Planning for the Split, Kraft to Cut 1,600 Jobs

Jan. 18, 2012
Most from sales and management; manufacturing untouched for now.

In preparation for its split into two companies later this year, Kraft Foods Inc. on Jan. 17 announced several changes, including the elimination of approximately 1,600 jobs in North America throughout 2012, about 40 percent of which are due to the realignment of U.S. sales.

Key moves include realigning the U.S. sales organization, consolidating U.S. management centers and streamlining the corporate and business unit organizations.

“When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations," said Irene Rosenfeld, chairman and CEO -- and who will remain chairman and CEO of the unnamed global snacks company. "For the past year, the North American team has been working to streamline operations to deliver sustainable top-tier performance and continue to invest in our iconic brands. We're confident that this transformational work will improve effectiveness and fuel the future growth of both companies."

The grocery and snacks businesses – which will become separate companies – have distinct portfolios and routes to market, the company said. “By realigning the U.S. sales structure to create more focused teams, each company can customize its approach to in-store sales and execution to maximize impact,” a company statement read.

The snacks business will leverage a direct store delivery model, with most U.S. retail sales employees shifting to the North American region of what will be a largely global snacks company.

To capitalize on its warehouse distribution strength, the heavily North American grocery company will reorganize within the U.S. Local retail support will be contracted to two leading sales agencies, with Kraft oversight and direction. Acosta Sales & Marketing will become the company's partner for grocery store and mass retail channel execution. Crossmark will continue to support Kraft in the convenience store channel.

Kraft anticipates having both U.S. sales organizations in place by April 1.

When the North American grocery company is spun off later this year, it will reduce its U.S. management center locations from four to two. The Beverages business unit in Tarrytown, N.Y., and the Planters brand in East Hanover, N.J., will relocate to the Chicagoland area by December. Most of the employees affected by these moves will have the option to transfer with their businesses to the future grocery company headquarters in Chicagoland. Kraft also will close its Glenview, Ill., management center by the end of 2013. Currently, Kraft is headquartered in a huge campus in the Chicago suburb of Northfield, but there have been local reports the company is inquiring about offices downtown.

“Having the majority of our business units together in one location will provide greater development opportunities for our people and will help us continue building our brands more efficiently and collaboratively," said Tony Vernon, currently president of Kraft Foods North America and CEO of the future grocery company.

The future global snacks company also will have its headquarters in the Chicagoland area, with the choice of site currently under consideration. The North American region for the global snacks company will be based at the East Hanover campus.

In Canada, both companies will retain sites in the Greater Toronto area. The Kraft grocery business will stay in the current Don Mills offices, while the snacks business moves to recently opened offices in Mississauga. The Madison, Wis., management center will remain the site for the Oscar Mayer business unit.

About the layoffs: Most of the 1,600 positions in the U.S. and Canada are from sales, corporate and business unit areas, and another 20 percent are currently open positions.

The planned workforce reductions do not include manufacturing facilities. With the impending separation into two independent companies, Kraft is continuing its review of manufacturing facilities to consider what's best for both new companies.

"Making these tough choices is never easy, and we recognize the impact these changes will have on many of our people and their families," said Vernon. "But our plan for a more nimble company, combined with the current economic and competitive pressures, led us to this point. Taking the necessary steps now will enable us to continue investing in our beloved brands to drive growth."

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