Kraft set for major reshuffle

By Anita Awbi

- Last updated on GMT

Related tags Europe Kraft foods

Kraft Foods has announced plans for a major European reshuffle and
a string of acquisitions, as US parent company Altria segregates
the food producer from its ailing tobacco subsidiary.

The food giant will restructure its Central and Western European manufacturing plants in a bid to consolidate operations in the tough economic climate, and match the pace of retail globalisation.

The former head of Central Europe Joachim Krawczyk will front the new pan-European Kraft, as parent company Altria moves to seperate the division from its fated tobacco division Philip Morris.

IGD senior business analyst Patrick Mitchell-Fox told​: "In terms of production, Kraft is moving to more advantageous locations in mainland and Central Europe, which have reduced costs.

"But there must be a disjunction between the marketing function which is more UK based and the production function. This move sees a consolidation of the two, as the company rationalises its position in emerging and established markets."

Mitchell-Fox pointed to the global retail trend that is forcing many producers to think on a more international scale.

Companies need to have a serious international strategy in place to deal with expanding supermarket chains, he explained.

"Manufacturers' relations with retailers are changing, they have to keep their end up and match the retailers across the international market place,"​ he said.

The firm, which produces Kenco coffee and DairyLea cheese, also revealed plans for major acquisitions across Europe, but failed to stipulate further on specific targets or regions.

Director Paula Sneed told Financial Times Germany: "We are in acquisition mode. For example, we will buy brands to expand our business units."

Sales growth in the packaged foods industry has been slow in the US and Europe, as rising costs for fuel, packaging materials and some natural ingredients, such as cocoa, impact on profits.

Analysts predict scant opportunity for growth in this sector, unless companies become more acquisitive.

The company is expected to make acquisitions to consolidate its position in core areas, such as coffee, dairy and chocolate. Mitchell-Fox expects Kraft to seek add-ons to its power brands Kenco, DairyLea and Philadelphia soft cheese.

Meanwhile Kraft's parent company Altria has said it will split itself into two or three parts, in an effort to distance the Philip Morris tobacco division from other operations.

Altria is currently waiting to hear the outcome of a US supreme court ruling that may restore a $145 billion ruling against Philip Morris.

If the fine is reinstated the company will be anxious to ensure its other assets do not feel the blow.

Mitchell-Fox said: "Altria has made all the preparations to ring fence Kraft so it will not suffer from the impact of a possible legal penalty."

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