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Kraft Splitsville : Irene Rosenfeld likes US Groceries for Tony Vernon | Deal Insight

The man who leads her foray in chocolates after the Cadbury’s UK buy that kicked up a dirtstorm has managed to grow emerging markets chocolate business but is on his own as Irene Rosenfeld finalises the split for the Company between its global confectionary business and the Domestic US based Groceries business. Sanjay Khosla continues his 5-10-10 plan as Head of Developing Markets, with BranCo organic growth of 11% and 10% of Kraft 2011 deliveries thru innovation.

The US based business will not be led by Irene Rosenfeld even though popular opinion puts her in charge. In the global snacks business that also includes Trident Gum apart from the Global Kraft chocolate roll outs incl Cadbury’s limited Oreo roll out in Asia (India), Irene Rosenfeld was appointed CEO as late as December 2011. Both the Global confectionary business and the North American Groceries business will be listed, the latter keeping the original KFT sticker if history is an indicator. Of course double digit growth in 2011 in key markets in the global snacks business, not just in Chocolates in the Emerging markets business but also cookies and confectionary even as the business degrew by double digits in North America has vindicate the management decision to split all 2011 and now GroceryCo CEO, Tony Vernon is ready to take that portion as a separate listed company in 2012.

Maxwell House is among the best known brands thaat could have needed a brand piggyback from Mac and Cheese or even Oreos to sell, as it depends on Food Services or Wholesale distribution where Brand Rcall may on a good day pull in a big deal, but apparently even if that synergy was discussed it was not achieving much. Oscar Meyer is another Modern Food brand in meats that like Maxwell House will remain with the slow NA groceries’ business

John Cahill from hedge fund, Ripplewood Holdings was appointed Exec Chairman of the GroceryCo. He has also been Chairman and CEO at the other Splitsville candidate Pepsi

Capex was maintained thru the split year operations at $1.7 bln, keeping Free Cash down at $2.7 bln for 2011, negating probably one cash advantage of a split , so one can distinguish the split from a LBO ( funny/ non funny notes based interjection o lala! )

Also Cost of Goods hit by inflation grew double digits and revenues did not (6.6%) at $9.8 bln and $14.7 bln respectively of now one can safely assume a arithmetic addition of NA grocery and global brands businesses ( that sounds kinda like how they went, we’ll go with Global Brands unit for their confection, Cadburys and other China and Asia units)

With CAGNY Conference data available we will use Organic NON GAAP data hereunder :

Tony Vernon’s North American business delivered $6.5 bln in revenues and Global Brands delivered $7.7 bln revenues dispelling its global growth myth , GrocCo grew 8% over 2010 much higher than BranCo that grew 5% in Emerging markets and less than 3% in Europe thus requiring more of Irene’s slash and burn skills to eed that portfolio leavin git witht he growth in India and China to celebrate..

Food Services ( deliveries to Wholesale markets, Hotels and Airlines) are $1.4 bln and an important part of GrocCo. US Snacks and Cheese business  are another $2.8 bln in GrocCo sales,  leaving $2.4 bln to convenience meals, groceries and beverages in the GrocCo unit

To recap in Gross Sales, GrocCo is $25 bln and BranCo $29 bln  ($13 bln of which from Europe) Club Social sales have quadrupled from 2006. BRIC markets grew 19%, Brazil 15% to $2 bln, China to $800 mln with Productivity gains of 4%

To be continued..





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This entry was posted on February 23, 2012 by in Financial Markets.


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