Food Business News - April 7, 2015 - (Page 16)

Heinz, national opportunities Kraft merger offers ample inter PITTSBURGH - Sometimes, when you take a look under the hood, you find more problems than you bargained for. But for John Cahill, chairman and chief executive officer of Kraft Foods Group, that look evidently opened the door for opportunity. A little more than a month ago Mr. Cahill unveiled plans to work with Kraft's management team and become more immersed in the business. At that time, he said he planned to "really get under the hood" and "develop a well-informed comprehensive plan that will accelerate the pace of change and put Kraft on a clear path to long-term sustainable growth." 16 FOODBUSINESS NEWS ® On March 25, the company announced plans to merge with the H.J. Heinz Co. Once the dust settles, Heinz shareholders will own 51% of the combined company, which is to be called The Kraft Heinz Co. As part of the transaction, Kraft Foods shareholders will receive stock in the combined company as well as a special cash dividend of $16.50 per share, which represents 27% of Kraft's closing stock price on March 24. The cash dividend payment will total approximately $10 billion and be funded by an equity contribution from Berkshire Hathaway and 3G Capital, the owners of Heinz. The agreement has been approved by the boards of directors of both companies. p A potential merger with H.J. Heinz Co. that would vault the new company into the No. 3 spot among North American food and beverage companies term in terms of annual sales certainqua ly qualifies as change. The only comp companies it would trail would P be PepsiCo, Inc., and Nestle S S.A., according to Kraft. In a March 25 conference call with analysts to discuss the transaction, Mr. Cahill, who is set to become vicechairman of the new company, said there are numerous opportunities for revenue synergies, including the benefits of increased scale and the potential to revitalize the two companies' iconic brands with brand extensions and offerings that would be difficult to execute for each of the companies on a standalone basis. But it is the international opportunity that Mr. Cahill said he was most excited about. "Kraft's brands are already well known across the globe," Mr. Cahill said. "Our ambition is to leverage these equities by bringing the right brands to the right markets. Heinz is the perfect platform to enable Kraft to execute in its obvious right-to-win categories across the globe." Kraft's brands include Macaroni and Cheese, Velveeta, Oscar Mayer, Lunchables, Planters, Philadelphia Cream Cheese, Kool-Aid and MaxHouse well House, while Heinz' inc portfolio includes the compasignatur ny's signature Heinz ketchup and sauces as well as OreClassico Ida, Classico, Complan, ABA, Plasm Quero, Plasmon, Master and Wattie's. illust "To illustrate the global reach of the combined comp company, consider tha that 34% of our co combined sales wi will come from inte international marw kets, with 24% outside North America," Mr. sa Cahill said. "Europe will com comprise approxim mately 10% of the c combined busin ness, with APAC (Asia-Pacific) and the rest of the world contributing 14%." He said this international exposure will become "critical" as certain licensing agreements with Mondel z International that were entered into several years ago begin to expire, opening the door to "ample opportunity to market certain brands overseas, particularly in Central and South America and in Europe." "The potential is already there, and the combination with Heinz allows us to realize that potential in the very near term," he said. "To better illustrate this point, consider the 14 international markets in which the Kraft brand has at least 80% brand awareness. These aren't just any markets. These are large and growing countries spread around the globe. But most importantly, in 13 of these 14 countries, Heinz already has meaningful goto-market infrastructure, particularly in the U.K., Australia, Italy, China, Brazil and Indonesia. Clearly there is much to be excited about here." The market reacts In an interview on CNBC, Erin Lash, an analyst with Morningstar, described differences and parallels between the two companies. "Kraft's brands are obviously focused right now in the U.S., so combining with Heinz provides that international distribution platform," Ms. Lash said. "And further, Kraft has been working during its time as an independent organization to cut costs and improve the efficiency of its operations, something that Heinz has been undergoing Continued on Page 19 April 7, 2015

Table of Contents for the Digital Edition of Food Business News - April 7, 2015

Food Business News - April 7, 2015
Challenges ahead for ConAgra Foods
Shifting from weight management to wellness
Beverage Business News - Beyond milk: Dairy ingredient trends
Table of Contents
Web Contents
Editorial - India may soon rival China in growth
Health concerns, competitive headwinds slow U.S. chocolate sales growth
Innovation brewing at McCormick
Tyson Foods leveraging Hillshire innovation
Heinz, Kraft merger offers ample international opportunities
Kroger on the cutting edge
Packaged meats sales lift Smithfield earnings
Market Insight - Farmers’ planting intentions vary from expectations
Washington - Feinstein, Leahy introduce B.P.A. labeling bill
Company Profile - Panera 2.0: In pursuit of excellence
Ingredient Innovations - Anticipating egg alternative needs
Dairy solids assist with flavor development
New Food Products
Ingredient Market Trends - U.S.D.A. March 1 soybean, corn and wheat stocks up from year ago
Ingredient Markets
Highlights from Research Chefs Association’s Culinary Expo in New Orleans
Supplier Innovations and News
Ad Index
Food Business in the News

Food Business News - April 7, 2015