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Kraft Makes More Management Changes

February 13, 2015
Food & Drink
Kraft Foods Group Inc. made more management changes and said its fourth-quarter revenue rose 2.2%, reflecting some improvement in pricing to offset higher input costs.
 
The company said Chief Financial Officer Teri List-Stoll, Chief Marketing Officer Deanie Elsner, and Chuck Davis, executive vice president of research, development, quality and innovation, will leave the company.
 
George Zoghbi, currently vice chairman of operations, research and development, sales and strategy, was named chief operating officer.
 
Kraft said Chris Kempczinski, who currently leads its Canada unit, will be executive vice president of growth initiatives and president of international.
 
“The newly created leadership positions reflect Kraft’s commitment to accelerating the pace of change and improving execution,” the company said.
 
In December, Kraft Chairman John Cahill replaced Tony Vernon as chief executive, signaling a desire for faster change amid an industrywide struggle for profitable growth.
 
Kraft posted a $398 million net loss on a charge related to postemployment benefit plans.
 
Excluding the market-based impact to the benefit plans in both periods, operating income increased at a low single-digit rate, with a double-digit increase in earnings per share.
 
Kraft’s revenue rose to $4.7 billion from $4.6 billion. Analysts polled by Thomson Reuters expected $4.625 billion. Organic revenue—which typically excludes acquisitions, divestitures and currency impacts—rose 3.4%.
 
“While there were some positive developments in the fourth quarter, we did not deliver to our potential in 2014, with the macro environment and our execution affecting our results,” Mr. Cahill said in a statement.
 
Kraft, home to brands such as Oscar Mayer, Maxwell House, Velveeta, Kool-Aid and Jell-O, has been forced to raise prices on some products, such as cheese and ground coffee, in response to higher commodities costs.
 
The fourth quarter had positive net pricing of 1.9 percentage points, and the company said its results reflected “significant pricing actions.”
 
Higher pricing was a factor in large increases in operating income at the company’s cheese and refrigerated meals segments. The beverage unit, which saw a decline in operating income, was hurt by lower pricing that resulted from increased promotional activity.
 
Kraft’s per-share loss was 68 cents. In the year-earlier quarter, it earned $931 million, or $1.54 a share, a figure that included a benefit of $1.11 a share related to post-employment benefit plans.
 
In late trading, Kraft shares were down 2.4% to $64.56.
 
Kraft has been vulnerable to the pressures squeezing many established food makers, including weak overall spending by U.S. shoppers and a shift in consumer tastes away from highly processed food. That has put brands like Kraft’s Shake ‘N Bake and Cheez Whiz in a tough spot. Iconic packaged-food makers have been pursuing brands known for natural and organic ingredients, with General Mills Inc. buying Annie’s Inc. last year and Campbell Soup Co. purchasing Bolthouse Farms in 2012. On Thursday, Campbell lowered its outlook for the year.
 
Kraft’s snacks business Kraft Foods Group Inc. was spun off in late 2012 and is now known as Mondelez International Inc.
 
By Josh Beckerman
 

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