the snacking aisle, end caps or the hot zones near the cash register. As such, they benefit greatly from a high touch, more labor-intensive sales and distribution capability, often direct-store delivery. Yes, this does require a higher fixed cost structure with higher selling expenses, but it allows us to manage product mix and to maximize revenues much more effectively.” After the separation, the North American Grocery business will have annual revenue of about $16 billion and market-leading positions in about 80% of its categories. It will include the Kraft, Maxwell House, Oscar Mayer and Philadelphia “billion-dollar” brands, plus three more brands with revenues of at least $500 million and another 14 brands with revenue of more than $100 million. “In a sense, the North American Grocery business will be a pure play as a lean, mean center-of-the-store machine in the most profitable markets in the world,” Ms. Rosenfeld said. “Going forward, the North American Grocery compound annual growth to essentially flat last year. “We are well outperforming the industry, but our categories too have decelerated from approximately 5% to 2% growth in 2010. If you believe that there is a new normal of slower consumption growth in North America, and we do, then certain capabilities will be even more important in the future. Things like stronger share position, worldclass marketing, go-to-market scale, and low-cost producer status will become even more critical in the future.” The Global Snacks business will have revenues of about $32 billion after the separation. It will have more than 42% of sales from developing markets, 36% from Western Europe and 22% from North America. About 75% of Global Snacks revenue will come from snacks, and it will have eight “billion-dollar” brands — Cadbury, Jacobs, LU, Milka, Nabisco, Oreo, Tang and Trident. It also will have another six brands with revenue of more than $500 million and 40 other brands with more than $100 million in sales. “Geographically speaking, Global Snacks will rank among the leading C.P.G. players in emerging markets,” she said. “Indeed, this company will have one of the most desirable exposures to developing markets among large-cap C.P.G. players.” Until the new companies are created, Kraft will continue to report as one company and will work to deliver on its goals for 2011 and 2012, she said. FBN The North American T Grocery business will Groc be a pure play as a lean, mean center-ofthe-store machine in the most profitable markets in the world. — Irene Rosenfeld, chairman and chief executive officer b i l g it t g business can leverage its categoryleading market positions and continue to deploy its capabilities in innovation and marketing while focusing single-mindedly on warehouse distribution and sales efficiency.” Ms. Rosenfeld emphasized that the North American Grocery business’ scale and efficiencies will be central to the business’ success given how the North American market has changed. “Simply put … the U.S. has stalled,” she said. “In the 19 largest food and beverage categories, the average growth rate has plunged from about 5% 26 FOODBUSINESS NEWS ® September 13, 2011

Table of Contents for the Digital Edition of Food Business News - September 13, 2011

Food Business News - September 13, 2011
Kraft’s split on schedule
Nonfat dry milk prices drop as milk output rises
Shining a light on sugary drinks
Web Contents
Editorial - Preparing for the rising cost of fresh water
Private label products make gains in salad, sugar categories
Seaboard’s Rod Brenneman to lead Butterball
Limited avocado supply hurts Calavo earnings
PepsiCo outlines path for global snacks growth
F.D.A. initiates projects to trace foodborne illnesses
U.S.D.A. study shows food insecurity down from 2009
McCormick completes acquisition of Kamis
Leadership team set for Sara Lee’s CoffeeCo spin-off
Seneca, Allens terminate merger negotiations
Human milk components the focus of partnership
JBS shifting operations in Brazil
Dannon opens new innovation center
July red meat production down 4% from year ago
Aramark to acquire Filterfresh from G.M.C.R.
Tyson Foods to ramp up prepared foods output
McDonald’s investing $1 billion in Canada
Rowland Coffee integration on track at Smucker
Food trucks transitioning from fad to trend
Kraft’s split on schedule
Restructuring charges weigh on Campbell earnings
Starbucks K-Cup Portion Packs going to grocery stores
Sanderson Farms swings to loss in quarter
Nestle completes production unit for nutrition factory
Restaurant Performance Index falls beneath 100 to 11-month low in July
Washington - Shining a light on sugary drinks
Market Insight - Nonfat dry milk prices drop as milk output rises
Health and Wellness - School lunches get slimmer
Ingredient Innovations - Possible opportunity in immunity
Flavor Trends - Fire and flavor
New Product Trends - Expanding flavors and protein sources in jerky
New Food Products - Dannon introduces Activia Selects yogurt
New Food Products - Balance Bar launches nimble bar for women
New Food Products - Nestle introducing Nescafe LiquiFresh Gourmet Blend
New Food Products - New jerky from Jack Link’s uses Cholula Hot Sauce
New Food Products - Odwalla adds Super Protein Mango smoothie
New Food Products - Frito-Lay introduces Doritos and Cheetos Fiery Fusion
New Food Products - Burger King adds Quaker oatmeal to breakfast menu
New Food Products - Lifestyle Foods launching G2 snack line
INGREDIENT MARKET TRENDS - Winter wheat planting under way except in dry Southwest
Ingredient Markets
Supplier Innovations and News - Soy blend has texture characteristics of meat
Supplier Innovations and News - Sustainable palm oil certifi cation reaches Brazil
Supplier Innovations and News - Grain Processing Corp. promotes scientist
Supplier Innovations and News - Starches offer retort, freeze/thaw benefits
Supplier Innovations and News - Red Arrow launches pot roast fl avor
Supplier Innovations and News - Takasago names v.p. of consumer insight
Supplier Innovations and News - Honey, fig flavors join balsamic vinegar line
Ad Index
Food Business in the News

Food Business News - September 13, 2011