Kraft Names Who Will Move Its Cheeses (And All Else)

Kraft Foods yesterday formally revealed that current CEO Irene Rosenfeld, 58, will head up its $31 billion global snacks business, and Kraft North America president Anthony Vernon, 55, will run the $17 billion North American grocery business when the company bifurcates next year, Reuters reports.

“The appointments of two internal candidates -- which was widely expected -- could signal that the two new companies do not plan to deviate much from Kraft's ongoing aggressive marketing makeover, which has included multiple ad-agency shifts and more aggressive spending,” E.J. Schultz observes in Ad Age.

Kraft also named John Cahill, 54, currently a partner at private equity firm Ripplewood Holdings, as non-executive chairman of the North American grocery company. Cahill will “initially” serve as executive chairman when he joins the company in January, however, “reflecting the tremendous effort required to launch and transition to a public company,” according to a company statement.

"Irene, John and Tony are three of the finest executives in business today," says Mark Ketchum, lead director of Kraft’s board of directors. "Their commitment to shareholder value, passion for brands and focus on sound financial management give the board great confidence in the future of the snacks and grocery companies."

Cahill has held senior finance positions with PepsiCo and KFC and served as chairman and CEO of The Pepsi Bottling Group, which separated from PepsiCo in 1999. He is currently on the boards of Colgate-Palmolive and Legg Mason.

Credit Suisse analyst Robert Moskow tells Reuters’ Martinne Geller that snaring Cahill is "a huge positive," given his experience. "Something as sensitive as this, where you're splitting apart two companies, it's a great idea to have someone who can focus so intensely on making that separation happen flawlessly," he says.

Moskow tells the Chicago Tribune’s Emily Bryson York that Vernon is the "right choice" to run the North American grocery company, which will be called Kraft Foods. Since Vernon joined the company two years ago, the number of North American grocery brands that are holding or gaining share has gained significantly, Moskow points out.

"He provides that organization with a lot of energy and a lot of creativity," he says. "I've been impressed with how the marketing touch has improved at Kraft since he's been here and the way that operational productivity has accelerated."

Bernstein Research analyst Alexia Howard tells the Financial Times’ Alan Rappaport that Vernon has been pushing Kraft to be “edgier and more entrepreneurial” and points out that that “as a standalone company, the grocery business will have more opportunity to seek bolt-on acquisitions of small, fast-growing regional brands.”

Howard also speculates that Rosenfeld might be eyeing PepsiCo’s Frito-Lay, which she once led, as an acquisition target. “If Kraft gets more than expected from the Cadbury combination, it could repeat that with the salty snacks business that Frito-Lay has,” Howard says.

Julie Jargon and Paul Ziobro write in the Wall Street Journal that despite the announcements yesterday, “some thorny questions remain, including: Does Philadelphia cream cheese belong with snacks or groceries? And how will Planters' trail mixes secure coveted shelf space after the split?”

And you thought you had a tough day ahead of you.

The larger picture is that Rosenfeld and Vernon “must sort out the fates of several brands, structure their sales forces and make a number of personnel decisions quickly, because the company plans to detail how the break-up will look in a Securities and Exchange Commission filing by early in the second quarter of 2012.”

Regarding the “ownership” questions, Kraft spokesman Mike Mitchell says, "broadly speaking, those decisions have been made but the actual gears behind which company owns which and how it will be licensed is a backroom decision that is happening now."

Kraft’s revenue from emerging markets has almost quadrupled since 2004, with international sales surpassing North America’s last year for the first time. Vinicy Chan’s piece in Bloomberg yesterday gives an indication of just how aggressive Kraft has become since it acquired Cadbury Plc last year, at least in India -- increasing its annual investment in advertising, capital expenditure and sales and marketing by more than 70%, he reports.

“There are some categories in the world that people consume in good times and bad times, and chocolate is one of them,” Anand Kripalu, Kraft’s president of South Asia and Indo-China, tells Chan. Kripalu also says that the company is doing its best to hold the line on prices. “Affordability is the key driver of our business” in India, he says. “Chocolate gives consumers a small moment of joy.”

So do marshmallows, in some circles, and leave it to Kraft to reinvent them.

The Chicago Sun-Times’ Neil Steinberg ran a piece on Thanksgiving Eve about his wife bringing home a bag of German Chocolate Cake Jet-Puffed Mallow Bites that he can’t get enough off. His whole column, in fact, is devoted to the Marshmallow Renaissance being led by the Jet-Puffed brand, including Chocolate Royale, Chocolate Mint and Pina Colada Mallow Bite.

As for me, I shall resist the temptation, but you’ve got to believe that with products like Pina Colada Mallow Bite, Kraft has also got the new product engines running full-bore.

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