Irene Rosenfeld, CEO of Kraft, Gives the World Economic Forum at Davos the Benefit of Her Wisdom
One part will be its core North American business, including Philadelphia, Dairylea and Capri Sun.
The other part will be an international snacks business, which will contain Trident Gum, Oreo biscuits and Cadbury’s.
Kraft said its business had naturally grown in two different directions, that
now differ in their future strategic priorities, growth profiles and operational focus.
Irene Rosenfeld, Chief Executive of Kraft, said:
We have built two strong, but distinct, portfolios. Our strategic actions have put us in a position to create two great companies, each with the leadership, resources and strong market positions to realise their full potential.
This comes just a year and a half after Kraft took over Cadbury’s. During the fight over the takeover, Kraft promised to keep open Cadbury’s Somerdale factory – in fact, they cited that as one of the key reasons for supporting the deal, since Cadbury’s had previously been planning to close it.
A few months after they completed the takeover, Kraft announced they were closing Somerdale anyway. They also moved some of the Cadbury’s headquarters jobs to Zurich, where they already had the Tobler chocolate business.
The costs of integrating the businesses can only be guessed at, but must have amounted to many millions of pounds. Beyond the actual integration costs – redundancies, IT system changes, branding and so on – the integration would also have caused major disruption to the businesses and distracted management from doing their real jobs.
At the time of the takeover, Kraft fatuously stated that they wanted to create
a global powerhouse in snacks, confectionery and quick meals.
And now that “global powerhouse” is to be dismantled, supposedly to create value, less than two years after it was created, supposedly to create value.
At the time of the merger, Kraft said that Cadbury’s
would benefit from Kraft Foods’ global scope and scale and array of proprietary technologies and processes.
But clearly all those benefits are so very yesterday and now no longer apply.
The whole approach of doing “deals” and shuffling real companies around like counters on a chequers board really is utterly fatuous. Obviously these deals make lots of money for the teenage scribblers who recommend them. But how much value do they really add to the companies concerned?
The answer is that mergers and demergers actually tend to destroy value, including shareholder value. They destroy wealth.
Wealth is created from managing businesses properly so that they make profits, employ people and invest for the future. It is not created by clever financial whizz-kids creaming off huge bonuses by pushing through deals like this.
And Ms Rosenfeld? Well, she’s achieved nothing in her time leading Kraft. A big fat zero.
I am so glad I don’t own Kraft shares.
Time to resign , Irene?