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Kraft to split its snacks and grocery businesses

August 5th, 2011

Eighteen months after buying Cadbury- the European candy maker-, Kraft Foods has announced that it is to split into two companies by separating its North American grocery business from its global snacks enterprise.

“Eighteen months into the Cadbury integration, the company has, in fact, built a global snacking platform and a North American grocery business that now differ in their future strategic priorities, growth profiles and operational focus,” says the company.

The company goes on to say that the snacks business would focus on ‘fast-growing developing markets and in instant consumption channels’, while the North American business would continue to develop its brands distributed through more traditional grocers.

“The global snacks business has tremendous opportunities for growth as consumer demand for snacks increases around the world,” the chief executive Officer, Ms. Rosenfeld said. “The North American grocery business has a remarkable set of iconic brands, industry-leading margins and the clear ability to generate significant cash flow.”

The new snacks company will combine units in Europe and the developing markets as well as the North American snacks and confectionery businesses. Annual revenue for the group — which will include brands like Oreo, Cadbury, Milka, Tang and Trident — is expected to be $32 billion, with three-quarters coming from international operations and 42 percent from emerging markets.

The North American spinoff should have about $16 billion in annual revenue from Kraft’s cheese, beverage and meals businesses. Its portfolio will include products like Maxwell House coffee, Philadelphia cream cheese and Jell-O.

“Detailed review by the board and management has shown that these two businesses would now benefit from being run independently of each other,” adds Kraft.

The announcement comes only days after Kraft was forced to pay £400 million towards Cadbury’s deficit-struck pension scheme. Shortly after buying Cadbury, the US firm was criticised for trying to encourage workers to leave the defined-benefit plan, after discovering that a quirk in its rules makes it difficult to close unilaterally.

The separation is expected to take at least 12 months, and be completed before the end of next year.

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