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Kraft Foods unveils plan to lift sales; shares fall 3%

February 21, 2007|From Reuters

SCOTTSDALE, ARIZ. — Kraft Foods Inc. unveiled a strategic plan Tuesday that includes developing products that combine many of its best-known food brands, ramping up marketing spending and becoming more effective in its cost-cutting efforts.

But the company's shares fell 3.1% as underwhelmed analysts said the plan from Irene Rosenfeld, a longtime Kraft employee who returned to the company as chief executive in June after a stint at PepsiCo Inc., failed to inspire much enthusiasm.

Although Kraft seems keen on winning back consumers who now buy more meals away from home, the strategy lacked divestitures, which some analysts hoped to see from the largest North American food company.

"I think when you have Maxwell House [coffee], you just can't stand back and let Starbucks eat your lunch every day," John McMillin, food industry analyst at Prudential, said of Rosenfeld's plan. "The same goes for Oscar Mayer against Subway and DiGiorno against Domino's."

But Rosenfeld sees Kraft's size as one of its assets, because it sells all the different components of a meal.

Among new products Rosenfeld promoted at an analyst conference in Scottsdale, Ariz., were a microwaveable deli sandwich that combines Oscar Mayer lunch meat, Grey Poupon mustard and Kraft cheese.

Kraft has struggled to improve earnings amid lackluster sales, higher costs and a $3-billion restructuring program that has included factory closings and job cuts.

Rosenfeld suggested it would take about two years to get things moving under the new plan, which also includes a $5-billion stock repurchase program to begin after the company is spun off from Altria Group Inc. in March.

Shares of Northfield, Ill.-based Kraft closed down $1.09 at $33.86.

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