Food Business News - Mar 21, 2006 - (Page 1)

FoodBusinessNews ® NEWS, MARKETS AND ANALYSIS FOR THE FOOD PROCESSING INDUSTRY Kraft: Less than the sum of its parts? von Eschenbach nominated to lead F.D.A. 10 Achieving snack satisfaction 19 Inside Pompeian's olive oil business 26 MARKET WATCH March 21, 2006 CHICAGO - In the wake of an extended period of financial underperformance, a breakup of Kraft Foods, Inc. should receive serious consideration. That was the thesis of an extended research report published recently by a team headed by David C. Nelson, research analyst at Credit Suisse First Boston, Chicago. Fulfilling what he described as an analyst's job of occasionally offering "unsolicited advice," Mr. Nelson said the potential for a Kraft spinoff from Altria, which owns 85% of Kraft, would create an opportunity for "outside the box thinking." "The core of our rather sacrilegious suggestion for consideration is to think about whether breaking up the Kraft portfolio into more focused businesses could unlock greater value," he said. "We believe investors and strategic acquirers would pay higher multiples for (successful) focused businesses, and that the parts of Kraft may have more success if more focused." Underlying Mr. Nelson's thesis is the increasingly prevalent view that "acquisitions for breadth don't work." While size has advantages, he suggested that managing across multiple categories complicates running a business and that retail customers tend to make decisions at the category rather than corporate level. "We find focused companies like Hershey and Wrigley and even Kellogg and Campbell Continued on Page 15 Lack of control B.S.E. and A.I. continue to disrupt meat and poultry industry Stocks on March 1 were the smallest since 1993. What North American meat and poultry processors want to talk about is how they are adding value to their products and meeting consumer demand, whether it is pushing bacon beyond the breakfast table and turning it into a mainstream item suitable for lunch and dinner, or selling beef and chicken strips in the produce department of supermarkets as ingredients for salads. Unfortunately, bovine spongiform encephalopathy (B.S.E.) and highly pathogenic avian influenza (H.P.A.I.) continue to steal the headlines and have created some of the most volatile industry market conditions in recent memory. "We are managing the things that are under our control, but the business is a tough, volatile place right now," said John Tyson, chairman and chief executive officer of Tyson Foods, Inc., Springdale, Ark., the largest meat and poultry processor in the Continued on Page 23

Table of Contents for the Digital Edition of Food Business News - Mar 21, 2006


Food Business News - Mar 21, 2006