Kraft Foods (KFT) said it would split into two separate companies, according to an Aug. 4 company statement, highlighting a trend that consumer foods and goods makers need to focus on higher-growth emerging markets as the outlook for expansion in developed markets remains sluggish..
The snacks business, with estimated revenue of about $32 billion, will consist of the current Kraft Foods Europe and developing markets units as well as the North American snacks and confectionery businesses, the company said in a statement.The North American grocery business would consist of the current U.S. beverages, cheese, convenient meals and grocery segments and the non-snack categories in Canada and food service. The tax-free spinoff could be complete by the end of 2012. "Given the different investment priorities and growth trajectories of the two businesses, it makes a lot of sense to separate them," Sanford C. Bernstein analyst Alexia Howard noted the day of Kraft's announcement. "The strategic rationale for such a move is strong." She said Kraft's split will aid CEO Irene Rosenfeld in expanding Kraft's footprint in emerging markets and take on new acquisitions, all while working to push the company's higher-margin U.S. grocery business forward.