Kraft Prepares for Split

Kraft Foods is outlining several moves that the Northfield, Ill.-based food giant said will help ensure its North America-based snacks and grocery businesses are well-positioned to become two independent public companies before the end of 2012.

Key decisions include realigning Kraft’s U.S. sales organization, consolidating U.S. management centers and streamlining the corporate and business unit organizations. These actions will result in the reduction of about 1,600 positions in North America throughout 2012, about 40 percent of which are due to the realignment of U.S. sales.

“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, Kraft chairman and CEO. “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 have distinct portfolios and routes to market. 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, the company explained. The snacks business will leverage a direct store delivery model, with most U.S. retail sales employees shifting to the North American region of the global snacks company.

To capitalize on its warehouse distribution strength, the grocery company will reorganize within the United States. 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.

“Consolidating our management locations is a sound business move,” said Tony Vernon, EVP and president of Kraft Foods North America, and CEO of the future grocery company. “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.”

The beverages business unit in Tarrytown, N.Y., and the Planters brand in East Hanover, N.J., will relocate to the Chicago area by December 2012. Most of the employees affected by these moves will have the option to transfer with their businesses to the future grocery company headquarters in the Chicago area. Kraft also will close its Glenview, Ill., management center by the end of 2013.

The future global snacks company will also have its headquarters in the Chicago 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.

Throughout 2011, the North American business has been lowering costs to provide funds to invest in its brands. With leaner structures planned across both the future grocery company and the North America Snacks region, Kraft plans to eliminate about 1,600 positions throughout the United States and Canada over the next 12 months, primarily from sales, corporate and business unit areas. About 20 percent of these job eliminations are currently open positions.

These 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,” Vernon said. “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.”

Kraft Foods Inc. markets biscuits, confectionery, beverages, cheese, grocery products and convenient meals in 170 countries under numerous brands including Cadbury, Maxwell House, Nabisco, Oreo, Oscar Mayer, Philadelphia, Tang and Trident.