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Kraft Foods Group Inc. Shakes Up Management Team After a Flat Sales Year

By Demitri Kalogeropoulos - Feb 12, 2015 at 5:48PM

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The food and snack giant continued to struggle with some parts of its portfolio in the fourth quarter.

Kraft Foods Group ( KRFT.DL ) announced fourth-quarter earnings results on Thursday evening. And while the food and snacks giant beat Wall Street's revenue expectations, it continued to struggle with higher costs.

Meanwhile, sales were weak in a few of its biggest brands. In response, the company announced a major shake-up to its management team aimed at getting growth back on track.

Source: Kraft Foods.

Fourth-quarter results
Quarterly revenue ticked higher by 2%, to $4.7 billion, which was just ahead of analysts' $4.6 billion target. The good news for investors is that the fourth-quarter sales improvement didn't come simply from price hikes, as was the case in the prior quarter. Kraft's 3.4% organic sales growth rate included significant volume gains this time. 

Source: Kraft Foods.

Reported profit fell to a loss of $0.68 per share as the company took a massive one-time labor charge. But without that non-cash event, earnings per share would have grown by double-digits, thanks to lower advertising and overhead costs.

Operationally, the standout product division in the fourth quarter was Kraft's refrigerated meals unit, which rode momentum from the Lunchables and Oscar Mayer brands to a strong 6% sales boost. However, the company struggled in a few of its other key categories, including beverages, non-refrigerated meals, and desserts. Each of those units booked lower pricing and lower sales volume this quarter.

Time for a change
For the second quarter in a row, CEO John Cahill called out management missteps as contributing to the company's weak results. "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," he said in a press release.

In response, the company announced several management changes aimed at "accelerating the pace of change and improving execution," according to a separate press release. Kraft named a new Chief Operating Officer, George Zoghbi, and a new executive in charge of growth initiatives and international sales, Chris Kempczinski. At the same time, Kraft's Chief Financial Officer, Chief Marketing Officer, and executive in charge of Research and Development, are all leaving the company.

The personnel changes demonstrate that Kraft isn't ready to settle for another year like 2014, which included zero revenue improvement on organic sales growth of less than 1%. Still, they also show that the company's problems won't be a simple matter of cutting costs or adjusting a single marketing approach. Kraft will have to make key structural changes to keep ahead of the quickly changing trends in its customers' shopping habits.

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