Kraft Skids on Management Shake-Up, Altria's Woes

According to Morgan Stanley's tobacco analyst, David Adelman, the appeals court probably will find that Byron lacked the authority to alter the $12 billion bond. The company is appealing a class-action suit that alleged that its main operating unit, Philip Morris, claimed "light" cigarettes were safer than "full flavor" ones.

"There is a potential liability there for Kraft," said Christine McCracken, an analyst FTN Midwest, noting that the stock trades in tandem with Altria. FTN Midwest has no investment banking relationship with the company.

Kraft was spun off from Philip Morris in an initial public offering two years ago, but is still essentially controlled by the tobacco giant. Altria owns half of Kraft's Class A common stock and almost all of its voting stock. Some market watchers have suggested that Kraft could be ensnared by Altria's legal problems, as Altria could conceivably be forced to dip into Kraft's reserves in order to pay off its debt.

Altria helped drag down the Dow Wednesday, ending down $2.77, or 5.9%, at $44.

As for Kraft's new management, Daryl G. Brewster, 46, formerly group vice president of Kraft North America and president of the Canada, Mexico and Puerto Rico operations, will succeed Polk. Brewster will be responsible for brands including Oreo, Ritz, Planters, Life Savers, Chips Ahoy! and Altoids. Kraft didn't announce a replacement for Rosenfeld.

Regarding Polk, "the question of whether [his departure] signals any problems at Nabisco can be debated, but it is clear that category conditions are soft and obesity issues are present," said Prudential's McMillan.

Whether Kraft's efforts at healthier food will pay off is unclear. "The company tried for years to make its food healthier, but it didn't work. People didn't like the taste," said FTN's McCracken. "They may sell more products. This is a good effort to address the situation. But I do not know if it will ultimately have an impact."