Kraft and Mondelez International announce split

Kraft has announced the split of its operations into two independently-listed companies.

Kraft Foods Inc has spin off its North American Grocery business under the name of Kraft Foods Group, while on the same date (October 1)  it changed its name to Mondelez International Inc and proceed as a global business concentrating on snacks, such as biscuits, chocolate, gum and sugar confectionery.

Reasons for the split, revealed in a report carried out by Euromonitor International, were attributed to an “enlarged but distinctly polarised portfolio” following the firm’s acquisition of Cadbury in 2010 and an enhanced presence in the snack food market.

The overarching objectives for the newly listed companies are to allow each business to focus on its distinct growth profiles, product categories and strategic priorities. However, the divided operations are both aligned with the same growth driving trends most multinationals currently aggressively act on, creating significant competitive barrier to further expansion. The new entities also lost the advantages the large conglomerate was offering to leverage scale and infrastructure across markets and categories.

Given its geographic market coverage, Mondelez is in a good position to drive strong volume growth in its identified emerging focus markets, such as Brazil, India and Russia, where volume growth prospects in snack food categories are positive. In contrast, Kraft Foods Group will have to focus more on value driven growth, through continuous innovation in the mature North American market environment.

Based on 2011 results, the estimated revenue for Mondelez, with global market reach in snack food categories, will be about US$36 billion, while Kraft Foods Group, the North American grocery division’s revenue is US$19 billion.