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Mondelēz International

Mondelēz International
Formerly called J.L. Kraft & Bros. Co.
National Dairy Products
Kraft Foods Inc.
Type Public
Traded as NASDAQ: MDLZ
Industry Food processing
Founded December 10, 1923 (1923-12-10) in Chicago, Illinois
Founders Thomas H. McInnerney
Headquarters Deerfield, Illinois, US
Area served Worldwide
Key people Irene Rosenfeld (Chairman and CEO)
Operating income Increase US$3.97 billion (2013)
Profit Increase US$3.92 billion (2013)
Total assets Increase US$72.56 billion (2013)
Total equity Increase US$32.37 billion (2013)

Mondelēz International, Inc. ( )[1] is an American multinational confectionery, food and beverage conglomerate, employing around 107,000 people around the world. It comprises the global snack and food brands of the former Kraft Foods. The Mondelēz name, adopted in 2012, came from the input of Kraft Foods employees at the time, a combination of the words for "world" and "delicious" in romance languages.[2][3]

Mondelēz International manages well-known snack brands around the globe, including in cookies and crackers (Oreo; Chips Ahoy!; TUC; Belvita; Triscuit; Club Social; and Barni), chocolate (Milka, Côte d'Or, Toblerone, and Cadbury Dairy Milk), and gum and candy (Trident, Chiclets, Halls, Stride, and Cadbury Dairy Milk Eclairs).

The company is headquartered in Deerfield, Illinois, a Chicago suburb,[4] and is a manufacturer of chocolate, biscuits, gum, confectionery, coffee, and powdered beverages. The company consists of the global snacking and food brands of the former Kraft Foods Inc. following the spin-off of its North American grocery operations in October 2012. Mondelēz International's portfolio includes several billion-dollar brands such as Cadbury (acquired through a buy out of Cadbury in 2010) and Milka chocolate, Jacobs coffee, Toblerone, Nabisco and Oreo cookies, LU, Tang powdered beverages, and Trident gums. Mondelēz International has annual revenue of approximately $36 billion and operations in more than 80 countries.

Mondelēz Canada controls the rights to Christie Brown and Company, which consists of brands such as Mr. Christie and Dad's Cookies. The head office is in Mississauga, Ontario with operations in Scarborough and Montreal.

Contents

  • History 1
    • Origin of the firm 1.1
    • Beginnings for Kraft 1.2
    • After National Dairy acquisition of Kraft-Phenix 1.3
    • National Dairy becomes Kraft 1.4
    • Dart merger 1.5
    • Philip Morris acquisition and merger with General Foods 1.6
    • Financial expansion 1.7
      • Purchase of Cadbury 1.7.1
      • Acquisition fallout 1.7.2
      • Sale of frozen pizza division to Nestlé 1.7.3
      • Spinoff of Kraft Foods Group 1.7.4
  • Controversies 2
    • Trans fat litigation 2.1
      • Complaint 2.1.1
      • Kraft's response 2.1.2
    • Other cases 2.2
    • Political campaign 2.3
    • Environmental record 2.4
  • Recalls 3
  • References 4
  • External links 5

History

Origin of the firm

The company has its origin as National Dairy Products Corporation (National Dairy), formed on December 10, 1923, by Thomas H. McInnerney.[5] The firm was initially set up to execute on a rollup strategy in the then-fragmented United States ice cream industry. Through acquisitions it expanded into a full range of dairy products. By 1930 it was the largest dairy company in the United States and the world, exceeding Borden.

McInnerney operated the Hydrox Corporation, an ice cream company located in Chicago, Illinois. In 1923 he went to Wall Street to convince investment bankers to finance his scheme for consolidating the United States ice cream industry. He initially found "hard sledding"[6] with one banker saying the dairy industry "lacked dignity." He persevered and convinced a consortium including Goldman Sachs and Lehman Brothers to finance a rollup strategy.[7]

As a result, National Dairy Products Corporation was formed in 1923 in a merger of McInnerney's Hydrox with Rieck McJunkin Dairy Co of Pittsburgh, Pennsylvania. The resulting firm was listed on the New York Stock Exchange with the offer of 125,000 shares having been oversubscribed.[5]

The firm grew quickly through a large number of acquisitions. As it is typical in a rollup strategy, acquisitions were primarily for stock in National Dairy rather than cash. National Dairy Products Corporation acquired more than 55 firms between 1923 and 1931, with a few notable entities among those:

Year Firm Sector Location
1924 W.E. Hoffman Ice cream Pennsylvania
1925 Dunkin Ice Cream Ice cream Illinois
1925 Sheffield Farms Fluid milk, ice cream, other New York
1926 Breyers Ice Cream (dessert products currently owned by Unilever) Ice cream Pennsylvania
1928 Breakstone Brothers Fluid milk, cheese New York
1928 General Ice Cream Ice cream New York, East Coast
1929 Hiland Dairy Fluid milk, other Kentucky
1930 Kraft-Phenix Cheese, other US, international
1931 Consolidated Dairy Products Ice cream, other dairy New York, New Jersey

Beginnings for Kraft

Kraft Foods consumer product logo: Used on Kraft branded products

Born in Stevensville, Ontario, Canada in 1874, James L. Kraft emigrated to the United States in 1903 and started a wholesale door-to-door cheese business in Chicago; its first year of operations was "dismal", losing US$3,000 and a horse. However, the business took hold and Kraft was joined by his four brothers to form J.L. Kraft and Bros. Company in 1909. As early as 1911, circulars and advertisements were used by the company.

In 1912, the company established its New York City, New York, headquarters to prepare for its international expansion. By 1914, 31 varieties of cheeses were being sold around the US because of heavy product development, expansion by marketing, and opening a wholly owned cheese factory in Illinois.[8]

In 1915, the company had invented pasteurized processed cheese that did not need refrigeration, thus giving a longer shelf life than conventional cheese.[8] The process was patented in 1916 and about 6 million pounds of the product were sold to the U.S. Army for military rations during World War I.

In 1916, the company began national advertising and had made its first acquisition—a Canadian cheese company.[8]

In 1924, the company changed its name to Kraft Cheese Company and listed on the Chicago Stock Exchange.[8] In 1926, it was listed on the NYSE. The firm then began to consolidate the US dairy industry through acquisition, in competition with National Dairy and Borden. Firms acquired included:

Year Firm Sector Location
1927 A.E. Wright Salad dressings n/a
1928 Phenix Cheese Cheese, other dairy products National
1928 Southern Dairies Fluid milk, milk powder, other dairy products Southern US
1928 10 "cheese dealers" Cheese, other dairy products New York
1928 Henard Mayonnaise Co Mayonnaise Southern US
1929 D.J. Easton Mayonnaise New Jersey
1929 2 other mayonnaise companies Mayonnaise n/a
1929 10 companies Cheese, other dairy products various regional
1929 International Wood Products n/a n/a
1929 Gelfand Manufacturing n/a n/a

In 1927, it established its London UK and Hamburg, Germany, sales offices—its first forays outside North America. Sales for 1927 were $60.4m.

In 1928, it acquired Phenix Cheese Company, the maker of a cream cheese branded as Philadelphia cream cheese, and the company changed its name to Kraft-Phenix Cheese Company.

In 1929, The New York Times reported that Kraft Phenix, The Hershey Company and Colgate were considering merging.[9] In the same year, it was reported that National Dairy, Borden and Standard Brands (a firm that is now part of Kraft Foods) were all looking at acquiring the firm.

By 1930, it had captured 40% of the cheese market in the US and was the third largest dairy company in the US after National Dairy and Borden. In 1930, the company also began operating in Australia following a merger with Fred Walker & Co.[8]

After National Dairy acquisition of Kraft-Phenix

At the time of the acquisition in 1930, National Dairy had sales of $315m compared with $85m for Kraft Phenix. National Dairy management ran the combined business. Following the Kraft-Phenix acquisition, the firm continued to be called National Dairy until 1969 when it changed its name to Kraftco.[10]

Historically, all of the firm's sales came from dairy products. However, the firm's product lines began to diversify away from dairy products to caramel candies, macaroni and cheese dinners and margarines. From the 1950s onward, the firm began to move away from low value added commodity dairy products, such as fluid milk.[11] This trend would continue for the firm, through neglect and divestiture, until the primary remaining dairy product produced by the firm would be cheese. As a result, the modern history of the firm emphasizes the cheese history.

In 1933, the company began marketing by radio sponsorship. In 1935, the Sealtest brand of ice cream was launched as a unified national brand to replace the firm's numerous regional brands.[8]

During World War II, the company sent four million pounds of cheese to Britain weekly.[8]

Product development and advertising helped the company to grow during the postwar years, launching sliced process cheese and Cheez Whiz, a brand of process cheese sauce, in the 1950s.

During these years, Thomas McInnerney, National Dairy's founder, and James L. Kraft, Kraft's founder, died, and at the end of the decade, the divisions became less autonomous and even diversified to the glass-packaging business with the acquisition of Metro Glass in 1956.[8]

In 1947, the company tested the marketing power of the emerging medium of television by producing an hour-long drama/anthology series, the Kraft Television Theatre. The product advertised on the program, MacLaren’s Imperial Cheese, was selected because "... [it had] not only had no advertising appropriation whatsoever, but had not even been distributed for several years." As described by internal documents of J. Walter Thompson—the advertising firm which conceived of the marketing test—the result was "although there was no other advertising support for it whatsoever, still grocery stores could not keep up with the demand."[12]

In the 1960s, product development became intense, launching fruit jellies, fruit preserves, marshmallows, barbecue sauces and Kraft Singles, a brand of individually wrapped cheese slices.[8] During this decade, the company also expanded in many markets worldwide.

In 1961, the firm acquired Dominion Dairies of Canada, marking the first effort by the firm to expand into fluid milk and ice cream outside the United States.[13] In the same year it also acquired The Southern Oil Company in Manchester, England.

National Dairy becomes Kraft

In 1969, the firm changed its name from National Dairy to Kraftco Corporation. The reason for the name change was given at the time: "Expansion and innovation have taken us far afield from the regional milk and ice cream business we started with in 1923. Dollar sales of these original products have remained relatively static over the past ten years and, in 1969 accounted for approximately 25% of our sales."[14] At the same time, the firm transferred to

  • Official website
  • Mondelēz International on Facebook
  • New York Times article about Mondelez name and rebranding
  • Kraft Foods Canada
  • Mr. Christie brands

External links

  1. ^ Michael J. De La Merced (March 21, 2012). "Kraft, ‘Mondelez’ and the Art of Corporate Rebranding".  
  2. ^ For Oreo, Cadbury and Ritz, a New Parent Company, The New York Times, Stephanie Strom, May 23, 2012
  3. ^ "Kraft Foods Proposes Mondelēz International, Inc. As New Name For Global Snacks Company". Nasdaq OMX. 
  4. ^ "Q: Where is Mondelēz International's headquarters?". Mondelēz International. Retrieved November 5, 2012. Mondelēz International Global headquarters is located in Deerfield, IL, a northern suburb of Chicago. Our mailing address is: Mondelēz International Three Parkway North Deerfield, IL 60015 
  5. ^ a b Wall Street Journal, Dec 13 1923
  6. ^ Wiktionary definition of "sledding"
  7. ^ Los Angeles Times, July 28, 1929
  8. ^ a b c d e f g h i j k l m n o p q "Kraft Foods Inc.". Funding Universe. 2002. Archived from the original on August 19, 2010. Retrieved 2008-03-10. 
  9. ^ New York TImes, October 16, 1929
  10. ^ Kraftco Corporation Annual Report 1969.
  11. ^ Compare National Dairy annual report 1938, 1958 and 1976 sales mix data
  12. ^ Kraft'-ing a Durable Business Model"'". TelevisionWeek. 2008-04-27. Retrieved 2008-06-01. 
  13. ^ National Dairy annual report 1961, p. 6.
  14. ^ Kraftco annual report 1969, p. 3.
  15. ^ "Banbury – Economic history | A History of the County of Oxford: Volume 10 (pp. 49–71)". British-history.ac.uk. 1923-03-22. Retrieved 2011-08-04. 
  16. ^ a b c d "No ketchup, please". The Economist. 2007-07-05. Retrieved 2007-07-17. 
  17. ^ "Getting better?". The Economist. 2007-07-12. Retrieved 2007-07-22. 
  18. ^ Rrstar.com Rockford Register article
  19. ^ "2010 Annual Report" (PDF). Berkshire Hathaway. Retrieved July 20, 2011. 
  20. ^ "Kraft replaces AIG in Dow Jones Industrial Average". USA Today. Associated Press. September 18, 2008. Retrieved September 18, 2008. 
  21. ^ "Yvonne Hiller Suspect in Kraft Shooting: Two Killed, One Wounded at Philadelphia Plant". CBS News. 
  22. ^ "Kraft's new MiO liquid flavoring". Packaging Digest. March 30, 2011. 
  23. ^ "Kraft Hopes to Make Splash with New Mio Water Flavoring". USA Today. February 22, 2011. 
  24. ^ "Kraft Foods Inc. proposes combination with Cadbury PLC.". Kraft Foods. September 7, 2009. Retrieved September 7, 2009. 
  25. ^ "Cadbury Rejects Kraft's 'Derisory' Takeover Bid". Sky News. Retrieved August 4, 2011. 
  26. ^ "Kraft Formalizes Bid For UK Candy Maker Cadbury". Allheadlinenews.com. Retrieved August 4, 2011. 
  27. ^ Roberts, Dan (January 19, 2010). "50 reasons to fight Kraft". The Guardian (London). Retrieved May 7, 2010. 
  28. ^ "Kraft to take over Cadbury". New Statesman. January 19, 2010. Retrieved January 19, 2010. 
  29. ^ Jose, Joshi. "Irene Rosenfeld’s strategy is packing more goodness into Kraft". Wowelle.com. Retrieved August 18, 2010. 
  30. ^ Namazi, N. "Kraft: Plans to make it big in India with confectionery". Business Review India. Retrieved Jun 23, 2010. 
  31. ^ Jose, Joshi. "Irene Rosenfeld’s strategy is packing more goodness into Kraft". Wowelle.com. Retrieved August 18, 2010. 
  32. ^ Ruddick, Graham (January 19, 2010). "Kraft buys Cadbury for £11.9bn: a Q&A". The Telegraph (London). Retrieved January 19, 2010. 
  33. ^ "A Warning To Kraft: If You Eat Cadbury You'll Get Indigestion". Retrieved January 20, 2010. 
  34. ^ a b Awal, Akanksha. "Oreo cookies and India’s sweet tooth". THE FINANCIAL TIMES LTD 2011. Retrieved March 7, 2011. 
  35. ^ "Cadbury’s bought out by Kraft". Leaf and Bean. Retrieved January 19, 2010. 
  36. ^ "ME confectionary market worth $113bn". Alibaba.com Hong Kong. Retrieved 3 Aug 2009. 
  37. ^ "Featured Brands". Cadbury – The Collaboration Factory. 
  38. ^ Swanekamp, Kelsey. "Kraft Swallows Cadbury". Forbes. Retrieved January 9, 2010. 
  39. ^ a b "Kraft Foods' profits hit by Cadbury costs". BBC. February 11, 2011. Retrieved 11 February 2011. 
  40. ^ STEUBER, ERIN. "Kraft, Cadbury not such a sweet deal?". Medill Reports. Retrieved April 15, 2010. 
  41. ^ "Kraft to sell Cadbury factory for £50 million". Small World News Service. Retrieved 22 March 2011. 
  42. ^ Daniels, Kurt. "Kraft Foods (NYSE:KFT) In Huge Manufacturing Investment". eMoneyDaily. Retrieved 22 April 2011. 
  43. ^ "Kraft apologises for closing Cadbury plant". NewStatesman. March 17, 2010. Retrieved March 18, 2010. 
  44. ^ "Kraft Foods Announces Agreement to Sell Pizza Business to Nestlé". Kraft Foods. 2010-01-05. Retrieved 2010-01-05. 
  45. ^ "Kraft Foods – Investor Center – Financial News Release". Phx.corporate-ir.net. Retrieved 2011-08-04. 
  46. ^ a b c "Taking Kraft to Court"
  47. ^ a b c "Second Amended Complaint for Violations of the UCL, FAL, and CLRA", September 16, 2010
  48. ^ Dariush Mozaffarian et al., "Trans Fatty Acids and Cardiovascular Disease", New England Journal of Medicine, 2006.
  49. ^ Frank B. Hu et al., "Diet, Lifestyle, and the Risk of Type 2 Diabetes Mellitus in Women", New England Journal of Medicine, September 2001.
  50. ^ Veronique Chajes et al., "Association between serum trans-monounsaturated fatty acids and breast cancer risk in the E3N-EPIC Study", Am J Epidemiology, 2008 June.
  51. ^ "American Heart Association: A History of Trans Fat"
  52. ^ "Motion to Dismiss Second Amended Complaint", December 7, 2010.
  53. ^ Marian Burros, "A Suit Seeks to Bar Oreos as a Health Risk", New York Times, May 14, 2003.
  54. ^ "Lawsuit dropped as Oreo looks to drop the fat", CNN, May 14, 2003.
  55. ^ "Who's Funding Prop 37, Labeling for Genetically Engineered Foods?". KCET. Retrieved 2013-06-28. 
  56. ^ "ANH calls for international boycott of Prop 37 NO campaign companies". Alliance for Natural Health Europe. 2012-11-14. Retrieved 2013-06-28. 
  57. ^ "Paper Giant Pledges to Leave the Poor Rainforest Alone. Finally. Asia Pulp & Paper—the notorious destroyer of pristine tiger and orangutan habitat—says it's changing its ways.".  
  58. ^  
  59. ^ Melinda Fulmer for the Los Angeles Times. September 23, 2000 Taco Bell Recalls Shells That Used Bioengineered Corn
  60. ^ Haller, Stephanie. "Kraft Recalls 137,000 Velveeta Shells & Cheese for Metal Wires". ConsumerBell. Retrieved 23 January 2012. 
  61. ^ Garance Burke (AP), "Kraft Foods offers salmonella timeline", USAToday, April 6, 2009
  62. ^ Lyndsey Layton, "Pistachio Firm Expands Recall Over Salmonella", Washington Post, April 7, 2009
  63. ^ "A Tale of Two Scares", Editorial, Washington Post, May 4, 2009

References

In April 2009, Kraft Foods issued a voluntary recall of products containing pistachios after discovering salmonella in one of its Illinois manufacturers. Kraft pinpointed as the source a California pistachio grower, which issued an initial recall of over 2 million pounds of nuts before broadening the recall to much of their 2008 crop.[61][62] A Washington Post editorial credited the "aggressive food safety system at Kraft Foods" for efficiently addressing the danger.[63]

Kraft entered mainstream headlines in September 2011, when it had to recall over 130,000 cases of Velveeta Shells & Cheese microwaveable cups. The company said there was a possibility that the cups could contain wire bristles.[60]

In September 2000, up to $50 million worth of taco shells were recalled by Kraft from Taco Bell's restaurants as well as supermarkets. The shells contained genetically modified corn that was not approved for human consumption by the Food and Drug Administration. It was the first-ever recall of a genetically modified food. The corn was supplied to a plant that Kraft bought the shells from.[59]

Recalls

For years, Kraft purchased paper for its packaging from Asia Pulp & Paper, the third largest paper producer in the world, which was labeled as a “forest criminal” for destroying “precious habitat” in Indonesia’s rainforest.[57] In 2011, when Kraft cancelled its contract with Asia Pulp & Paper, Greenpeace Executive Director Phil Radford commended Kraft for efforts made towards forest protection, for "taking rainforest conservation seriously."[58]

Environmental record

Throughout 2012, Kraft contributed $1,950,500 to a $46 million political campaign known as "The Coalition Against The Costly Food Labeling Proposition, sponsored by Farmers and Food Producers" [55] This organization was set up to oppose a citizen's initiative, known as Proposition 37, demanding mandatory labeling of foods containing genetically modified ingredients. As a result, there were calls for a boycott of Kraft products.[56]

Political campaign

The current lawsuit is not the first time Kraft has been criticized for the trans fat in their products. In 2003, a California lawyer made national headlines by suing Kraft for using trans fat in Oreo cookies.[53] Kraft foods announced a trans-fat free reformulation of Oreos shortly after the 2003 lawsuit was filed, and the lawsuit was dropped. Kraft denied that the change was made in response to the lawsuit, noting that the reformulation had been in planning long before the lawsuit.[54]

Other cases

Regarding several packaging claims, Kraft argues that they are not factual statements that can be proven true or false. For example, Kraft argues that the word "wholesome" is subjective and vague. Promotional statements that are too vague to prove or disprove are called puffery and are not actionable under the law. Kraft argues that "wholesome," "sensible," and "smart" are all puffery and therefore cannot be found misleading or deceitful.[52]

Kraft denies any wrongdoing. Its response briefs emphasize that the challenged claims are technically true. For example, Vegetable Thins are "made with real vegetables," and Kraft argues that this true statement cannot be called misleading. Kraft uses a similar line of argument for claims like "good source of calcium, iron & zinc to support kids' growth and development," "whole wheat," and others.

Kraft's response

  • Health claims like "a wholesome choice," which appears on Teddy Grahams, and "Sensible Snacking," which appears on several products, are false.
  • "No cholesterol" claims are misleading because they imply that the snack is good for cholesterol levels, when in fact trans fat is worse for cholesterol health than actual dietary cholesterol.
  • Claims like "made with real vegetables" or "real ginger & molasses" are misleading because the products contain less of these "real" and healthy ingredients than they contain artificial trans fat.
  • Teddy Grahams packaging claims to be a "good source of calcium, iron & zinc to support kids' growth and development," but this health claim is deceptive because the trans fat content is more harmful than the minerals are helpful.
  • Various additional phrases like "whole wheat" and "graham" imply a health benefit that the products do not contain.
  • On each package, some individual claims may be true, but overall, they add to the deceptive message of healthfulness.

Based on the trans fat content and other unhealthy ingredients in Kraft products, the lawsuit makes several arguments:[47]

The lawsuit cites current scientific consensus on the dangerous health effects of trans fat, which causes coronary heart disease[48] and has been linked to type 2 diabetes[49] and some forms of cancer.[47][50] The American Heart Association concludes that there is "no safe level" of trans fat in the diet.[51]

Teddy Grahams, varieties of Ritz Crackers, Honey Maid Grahams, Premium Saltines, Ginger Snaps, and Vegetable Thins all contain artificial trans fat, and Kraft presents these products as healthy with phrases like "wholesome choice," "sensible snacking," and "made with real vegetables." The complaint in the case argues that these claims are a violation of California's Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law.[46][47]

Complaint

A United States District Judge certified the class on June 6, 2012.[46]

In 2010, two California residents filed a class action lawsuit against Kraft Foods for claiming certain products are healthy when in fact they contain unhealthy trans fat. Kraft denied any wrongdoing, saying all packaging claims are true and legal. As of June 2012, the case is still ongoing.[46]

Trans fat litigation

Controversies

In October 2012, Kraft Foods Inc changed its name to Mondelēz International. Shortly thereafter it spun off the Kraft Foods Group to its shareholders.

In August 2011, Kraft Foods announced plans to split into two publicly traded companies—a snack food company and a grocery company.[45]

Former Kraft Foods corporate logo

Spinoff of Kraft Foods Group

On March 1, 2010, Nestlé concluded the purchase of Kraft's North American frozen pizza business for $3.7 billion. Kraft left the door open to repurchase with a buyback option not before one year and not after three years for the original sale price of $3.7 billion; but they did not take advantage of the option. The sale included DiGiorno, Tombstone and Jack's brands in the United States, the Delissio brand in Canada and the California Pizza Kitchen trademark license. It also includes two Wisconsin manufacturing facilities in Medford and Little Chute. The business generated 2009 net revenues of $1.6 billion, with 3,400 employees.[44]

Sale of frozen pizza division to Nestlé

On March 17, 2010, Kraft Foods said it was "truly sorry" over its closure of Cadbury's Somerdale Factory. Senior Kraft executive Marc Firestone made the public apology to MPs at a parliamentary select committee hearing.[43]

Cadbury sales were flat after Kraft’s acquisition. Despite the Cadbury takeover helping boost sales by 30%, Kraft's net profit for the fourth quarter fell 24% to $540 million due to costs associated with integrating the UK business after the acquisition.[39] Kraft spent a one-time $1.3 billion in integration costs to achieve $675 million in recurring annual synergy savings by the end of 2012 (estimated).[40] Kraft was forced to increase prices to offset rising commodity costs in North America and Europe. Kraft has had to contend with the higher cost of ingredients such as corn, sugar and cocoa. Kraft chief executive Irene Rosenfeld said, “We expect it will remain weak for the foreseeable future.” Taking into account integration costs, the acquisition knocked about 33% off Kraft's earnings per share immediately after the purchase of Cadbury.[39] In March 2011, Kraft caused national outrage when they sold the site of a historic Cadbury factory it vowed not to close for £50 million after initially publically promising the continuity of production within the UK in order to win over support for the deal from shareholders. Instead, production was immediately outsourced to Poland. The Somerdale Factory was closed just days after the takeover by Kraft Foods in 2009. Former Cadbury workers demanded an apology for the abrupt selling of the plant, but Kraft’s CEO Irene Rosenfeld refused to explain her actions.[41] Kraft continues to use Cadbury brands in emerging markets to expand all of its products. In April 2011, Kraft set to invest $150 million in South Africa’s manufacturing plants over three years. President Sanjay Khosla said, "South Africa is a priority market for us, where we focus on power brands like Cadbury chocolate."[42]

Acquisition fallout

At the time of the purchase, the chocolate and sugar industry had been growing rapidly at 15% over the previous three years and was valued at $113 billion.[36] The purchase of Cadbury was considered strange because they did not have a strong foothold on the confectionery market, but at the time Kraft noted their production of confectionery foods like Toblerone and candy foods like Oreo. Cadbury also owned popular gum brands such as Stride, Trident, Dentyne, and Chiclets.[37] Roger Carr, chairman of Cadbury, discussed his approval of the takeover by Kraft by saying, "We believe the offer represents good value for Cadbury shareholders and are pleased with the commitment that Kraft Foods has made to our heritage, values and people throughout the world."[38]

Following the purchase of Cadbury, Kraft commanded 14.8% of the global candy and gum market. Kraft argued that it could take advantage of the Cadbury distribution in developing markets of India, Brazil and Mexico.[34] As incomes rose in these developing nations, Kraft hoped that products such as Oreo would become impulse buys for children.[34] Mars, Inc. is second in the confectionery market with 14.6% share, followed by Nestle with 7.8%.[35]

The Cadbury purchase was part of the long-term strategy of Irene Rosenfeld, CEO and Kraft Chairman since March 2007, who developed a three-year turnaround plan designed to drive the profitable growth of Kraft Foods.[29] Rosenfeld wanted to develop new markets and expand product range when she assumed the role of chairman. It was assumed that the purchase of Cadbury would help Kraft products develop in new markets such as Brazil and India because of Cadbury’s current strong presence in those markets.[30] India is one of its most resilient markets with sales growth of 20% and profits growing at 30% in a competitive market.[31] Kraft believed the Cadbury purchase was also necessary because of the likelihood of Nestle and Hershey joining together. Kraft also believed it could squeeze savings of at least $675m annually by the end of the third year.[32] Irene Rosenfeld saw the Kraft Cadbury merger as the "logical next step in our transformation toward a high-growth, higher-margin company." She also justified the merger in order to build a "global powerhouse in snacks, confectionery and quick meals."[33]

On September 7, 2009, Kraft made a £10.2 billion takeover offer for the long-established British confectionery group Cadbury, makers of Dairy Milk and Bournville chocolate.[24] On November 9, 2009 Kraft's £9.8bn takeover bid was rejected by Cadbury. Cadbury stated that the takeover bid was a "derisory" offer.[25] Kraft renewed the offer under the same terms on December 4, 2009.[26] The offer generated significant political and public opposition in the United Kingdom and abroad, even leading to calls for the government to implement a policy of economic protectionism in cases of takeovers of large companies.[27] On January 19, 2010, Cadbury finally approved a revised offer from Kraft, valuing the confectionery business at $19.5 billion (£11.5 billion). The funding for the takeover was partially provided by the Royal Bank of Scotland, the British part-state-owned bank.[28]

Purchase of Cadbury

In March 2011, Kraft Foods introduced MiO, a sugar-free, zero calorie liquid flavoring product geared towards the 18–39 age demographic.[22] MiO has no artificial flavors but it does have artificial colors, artificial sweeteners and artificial preservatives, unlike some competing flavoring products, according to USA Today.[23]

On September 10, 2010, a disgruntled employee angered over a recent suspension, Yvonne Hiller, opened fire inside the Philadelphia Factory where she had worked for 15 years. Armed with a .357, Hiller shot 3 co-workers, killing 2 of them. Philadelphia Police responded within minutes of the 911 call. SWAT took Hiller into custody at 8:30 p.m. EDT.[21]

On September 22, 2008, the company replaced the troubled insurance company, American International Group in the Dow Jones Industrial Average.[20]

In February 2008, Berkshire Hathaway run by billionaire investor Warren E. Buffett announced that it had acquired an 8% stake in Kraft then worth over $4 billion. Buffett's business partner Charles Munger had also invested over $300 million in Kraft. Berkshire Hathaway owned 5.6% of the outstanding stock of Kraft Foods, as reported in the holding company's 2010 annual report.[19]

In November 2007, Kraft agreed to sell its cereal unit to Ralcorp Holdings, a major private-label food maker, for $2.6 billion in a form of a spin-off merger. This would add 50% to Ralcorp's sales, to $3.3 billion, and will be used for Kraft's debt payment, which was at $13.4 billion, in danger of a downgrade by Standard and Poor's.[18]

In July 2007, the company bought Groupe Danone's biscuit (cookie) and cereal division for $7.2 billion, including iconic French biscuit brand Lefèvre-Utile.[16][17] While two years earlier firestorms of protest had arisen over plans for American PepsiCo's hostile takeover of the French company, Kraft's announcement was not met with the same protests, in part because Kraft agreed not to close French factories and keep the new merged divisions headquarters near Paris for at least three years.[16]

Investor Nelson Peltz bought a three-percent stake at Kraft Foods and was talking with the executives on revitalizing the business,[16] with options such as buying Wendy's fast food chain or selling off Post cereals and Maxwell House coffee.[16] On January 31, 2007, after months of speculation, the company announced that its 88.1% stake would be spun off to Altria shareholders at the end of March 2007; each would be given approximately 0.7 shares of Kraft for every Altria share they owned. Kraft became an independent publicly held company.

In 2004, it sold its sugar confectionery division to Wrigley, while doing minor divestitures—including its hot cereals division (Cream of Wheat) in 2007, its pet snacks division (Milk-Bone) in 2006, juice drinks and Fruit2o in 2007 and some grocery brands in 2006.

In 2000, Philip Morris (renamed Altria in 2003) acquired Nabisco Holdings for $18.9 billion and merged the company with Kraft Foods the same year.[8] In 2001, Philip Morris sold 280 million Kraft shares via the third-largest IPO of all time, retaining an 88.1% stake in the company.

Financial expansion

As of 2007, Philip Morris (now Altria Inc.) had sold its stake in Kraft foods and the two companies are no longer affiliated.

Kraft began a major restructuring process in January 2004, following a year of declining sales (blamed largely on the rising health consciousness of Americans) and the sacking of co-CEO Betsy Holden. The company announced closures of 19 production facilities worldwide and the reduction of 5,500 jobs, as well as the sale of 10% of its branded products.

In 1995, it changed its name to Kraft Foods Inc. The same year, it sold its bakery division (except Lender's Bagels, which was sold in 1996 to CPC International), its candy division and its tablespreads division. Log Cabin syrup was sold in 1997.[8]

In 1990, the company acquired Jacobs Suchard (a European coffee and confectionery giant) and Freia Marabou (a Scandinavian confectionery maker) to expand overseas as its business was heavily dependent on the U.S. In 1993, it acquired RJR Nabisco's cold cereal business (mainly Shredded Wheat and Shreddies cereals) while selling its Breyers ice-cream division to Unilever and its Birds Eye unit to Dean Foods. In 1994, it sold its frozen dinners unit to H.J. Heinz and in 1995, it sold its foodservice unit.[8]

At the end of 1988, Philip Morris Companies purchased Kraft for $12.9 billion. In 1989, Kraft merged with Philip Morris's General Foods unit—makers of Oscar Mayer meats, Maxwell House coffee, Jell-O gelatin, Budget Gourmet frozen dinners, Entenmann's baked goods, Kool-Aid, Crystal Light and Tang powdered beverage mixes, Post Cereals, Shake 'n Bake flavored coatings and numerous other packaged foods—as Kraft General Foods. Its aggressive product development was reversed after the merger, as it became slow in addressing issues on its product lines due to its size, and also company politics.[8]

The Kraft Foods factory in Banbury's Ruscote estate. It has been a major employer in the town since 1965.[15]

Philip Morris acquisition and merger with General Foods

During the 1980s, Dart & Kraft offered mixed results to its shareholders, as new acquisitions in the food business—such as Churny premium cheeses, Lender's Bagels, Frusen Gladje ice cream and Celestial Seasonings tea—slightly offset the lagging nonfood business—Tupperware's decrease in sales and KitchenAid's (acquired soon after the merger) slide in market share—leading Dart & Kraft to spin off its nonfood business (except Duracell batteries) into a new entity (Premark International, Inc.) while changing its name back to Kraft, Inc. Premark was bought by Illinois Tool Works in 1999. In 1988, Kraft sold Duracell to private equity firm Kohlberg Kravis Roberts, who then put it into an initial public offering in 1989. Gillette[8] bought Duracell in 1996, and itself was acquired by Procter and Gamble in 2005.

In 1980, Kraft merged with Dart Industries—makers of the Duracell brand of batteries, Tupperware brand of plastic containers, West Bend brand of home appliances, Wilsonart brand of plastics and Thatcher glass—to form Dart & Kraft.[8]

Dart merger

[8]

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