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It is a virtual certainty Kraft Foods will split sometime in 2012. So how does the Chicago-based food company approach this? Simply, go about business as usual and make moves for the future when necessary.
Over the past few months, Kraft has had to answer questions about its future, while trying to make a profit at the same time. The main question that has been answered is “Who will run the two companies after the split?”
Chairman and CEO Irene Rosenfeld will stay on and keep her titles at the global snacking company. The CEO of the stand-alone North American grocery business will be Tony Vernon, president of Kraft Foods North America. Vernon will be partnered with John Cahill of Ripplewood Holdings to ensure a smooth transition.
It would seem as though Rosenfeld is the biggest winner, as she will be in charge of a company that had a 22 percent increase in net earnings for the most recent quarter. However, Vernon and Cahill will run a company which is projected to make $16 billion in annual revenue.
The recent third quarter success is not the only highlight for Kraft over the past few weeks. Last Thursday the snacking company was granted a perfect score on the Human Rights Campaign’s Corporate Equality Index. The HRC also added Kraft to its list of the best places to work.
All the success has not come without some controversy. Over the next two years, the snacking company plans to cut 200 jobs at Cadbury’s English factory, purchased over a year ago. At the same time, Kraft will invest $76 million into boosting production at the British confectionery company.
The other issue facing Kraft is the debate about whether or not it should use 97,000-pound trucks to make deliveries. Under U.S. law trucks, can weigh a maximum of 80,000 pounds on interstate highways, with exceptions in Maine and Vermont.
Once any problems are resolved it seems Kraft will have an interesting year in 2012.
Kraft Foods has been talking about separating into two different companies recently, but was still able to maintain a 22 percent profit during the third quarter. The increase came from higher prices and favorable tax rate and foreign exchange rates.
An article by Martinne Geller reports the net income rose to $922 million from $754 million one year ago.
According to the Associated Press, Kraft’s revenue rose from $11.8 billion to $13.23 billion during a time when most businesses are losing money. Kraft has been able to avoid problems of higher costs of ingredients by expanding in new markets, such as China.
Chief Financial Officer Dave Brearton addressed the topic of increasing prices in 2012 by explaining the anticipation of increased costs next year. He also suggested that costs will increase during the fourth quarter.
Regardless of the recent profit, Kraft is still going through the process of splitting into two separate entities. One of the new companies would maintain the “Kraft Foods” name, while the other would be decided by shareholders and employees.
Either way, CEO Irene Rosenfeld predicts the name will be “delicious.”
Perhaps that should be the name of the new organization instead of a way to describe it.
Rosenfeld also hinted at a possible relocation of the company’s corporate headquarters from Glenview to Chicago as a result of the split.
Officials from Kraft tried to control the situation by stating that both companies would be located in Chicago, but nothing had been announced officially. However, Kraft was the second biggest payer of property tax in Glenview, so losing just one of the properties would be a huge hit on the village, schools, park district, library and other taxing bodies, according to JournalOnline.
Maybe the recent profit from the third quarter will convince Kraft officials that a split is not necessary, and the headquarters can remain in Glenview. If not, then it will be interesting to see what will become of the separate parts of Kraft Foods, and the Glenview area.
ekdarkseid 