Kraft to Cut 1,600 Jobs in Split-Off, Reports Strong Close to 2011

The actions will result in the reduction of approximately 1,600 positions in North America throughout 2012, about 40 percent of which are due to the realignment of U.S. Sales.The snacks business will leverage a direct store delivery model, with most U.S. retail sales employees shifting to the North American region of the global snacks company.

Jan 18 2012 --- Kraft Foods has announced several moves to help ensure its North America-based snacks and grocery businesses are well-positioned to become two independent public companies before the end of 2012. Key decisions include realigning the U.S. Sales organization, consolidating U.S. management centers and streamlining the corporate and business unit organizations. These actions will result in the reduction of approximately 1,600 positions in North America throughout 2012, about 40 percent of which are due to the realignment of U.S. Sales.

"When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations," said Irene Rosenfeld, Chairman and CEO. "For the past year, the North American team has been working to streamline operations to deliver sustainable top-tier performance and continue to invest in our iconic brands. We're confident that this transformational work will improve effectiveness and fuel the future growth of both companies."

The grocery and snacks businesses have distinct portfolios and routes to market. By realigning the U.S. Sales structure to create more focused teams, each company can customize its approach to in-store sales and execution to maximize impact.

The snacks business will leverage a direct store delivery model, with most U.S. retail sales employees shifting to the North American region of the global snacks company.

To capitalize on its warehouse distribution strength, the grocery company will reorganize within the United States. Local retail support will be contracted to two leading sales agencies, with Kraft oversight and direction. Acosta Sales & Marketing will become the company's partner for grocery store and mass retail channel execution. CROSSMARK will continue to support Kraft in the convenience store channel.

Kraft anticipates having both U.S. Sales organizations in place by April 1.

When the North American grocery company is spun off later this year, it will reduce its U.S. management center locations from four to two.

"Consolidating our management locations is a sound business move," said Tony Vernon, Executive Vice President and President, Kraft Foods North America and CEO of the future grocery company. "Having the majority of our business units together in one location will provide greater development opportunities for our people and will help us continue building our brands more efficiently and collaboratively."

The Beverages business unit in Tarrytown, N.Y., and the Planters brand in East Hanover, N.J., will relocate to the Chicagoland area by December 2012. Most of the employees affected by these moves will have the option to transfer with their businesses to the future grocery company headquarters in Chicagoland. Kraft also will close its Glenview, Ill., management center by the end of 2013.

The future global snacks company will also have its headquarters in the Chicagoland area, with the choice of site currently under consideration. The North American region for the global snacks company will be based at the East Hanover campus.

In Canada, both companies will retain sites in the Greater Toronto area. The Kraft grocery business will stay in the current Don Mills offices, while the snacks business moves to recently opened offices in Mississauga. The Madison, Wis., management center will remain the site for the Oscar Mayer business unit.

Throughout 2011, the North American business has been lowering costs to provide funds to invest in its brands. With leaner structures planned across both the future grocery company and the North America Snacks region, Kraft plans to eliminate approximately 1,600 positions throughout the United States and Canada over the next 12 months, primarily from sales, corporate and business unit areas. About 20 percent of these job eliminations are currently open positions.

These planned workforce reductions do not include manufacturing facilities. With the impending separation into two independent companies, Kraft is continuing its review of manufacturing facilities to consider what's best for both new companies.

The news came as Kraft Foods Inc. reported that strong fourth quarter sales will lead to strong fiscal 2011 results, consistent with the company's previous outlook.

"We finished 2011 with strong business momentum in each of our geographies," said Irene Rosenfeld, Chairman and CEO.  "Our virtuous cycle of investment continues to pay off around the world, despite a difficult operating environment.  We expect our 2011 results will place us solidly among the top-tier of our peer group, and we remain on track to launch two industry-leading companies in 2012."

Net revenue for full year 2011 is expected to have grown approximately 10 percent.  Organic Net Revenue is expected to increase approximately 6.5 percent, compared to a previous outlook of at least 6 percent, driven by mid-single-digit organic growth in North America and Europe, and double-digit organic growth in Developing Markets. 

Diluted earnings per share are expected to be at least $1.95.  Operating EPS, which excludes acquisition-related costs, Integration Program costs, and costs related to the spin-off of the North American Grocery business, is expected to be at least $2.28, including a negative $0.01 impact from currency in the fourth quarter.  The previous outlook for Operating EPS was at least $2.27 excluding any potential impact from currency in the fourth quarter.

The company plans to release its full 2011 financial results, issue its outlook for 2012 and provide an update on its plan to create two independent companies on Feb. 21, 2012.