Analyst Insight by Lauren Bandy - Food Analyst
It has been two years since the world’s second largest packaged food company, Kraft Foods Inc, split to form Kraft Food Group Inc and Mondelez International. Kraft, the old-fashioned granddad of packaged food, kept a stronghold on its domestic market, with a brand portfolio consisting of US icons including Velveeta, Lunchables and Jell-O. In comparison, Mondelez set its sights on sweeter and warmer climes, becoming a much more streamlined company focusing on confectionery and snacks, and, free of its North American ties, it has been able to concentrate on faster growing markets in Asia Pacific and the Middle East and Africa (MEA). But, with the first full-year financial results in since the split, it seems neither company is faring particularly well since their famous billion dollar divorce, with both posting disappointing reports.
Chocolate versus Cheese
On paper, the spin-off made sense. Kraft has kept a wide product portfolio but become much narrower geographically. In 2013, over two-thirds of Kraft’s global sales came from chilled processed food and dairy, with sauces, dressings and condiments and sweet and savoury snacks also contributing significantly. In contrast, Mondelez has a much more narrow focus, with nearly 90% of sales coming from bakery and confectionery alone – of the nine billion dollar brands it owns (Oreo, Lu, Nabisco, Ritz, Cadbury, Milka, Trident, Halls and Philadelphia), only one, Philadelphia, sits outside these two core categories.