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Kraft Foods To Split Into Two Companies

Posted On: 8/4/2011

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GLENVIEW, IL -- Kraft Foods Inc. said it is splitting its global snacks and North American grocery businesses into two separate publicly traded companies.

The surprise Aug. 4 announcement comes a year and a half after Kraft's acquisition of Cadbury PLC, a move that positioned it as the second-largest global food company. | SEE STORY

The new snacks company, which will have annual sales of $32 billion and such brands as Oreo cookies, Cadbury chocolate and Trident gum, will include Kraft's North American snacks and confectionery businesses, along with its European and developing-markets units.

The grocery spinoff will include Kraft's U.S. beverages, cheese and convenient meals with brands like Maxwell House coffee, Kraft macaroni and cheese, and Jell-O desserts. The company would also include non-snack categories in Canada and its foodservice business. The grocery concern is expected to have about $16 billion in annual revenue.

Kraft sold its U.S. and Canadian pizza business to Nestlé for $3.7 billion shortly after the Cadbury acquisition. | SEE STORY

The separation of the two companies is expected to take at least 12 months through a tax-free spinoff of the North American grocery business to shareholders, and to be completed before the end of 2012.

Kraft's Vending & OCS division markets many of the industry's top-name snacks, convenience foods and beverages. Ritz crackers, Oreo and Chips Ahoy cookies, Lunchables meal kits, and Maxwell House and Yuban coffees are widely distributed in the workplace refreshments market through vending and coffee operators.

Kraft is also involved in the development of vending and coffee service machines. Tassimo Professional brewers for the single-cup office market and the revolutionary Diji-Touch touchscreen vending machine are among today's many equipment innovations.

Separately, Kraft reported second-quarter profit of $976 million, up from $937 million a year earlier. Net revenue climbed 13% to $13.9 billion, helped by price increases. Gross margin slipped to 35.1% from 38.3% on higher commodity costs.

Kraft also raised its guidance for the year, projecting operating earnings of at least $2.20 to $2.25 and organic net revenue growth of at least 4% to 5%. Its earlier forecast anticipated at least $2.20 in earnings and organic net revenue growth of at least 4%.