Kraft Foods plans to split into two companies

PORTLAND – Kraft Foods Inc. said Thursday it plans to split into two publicly traded companies, with one focusing on its international snack brands like Trident gum and Cadbury chocolates and the other on its North American grocery business that includes Maxwell House coffee and Oscar Mayer meats.

Kraft is the latest in a string of U.S. companies including rival Sara Lee Corp. to separate its business to cater to different niche markets.

“In general, it mirrors what we have seen from other consumer brands,” said Morningstar analyst Erin Lash.

The move surprised industry watchers because Kraft, the nation’s largest food maker, had long touted its scale and reach as its strength. Kraft officials said Thursday that after several years of acquisitions, sales and other changes, it became clear that the company had built two “strong, but distinct, portfolios” and the next step is to recognize the separate priorities for each.

“Simply put, we have now reached a stage in our development with a global snacks and grocery businesses in North America in which each benefit from standing on their own and focusing on their unique drivers of success,” Kraft CEO Irene Rosenfeld told investors Thursday during a conference call.

The two businesses will target two very different segments of the food market. Kraft’s grocery business, which sells products such as Oscar Mayer meats, Jell-O desserts and its namesake cheese, delivers estimated revenue of $16 billion. After the split, it will still be one of the largest food and beverage companies in North America.

Kraft’s snack business, by comparison, will be twice the size with estimated revenue of $32 billion and will focus on high-growth international business and the convenience stores, kiosks, and other places where the small treats are sold.

The two businesses will represent two different opportunities for investors as well. The snack business is expected to grow quickly, reinvesting its gains back in the business. The company already has been building its snack side for several years with acquisitions such as LU Biscuits and its $18.5 billion acquisition of Cadbury PLC a year and a half ago.

Meanwhile, the grocery side will rely on the strength of its well-known brands in North America for slower, steady gains that are more likely to deliver dividends for shareholders.

The deal is expected to take at least a year or more to complete.