Kraft to sell off Nordic and Baltic salty snack brands

By Jess Halliday

- Last updated on GMT

Related tags: Kraft foods

Kraft Foods is continuing to sharpen its focus on core brands with its latest divestment announcement – the sale of its Nordic and Baltic salted snack business to a private equity firm.

The signing of the deal to sell the Estrella, Maarud and Taffel Chips brands to Fepco 1 AS, a Norwegian subsidy of Herkules Private Equity Fund, comes in the same week as the multinational completed the sale of its Post cereals business to Ralcorp Holdings.

Of the proposed Nordic/Baltic deal Piero Capizzi, VP market and customer development in the region said it “fits Kraft International’s strategy to focus on our core categories where we can reinforce our competitive advantages and win in the marketplace”.

The Post-Ralcorp deal, for $2.6bn of stock and cash, was also part of the company's strategy to concentrate on core divisions.

Food Manufacturers are operating in particularly tough economic conditions at present, given the significant rises in commodity and energy costs.

In full year 2007 Kraft saw an increase in net revenues to US$34,356m, up from $34,356m the previous year. Operating income took a hit, however, falling from $4521m to $4331m.

The firm has had a restructuring programme in place since 2004, which is expected to be completed by the end of 2008. By that time it expects to have realised $1 bn out of an anticipated $1.2 bn in cumulative annualised savings. The programme will have cost it some $2.8bn.

Guidance also reflects the company's expectation for greater savings at a lower cost from its restructuring program. Cumulative annualized savings will reach approximately $1.2 billion, of which $1.0 billion will be realized by the end of 2008. Additionally, total costs for the full program are expected to be $2.8 billion, down from a previous expectation of $3.0 billion as a result of program changes and better execution of several initiatives.

Since the inception of its cost restructuring program in 2004, the company has incurred total costs of $2.1 billion. This program will be completed in 2008, although the full annualized impact of savings will be realized thereafter. The updated components of the 2004 restructuring program are as follows:

In the Nordic and Baltic countries, Kraft has decided to concentrate on brands in its core categories of coffee, chocolate, biscuits, cheese and dairy; brands favoured by the strategy include Gevalia and Jacobs coffee, Marabou and Freia chocolate, and Philadelphia cream cheese.

Details of the salty snacks sale have not been disclosed, and the deal is subject to regulatory approvals. If the go-ahead is granted, closure is expected before the end of 2008.

The Estrella and Maarud brands are present in Sweden, Norway, Finland, Denmark, Lithuania, Latvia and Estonia. Taffel Chips are present only in Denmark.

The sale will also include assets and operations in Norway, Sweden and Lithuania; 350 employees will transfer to the new owner.

Related topics: Kraft Foods, Markets

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