US food giant Kraft to split in two

NEW YORK: Kraft Foods said on Thursday it will split in two, spinning off one company to target fast-growing emerging markets with its global snacks portfolio and another to focus on its US grocery business.

The announcement came after the global food giant made a series of major acquisitions in recent years, notably its takeover of storied British confectionery firm Cadbury.

"We have built two strong, but distinct, portfolios," Kraft chairman and chief executive Irene Rosenfeld said in a statement announcing the split.

"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."

A review by Kraft's board and senior management "has shown that these two businesses would now benefit from being run independently of each other," the company said.

The spun-off snacks business is expected to make some $32 billion in yearly revenue and will seek to take advantage of growth in "numerous highly attractive emerging markets", Kraft said.

Its major brands will include Oreo cookies, LU biscuits, Cadbury and Milka chocolates, Trident gum and Tang powdered beverages.

Meanwhile, sales at the grocery spin-off are projected at about $16 billion. It will focus on North American markets and offer brands such as Philadelphia cream cheese, Maxwell House coffee and Jell-O desserts.

Kraft said it would aim to launch the new companies before the end of 2012. It did not give names for the two spin-offs.

The company's rationale for the split was to prevent its slow-growing North American divisions from weighing down its booming business in emerging markets, said Ildiko Zsalai, senior company analyst at Euromonitor.

"These divisions' narrow geographic market reach, limited potential to generate dynamic growth rates in their mature, sluggish markets and a potential strategic misfit ... have all (led) to the company's decision to separate these operations from the dynamically performing global snacks business," he said.

Shares of Kraft initially rallied nearly three percent in late morning trade but later pared their gains amid a broad sell-off in global markets. They were up 0.6 percent on the New York Stock Exchange at about 1630 GMT.

Based in Northfield, Illinois, Kraft Foods is a global giant that had $49.2 billion in sales last year. It has a presence in about 170 countries and owns scores of brands, some of them more than 100 years old.

Copyright AFP (Agence France-Presse), 2011