For more than seven decades, Kraft Foods
The first company will consist of Kraft's global snacks operation, which includes Cadbury, Oreo, and Trident brands. The second will include the higher-margined domestic grocery business. Casualties of the split include 1,600 U.S. jobs. Kraft blames about 40% of the job cuts on the realignment of U.S. sales and claims that about 20% of the jobs are currently unfilled positions.
While axing much-needed U.S. jobs is never easy, it'll help the food giant slim down operations where it counts. Kraft plans to reduce the number of management offices across the country down from four to two. This should be a positive for Kraft (and investors) as it looks to create two companies that are both leaner and more competitive on their own.
As my Foolish colleague Matt Koppenheffer pointed out, Kraft is no stranger to successful spinoffs. In 2008, Kraft's former parent company, Altria
Since the 2008 split, Altria and Philip Morris have outperformed the Dow Jones Industrial Average, returning 52% and 61%, respectively, over the Dow's mere 6% return for the same period, so there is evidence that both of the companies left after a spinoff can still thrive.
According to a recent report by Global Industry Analysts, the global snacks food market is set to reach $334.7 billion by 2015. The split should better position Kraft to market its snacks business in emerging markets such as China. Additionally, a push into emerging markets would put Kraft in more intense competition with PepsiCo
Kraft's split gives investors the opportunity to buy a piece of a multinational growth company or put their money into a more stable, dividend-friendly domestic one. Either way, I think Kraft's on target to unlock long-term gains.
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