Kraft's New Big Cheese

It's shakeup time again at Kraft (NYSE:KFT). The Motley Fool Income Investor pick announced yesterday that it has named Irene Rosenfeld as CEO of the food giant in place of Roger Deromedi. The move represents the second change at the top in just three years as the company seeks to bump up its growth. Rosenfeld will face many of the problems of her predecessor, but her key challenge may be maintaining a sense of stability as she makes the changes needed to transform Kraft into a more effective competitor.

Leadership changes have become something of a routine at Kraft. Deromedi became sole CEO in 2003, but before that he served as co-CEO with Betsy Holden. Predictably, having two head honchos didn't work out particularly well, and Holden left the company not long after being demoted.

Holden's departure was perhaps understandable in light of her demotion. Unfortunately, however, Kraft has been suffering from a more troubling loss of management talent recently. According to Crain's Chicago Business, at least nine people at the vice-president level or above have left the company in the past 21 months. Two unnamed executives explained that they had left out of lack of confidence in Kraft's turnaround efforts, which to date have included the sale of brands with $1.7 billion in annual sales, as well as 14,000 layoffs and the shuttering of 40 factories.

Rosenfeld will face the formidable, yet necessary, task of re-establishing stability in the executive ranks, as the company moves toward its spin-off from Altria (NYSE:MO). Kraft is a leaner, more focused company as a result of Deromedi's efforts, but the change at the top may have something to do with Altria's desire for more improvement.

It won't be easy. Commodity prices continue to squeeze profits -- in this year's first quarter, commodity costs were about $100 million more than in the first quarter of 2005. Meanwhile, Kraft needs to improve international performance, especially in Europe, where sales have suffered due to competition from discounters' labels.

Fortunately, Rosenfeld looks to be a good candidate for the job. While her most recent position was at PepsiCo (NYSE:PEP) as head of Frito-Lay, she spent more than 20 years at Kraft, so she doubtlessly knows the company and its culture well. Hopefully, this will help her salve discontent in the ranks as she steers Kraft through its ongoing transformation.

For more on Kraft:

• A Low-Key Quarter for Kraft
• Kraft: A True Buy-and-Hold?
• Kraft's Problem Area

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.