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Kraft Foods, Inc.
Type Public (NYSE: KFT)
Founded 1903
Headquarters Northfield, Illinois, USA
Key people Irene Rosenfeld, CEO
Industry Food Processing [1]
Products See brands listing.
Revenue ▲ $37.241 Billion USD (2007)
Net income ▲ $2.590 Billion (2007)
7.0% profit margin
Employees 103,000 (December 13, 2007)
Website www.kraft.com

Kraft Foods, Inc. (NYSE: KFT) is the second-largest food and beverage company headquartered in North America (behind PepsiCo) and the third largest in the world (after Nestlé SA and PepsiCo).

The Philip Morris Company (now known as Altria Group), acquired Kraft for $12.9 billion in 1988, eventually merging it with another food subsidiary, General Foods, which it had acquired in 1985. In 2000, Philip Morris acquired Nabisco and merged it with Kraft. Altria sold 280 million Kraft shares via an initial public offering in 2001, retaining an 88.1% stake. On January 31, 2007, after months of speculation, the company announced that its 88.1% stake would be spun off to Altria shareholders at the end of March 2007. Kraft is now an independent publicly held company.

Kraft is headquartered in Northfield, Illinois, USA, a Chicago suburb. Kraft Foods markets many popular brands in more than 155 countries.

Kraft Foods is named after James L. Kraft, who founded the original wholesale cheese business in 1903.

Kraft Foods became a component of the Dow Jones Industrial Average on September 22, 2008, replacing AIG.[1]

Contents

History

Canadian born James L. Kraft started a wholesale door-to-door cheese business in Chicago in 1903; its first year of operations was "dismal", losing $3,000 and a horse. Still, the business took hold and Kraft was joined by his four brothers to form J.L. Kraft and Bros. Company in 1909. As early as 1911, circulars and advertisements were in use by the company. In 1912, the company established its New York headquarters to prepare for its international expansion. By 1914, 31 varieties of cheeses were being sold around the United States, due to heavy product development, expansion by marketing, and opening a wholly-owned cheese factory in Illinois.[2]

In 1915, the company had invented pasteurized processed cheese that didn't need refrigeration, thus giving a longer shelf life than conventional cheese.[2] The process was patented in 1916 and about six million pounds of the product were sold to the U.S. Army for military rations during World War I. In 1919, the company began national advertising and had made its first acquisition: a Canadian cheese company.[2]

In 1924, the company changed its name to Kraft Cheese Company and went public.[2] Kraft had established its London and Hamburg sales offices (its first forays outside North America) in 1927. In 1928, it acquired Phenix Cheese Company makers of Philadelphia cream cheese and changed its name to Kraft-Phenix Cheese Company; it had captured 40 percent of the cheese market in the United States by 1930. Kraft also began operating in Australia following a merger with Fred Walker & Co.[2]

The same year (1930), National Dairy Products Corporation - makers of Breyers ice cream and Breakstone's cottage cheese and sour cream - acquired Kraft-Phenix.[2] During these years, Kraft's product lines were diversified from cheese to salad dressings, caramels, macaroni and cheese dinners and margarines. In 1933, the company began marketing by radio sponsorship. In 1935, Sealtest ice cream was launched.[2]

During World War II, Kraft Cheese Company sent four million pounds of cheese to Britain weekly.[2] In 1945, Kraft changed its name to Kraft Foods Company as its product lines had diversified. Product development and advertising helped the company to grow during the postwar years, launching sliced process cheese and process cheese sauce in the '50s. During these years, National Dairy's owner Thomas McInnerney and Kraft's founder James L. Kraft died, and at the end of the decade, the divisions became less autonomous and even diversified to the glass packaging business with the acquisition of Metro Glass in 1956.[2]

In 1947 Kraft tested the marketing power of the emerging medium of television by producing the hour-long drama program the Kraft Television Theatre. The product advertised on the program, McLaren’s Imperial Cheese, was selected because "... [it had] not only had no advertising appropriation whatsoever, but had not even been distributed for several years." The result as described by internal documents of J. Walter Thompson, the advertising firm which conceived of the marketing test, was “although there was no other advertising support for it whatsoever, still grocery stores could not keep up with the demand.”[3]

Processed cheese plant in Strathmerton, Australia

In the '60s, product development became intense, launching jellies, preserves, marshmallows, barbecue sauces and individually-wrapped cheese slices.[2] It is also during this decade that the company expanded in many markets worldwide.

In 1969, National Dairy became Kraftco Corporation and transferred to Glenview, Illinois in 1972.[2] In 1976, its name changed to Kraft, Inc. to emphasize the trademark the company had been known for. Reorganization also occurred after the name change.[2] At the end of the 1970s, Kraft merged with Dart Industries - makers of Duracell batteries, Tupperware plastic containers, West Bend appliances, Wilsonart plastics and Thatcher glass - to form Dart & Kraft.[2]

During the '80s, Dart & Kraft offered mixed results to its shareholder, as new acquisitions in the food business - such as Churny premium cheeses, Lender's Bagels, Frusen Gladje ice cream and Celestial Seasonings tea - slightly offsets the lagging nonfood business - Tupperware's decrease in sales and KitchenAid's (acquired soon after the merger) slide in market share - that led for Dart & Kraft to spin off its nonfood business (except Duracell batteries) into a new entity (Premark International, Inc.) while changing its name back to Kraft, Inc. In 1988, Kraft sold Duracell to Gillette[2], which was acquired by Procter and Gamble in 2005.

At the end of 1988, Philip Morris Companies purchased Kraft for $12.9 billion. In 1989, Kraft merged with Philip Morris's General Foods unit - makers of Oscar Mayer meats, Maxwell House coffee, Jell-O gelatin, Budget Gourmet frozen dinners, Entenmann's baked goods, Kool-Aid, Crystal Light and Tang powdered beverage mixes, Post Cereals, Shake 'n Bake flavored coatings and numerous other packaged foods - as Kraft General Foods. Its aggressive product development was reversed after the merger, as it became slow in addressing issues on its product lines due to its size, and also company politics.[2]

In 1990, KGF acquired Jacobs Suchard - a European coffee and confectionery giant - and Freia Marabou - a Scandinavian confectionery maker - to expand overseas as its business was heavily dependent on the United States. In 1993, it acquired RJR Nabisco's cold cereal business (mainly Shredded Wheat and Shreddies cereals) while selling its ice cream division to Unilever, and its Birdseye unit to Dean Foods. In 1994, it sold its frozen dinners unit to H.J. Heinz and in 1995, it sold its foodservice unit.[2]

In 1995, it changed its name to the present name. The same year, it sold its bakery division (except Lender's Bagels, which was sold in 1996) to CPC International). Also, it sold its candy division in 1995, its tablespreads division the same year and Log Cabin syrup in 1997.[2]

In 2000, Philip Morris acquired Nabisco Holdings for $18.9 billion and merged the company with Kraft Foods the same year.[2] In 2001, Kraft issued the second-largest IPO of all time (might become the third-largest after VISA's IPO has been offered) and had sold 280 million common shares. In 2004, it sold its sugar confectionery division to Wrigley, while doing minor divestitures therefore - including its hot cereals division in 2007, its pet snacks division in 2006, juice drinks and functional water in 2007 and some grocery brands in 2006.

Altria announced on January 31, 2007, that it will spin off all the remaining Kraft Foods shares to Altria's shareholders; each will be given approximately 0.7 share of Kraft for every Altria share they own.

Investor Nelson Peltz bought a three-percent stake at Kraft Foods and is talking with the executives on revitalizing the business,[4] with options such as buying Wendy's fast food chain or selling off Post cereals and Maxwell House coffee.[4]

In February 2008, Berkshire Hathaway Inc. run by billionaire investor Warren E. Buffett announced that it had acquired an 8% stake in Kraft worth over $4 billion. Buffett's business partner Charles Munger had also invested over $300 million in Kraft.

In July 2007, the company bought Groupe Danone's biscuit (cookie) and cereal division for $7.2 billion.[4][5] While two years earlier firestorms of protest had arisen over plans for American PepsiCo's hostile takeover of the French company, Kraft's announcement was not met with the same protests, although a possible deal comes with strings: promising not to close French factories and keep the cookie headquarters near Paris for at least three years.[4] Kraft is much more powerful in the US than in foreign markets.[4]

In November 2007, Kraft Foods agreed to sell its cereal unit to Ralcorp Holdings, a major private-label food maker, for $2.8 billion in a form of a spin-off merger. This would add 50% to Ralcorp's sales, to $3.3 billion, and will be used for Kraft's debt payment, which is at $13.4 billion, in danger of a downgrade by Standard and Poor's.[6]

On September 22, 2008, Kraft Foods replaced the troubled insurance company AIG in the Dow Jones Industrial Average. [1]

Sponsorships

Kraft Foods is an official partner and sponsor of Major League Soccer and sponsors the Kraft Nabisco Championship, one of the four "majors" on the LPGA tour.

Brands

 Please wikify this article or section.
Help improve this article by adding relevant internal links. (October 2008)

Kraft Foods' core businesses are in beverage, cheese and dairy, snackfoods and confectionery, convenience foods and cereals. [7]

Ritz "Crackers'n Cheez" Handi-Snacks

Former brands

This list is incomplete; you can help by expanding it.

Kraft Foods in the news

In 1992, the gelatin industry, in particular Kraft's Atlantic Gelatin plant in Woburn, Massachusetts, which supplies the vast majority of Jell-O, came under scrutiny for a history of noxious smells, toxic waste releases into Boston Harbor, and a policy of corporate secrecy. Heading off a rash of local complaints, industry lobbyists invited Massachusetts state representatives Paul Casey and Carol Donovan into the plant. However, the representatives were barred from going past the conference room. Repeated requests for a plant tour by journalists were refused. In 1993, the plant was hit with a $250,000 fine for violating the Clean Air Act of 1970. In a February 4, 1996 article, the Associated Press reported that a Massachusetts Department of Environmental Protection official was one of only a few outsiders who had seen the inside of the Woburn plant.

1950s Kraft delivery van in Australia, advertising "Velveeta", "Vegemite" and "Kraft Cheddar"

Kraft began a major restructuring process in January 2004, following a year of declining sales, (blamed largely on the rising health consciousness of Americans), and the sacking of co-CEO Betsy Holden. The company announced closures of 19 production facilities worldwide and the reduction of 5500 jobs, as well as the sale of 10% of its branded products. Kraft Foods expects to eliminate 8000 jobs, roughly 8% of its workforce.[citation needed]

In 2005 the MX newspaper in Melbourne, Australia reported that Kraft refused to disclose the trans fats content of its products in its labelling.[citation needed] Company spokespeople contested the evidence that trans fats posed a known health risk and stated that a causal link was unproven.[citation needed]

See also

References

  1. ^ a b "Kraft replaces AIG in Dow Jones Industrial Average". Associated Press (2008-09-18). Retrieved on 2008-09-18.
  2. ^ a b c d e f g h i j k l m n o p q r "Kraft Foods' Company History". Funding Universe (2002). Retrieved on 2008-03-10.
  3. ^ "'Kraft’-ing a Durable Business Model". TV Week (2008-04-27). Retrieved on 2008-06-01.
  4. ^ a b c d e "No ketchup, please". The Economist (2007-07-05). Retrieved on 2007-07-17.
  5. ^ "Getting better?". The Economist (2007-07-12). Retrieved on 2007-07-22.
  6. ^ "Kraft to Shed Post Cereals Unit," Associated Press, November 15, 2007.
  7. ^ Largest Brands
  8. ^ Martha Phifer, "Cracked up for crackers" Orlando Sentinel, September 10, 2008. "Royal Lunch" produces no search results at KraftFoods.com, October 11, 2008

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