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NORTHFIELD, Ill. (CBS) — By the end of next year, food giant Kraft could be two separate companies.
As WBBM Newsradio 780′s Regine Schlesinger reports, Northfield-based Kraft is the second largest company, with annual revenues of $49 billion. Its brands include Oreo cookies, Trident gum, Maxwell House coffee, and Kraft cheeses.
LISTEN: Newsradio 780′s Regine Schlesinger reports
Now, Kraft is announcing plans to split into two publicly-traded companies – one focusing on snack foods, the other on its North American grocery business.
It comes at a time when companies such as Wal-Mart and Target are expanding their grocery business. Wal-Mart recently opened its first small-scale Wal-Mart Express grocery store in the Chatham neighborhood, and has plans for similar stores of various sizes at several sites in the city, including two in East Lakeview.
“Our strategic actions have put us in a position to create two great companies, each with the leadership, resources and strong market positions to realize their full potential,” chairman and chief executive officer Irene Rosenfeld said in statement.
The food maker’s stock gained 92 cents, or 2.7 percent, to $35.22 in premarket trading.
Kraft has steadily built up its snacks business over the years, helped in part by the acquisitions of LU biscuit from Danone and Cadbury PLC. The food maker said that the snacks company would include the current Kraft Foods Europe and developing markets units and the North American snacks and confectionery businesses. The non-snacks component of the business would include mostly powdered beverages and coffee.
The snacks business is estimated to have revenue of about $32 billion.
The grocery business, with estimated revenue of approximately $16 billion, would contain the current U.S. beverages, cheese, convenient meals and grocery segments and non-snack categories in Canada and food service. Its brands would also include Jell-O desserts.
Kraft said its plan to for a tax-free spinoff of the grocery business to shareholders will take some time, estimating that it will need a year or more to work on structure, management and other issues related to the split. Taking that into account, the company’s current plan is for the split to be complete by the end of next year.
Aside from the spinoff plans, Kraft also announced that its second-quarter earnings climbed 4 percent to $976 million, or 55 cents per share, from $937 million, or 53 cents per share, a year ago. Revenue rose 13 percent to $13.88 billion from $12.25 billion. Analysts polled by FactSet predicted earnings of 58 cents per share on revenue of $13.08 billion.
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