Kraft Foods to Split Into Two Companies

This story appears in the Aug. 15 print edition of Transport Topics.

Kraft Foods said a plan to split the Northfield, Ill.-based company into two separate businesses — a global snack foods business with revenue of about $32 billion and a North American grocery distribution business with revenue of about $16 billion — will lead to new distribution strategies for each company.

“We have built two strong, but distinct, portfolios,” Irene Rosenfeld, Kraft chairwoman, said in announcing the plan following approval by the company’s board of directors on Aug. 4. “The global snacks business has tremendous opportunities for growth, as consumer demand for snacks increases around the world. The North American grocery business has a remarkable set of iconic brands, industry-leading margins and the clear ability to generate significant cash flow.”

Company spokesman John Simley said there are no immediate changes in Kraft’s transportation and distribution strategy.

“It’s business as usual,” he said. “We’re still in the early stages of this process, and we’re working to develop detailed plans for each business. The work will likely take at least 12 months to complete.”

Kraft Foods ranks No. 30 on the Transport Topics Top 100 list of the largest private carriers with its 900 tractors, 375 straight trucks and 1,620 trailers. The company produces and sells crackers and cheese, cookies, hot dogs and deli meats, chewing gum, coffee and candy in 170 countries. Twelve of the company’s brands, including Maxwell House, Oreo, Oscar Mayer and Tang, generate revenue of more than $1 billion annually.

Under its proposal, Kraft’s North American snacks and confectionery business would be combined with Kraft Foods Europe and operations in developing markets.

The North American grocery business would consist of food and beverages, including Maxwell House coffee and Capri Sun beverages, Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese and Jell-O desserts, along with food-service operations in the United States and Canada.

Under current operations, Kraft distributes snacks directly to stores, while grocery items are generally delivered to customers’ distribution centers.

Kraft’s decision to separate its largely domestic food operations from its international businesses follows a similar move by Sara Lee Corp. of Downers Grove, Ill.

In January, Sara Lee announced that it would divide the company into two publicly traded companies after rejecting a takeover offer by private equity investment firm Apollo Global Management.

Under the Sara Lee plan, one company will be focused on international coffee and tea business, while the other will be focused on retail meat and food-service distribution in North America.

Sara Lee also operates a large fleet of trucks, mainly to provide store delivery of bread and bakery products.

Data from the U.S. Department of Transportation show that Sara Lee operates a fleet of more than 600 tractors, 4,801 straight trucks and 1,129 trailers. The company is not on the TT 100 private fleets list because data on the number of vehicles was not provided by the company.

As part of the transition, in recent months Sara Lee has sold off a number of its nonfood product lines, including shoe-care products, insecticides and detergents.

On Aug. 9, the company agreed to sell its refrigerated dough business to Ralcorp Frozen Bakery Products, a division of Ralcorp Holdings, St. Louis, for $545 million. The deal is expected to close by the end of 2011.

In May, Sara Lee acquired Aidells Sausage of San Francisco to complement its premium meats business.