Cheers Kraft Cadbury blend

Cheers Kraft Cadbury blend

The Financial Times

By Greg Farrell in New York

September 16 2010

The chief executive of Kraft Foods said

the integration of Cadbury, which it

acquired this year for $19bn, is on track

and predicted that the combined company

would generate organic revenue growth of

5 per cent or more next year.

Irene Rosenfeld told analysts that the

company would realise $1bn in revenue

synergies by 2013, over and above the

$750m in cost synergies that it had

promised investors earlier.

“We feel terrific about the integration of

Cadbury,” said Ms Rosenfeld in an

interview with the Financial Times. “Onethird

of Kraft’s top management is from

Cadbury.”

Ms Rosenfeld said that Kraft would deliver

organic growth – despite economic

headwinds in its home market – by

building its brands through advertising.

“Brand value is more important than it’s

ever been,” she said. “The consumer is

value conscious, not just price conscious.”

Tim McLevish, chief financial officer, told

analysts the company was planning to

increase the percentage of revenues spent

on marketing from its current level of 8 per

cent to the 9 to 10 per cent range.

Ms Rosenfeld told analysts that

divestitures of recent years, combined with

the acquisition of LU and Cadbury, had

repositioned Kraft in the global snack

category, where margins tend to be higher

than in the packaged food business.

The Cadbury deal puts Kraft in a stronger

position to take advantage of growth

opportunities in developing markets such

as Brazil, where snack consumption is

expected to grow along with rising gross

domestic product, she said.

The company believes that the

combination of high-margin snacks and

strong regional brands will be the primary

drivers of growth. Ms Rosenfeld said that

snacks and regional power brands – which

include Oscar Meyer and Miracle Whip in

the US and Jacobs coffee in Europe –

would account for 75 per cent of the

company’s portfolio and 90 per cent of its

growth as it seeks to achieve 5 per cent

compound annual growth over the next

three years.

Some analysts expressed scepticism about

the growth numbers, especially in North

America, where consumer spending

continues to lag as a result of the recent

recession and continued high

unemployment. The company said its

global strength, the result of the Cadbury

deal, would help offset weakness at home.

Kraft shares rose 54 cents to $31.59 on

Wednesday. It is up 12 per cent since July.