Kraft Foods Inc. announced that it will split into two companies by spinning off its North American grocery business from its global snacks business.
In a conference call with analysts, chairman and CEO Irene Rosenfeld said the company had been weighing a split of its business internally for several years, and that it made sense to do so now in part because it would impact the company's strategy for completing the integration of the Cadbury business, which Kraft acquired 18 months ago.
"We have built two strong, but distinct, portfolios. Our strategic actions have put us in a position to create two great companies, each with the leadership, resources and strong market positions to realize their full potential,” Rosenfeld said during the call. “The next phase of our development recognizes the distinct priorities within our portfolio. The global snacks business has tremendous opportunities for growth as consumer demand for snacks increases around the world. 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 snack business, with annual revenues of about $32 billion, will focus on global consumer snacking trends in developing markets (with key brands such as Oreo and LU biscuits, Cadbury and Milka). The $16 billion grocery business, with such brands as Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese and Maxwell House coffee, will continue seeking growth through innovation and marketing.
Kraft aims to launch the new companies before the end of 2012.