Divide and conquer, or not

Kraft Foods CEO Irene Rosenfeld signaled that the food giant will continue to aggressively market its North American grocery brands, even after the business is severed from its faster-growing global snacks unit in a split (which took the industry by surprise when announced in early August) planned for the end of next year, reports Advertising Age.

 

Two publicly traded companies will be created -- a $32 billion international snacks business, with eight billion-dollar brands, including Cadbury, Oreo and Trident brands, and a $16 billion North American grocery business, with four billion dollar brands, including Kraft Macaroni & Cheese, Oscar Mayer, Philadelphia, Maxwell House, Jell-O and other non-snack brands. Rosenfeld suggested that it was the acquisition of Cadbury that enables the company to divide in two by giving the snacks business enough scale to stand on its own.

 

"If you believe that there is a new normal of slower consumption growth in North America -- and we do -- certain capabilities will be even more important in the future," Rosenfeld told analysts at Barclays Capital's Back-to-School Consumer Conference. "Things like stronger share position, world-class marketing, go-to-market scale and low-cost producer status will become even more critical in the future."

 

Rosenfeld said the grocery business will "continue to be one of the largest and most admired food companies in North America. In fact, it will be No. 3 in size, behind Nestle and PepsiCo."

 

PepsiCo meanwhile -- which also presented at the conference -- explained why its scale makes sense, seemingly deflecting speculation that it would be the next big company to break up by separating its snacks and beverage businesses.

 

"Rest assured, Power of One remains a competitive advantage for us," said John Compton, CEO of PepsiCo Americas Foods, referring to the company's strategy of jointly promoting both businesses in stores.