Spinoff Could Put the Crunch Back Into Kraft

But Wall Street loves a new hero and is likely to give Rosenfeld a break as she figures out how to decentralize decision-making in Kraft's notoriously top-heavy bureaucracy, change middle managers' compensation to encourage market-share growth over stability, spend more on marketing, improve profitability and invest in some clever, tuck-in acquisitions.

One area in which the new CEO must lavish attention: innovation. Although the cookie division has done a great job of making a dozen new varieties of Oreos -- including the Uh-Oh! Oreo, which swaps chocolate cream for vanilla, orange Oreos for Halloween and mint Oreos just for fun -- other divisions are snoozing. While Kellogg has done great work by innovating numerous varieties of its Cheez-It brand, for instance, Kraft has failed to energize its own Cheese Nips entry in the category. Laugh if you will, but packaged food wars are won and lost in the shelf-by-shelf battle for snackers' fast-changing tastes.

The bottom line is that Kraft is not a dormant brand; it is only playing dead. Investors would normally kill to acquire shares of a company that generates three-quarters of its $30 billion in annual sales from products in which it has a No. 1 market-share position, as such dominance normally leads to enhanced clout with stores, manufacturing efficiencies and higher profit margins. If Rosenfeld can find a way to improve margins at least to the level of competitors by paring head count and slashing oddball divisions such as the beverage Capri Sun, then she's going to have a real winner on her hands.

Be a savvy shopper. Try to buy Kraft shares around $31 and look for prices to trek toward $40 by the middle of 2008.

At the time of publication, Jon Markman did not own or control shares of companies mentioned in this column.