BOSTON, Sept. 7, 2012 /PRNewswire/ -- The future
leadership team of Kraft Foods Inc.'s North American grocery
business presented its growth plans and financial outlook at a
meeting of analysts and investors today in Boston. The
business, which will become an independent public company in
October, expects to deliver steady and profitable top-line growth,
consistent bottom-line growth and a superior dividend
payout.
(Logo:
http://photos.prnewswire.com/prnh/20090420/KRAFTLOGO)
As previously announced, Kraft Foods Inc. plans to spin-off
Kraft Foods Group, Inc., which will hold Kraft Foods' North
American grocery business, at 5 p.m.
EDT on Oct. 1, 2012. Kraft
Foods Group will trade on the NASDAQ stock exchange under the
ticker symbol "KRFT." Following the spin-off, Kraft Foods Inc.
will be renamed Mondelēz International, Inc. Mondelēz International
will trade on the NASDAQ stock exchange under the ticker symbol
"MDLZ."
"Today, I have the honor to introduce a new Kraft, one with the
spirit of a startup and the soul of a powerhouse," said
Tony Vernon, President of Kraft
Foods North America and future Chief Executive Officer of Kraft
Foods Group. "Our aim is to be North
America's best food and beverage company, and we'll get
there by continuing to offer products consumers love, creating a
performance-based culture that motivates and excites employees and
becoming the best investment in the industry."
"Tony and his team have a clear mission and are ready to
deliver," said John Cahill, future
Executive Chairman of Kraft Foods Group. "I'm confident we have the
right plans and people in place to unlock the value of the North
American grocery business after its spin-off."
Unleashing the Power of an Unparalleled Portfolio
Kraft Foods Group offers a diverse, unrivaled portfolio of
admired brands with products in the beverages, cheese, convenient
meals and grocery categories. Led by iconic brands like
Kraft, Oscar Mayer and
Maxwell House, Kraft Foods Group will be North America's fourth largest consumer
packaged food and beverage company out of the gate, with revenues
of approximately $19 billion in
2011. Ten of the company's brands achieved sales of
$500 million or more in 2011, while
an additional 17 brands posted sales of $100
million or more in 2011. Approximately 80 percent of
Kraft Foods Group's revenue comes from categories in which the
company holds the No. 1 or No. 2 market position.
Growth Plans
Kraft Foods Group's future growth will be driven by a
four-part strategic plan: making its people its competitive
edge, executing with excellence, "turbocharging" its iconic brands
and redefining efficiency.
To make its people its competitive edge, Kraft Foods
Group plans to create a more nimble, less-layered organization and
unleash the skills and creativity of its people by breaking down
walls -- literally and figuratively -- at the company. Incentive
plans will be redesigned to incorporate stock ownership more
broadly to reinforce the alignment between employee and shareholder
interests. Stepped-up investment in talent acquisition and a
newly created "Kraft University" will help create the next
generation of Kraft leaders.
Second, Kraft Foods Group will execute with excellence by
strategically allocating resources to best leverage the breadth of
the company's portfolio, sales and warehouse distribution system.
In April 2012, Kraft Foods Group's
highly regarded sales organization teamed up with Acosta, a leading sales agency, which has
helped expand in-store merchandising coverage by 30 percent and
grow the company's presence on store shelves with a 5 percent
increase in total distribution points. The sales organization has
also realigned its incentives to focus on net revenue growth and
profit dollars.
The third step in the company's plan is to "turbocharge" its
iconic brands so they can grow faster than the market and key
competitors. This means delivering the right products at the
right price points, introducing "big bet" innovations like
MiO, which created an entirely new product category of
liquid beverage enhancers, addressing health & wellness needs
through the reformulation of existing products and introduction of
new products, and investing in world-class marketing. Increased
advertising in brands like Velveeta, Philadelphia, Kraft Mayo and
Capri Sun has already resulted in significant sales
increases.
Lastly, Kraft Foods Group will redefine efficiency to
free up cash, in order to make these important investments in
people, innovation and marketing. The company will employ
several tools such as Lean Six Sigma, supply chain simplification
and strategic sourcing, with the goal of becoming the lowest cost
producer in its categories. Success will be measured through
external benchmarking to reinforce a results-driven culture.
Long-term Outlook
Kraft Foods Group expects to be well-positioned over the
long term to deliver steady, reliable growth with a strong focus on
cash flow to fund a highly competitive dividend and reinvestment in
people, innovation and brand-building. The company will
consistently aim to accomplish:
- Organic revenue growth1 at or above the North
American food and beverage market rate of growth;
- Mid-single digit Operating Income growth;
- Mid-to-high single digit EPS growth;
- Mid-single digit dividend growth; and
- Free Cash Flow1 of at least 85% of Net Income.
"Cash will be king at Kraft," said Tim
McLevish, Chief Financial Officer of Kraft Foods
Group. "What matters to shareholders is total return and
dollars in their pockets. And cash will be the fuel to grow our
business."
2013 Outlook
Kraft Foods Group will launch from a position of strength,
having delivered four consecutive quarters of top- and bottom-line
growth. In 2013, the company expects to continue that momentum
with organic revenue growth in line with market growth, despite a
negative impact of 1 point due to product pruning.
Productivity improvements and overhead savings are expected to
drive 2013 EPS of approximately $2.60
on a GAAP basis. This outlook assumes interest expense of
approximately $520 million and an
effective tax rate of 35 percent. The results for the year also
include restructuring costs of about $240
million (or 26 cents per
share), compared to expected ongoing costs of about $125 million (or 14
cents per share) in a typical year. Free cash flow is
expected to be about 70 percent of GAAP net income – below the
long-term target of at least 85 percent due to an extra tax payment
in 2013 of approximately $200
million.
The management team expects to recommend to the Board an annual
dividend of $2.00 per share.
A live audio webcast of today's presentations, including slides,
is available at www.kraftfoodsgroup.com.
1 Please see discussion of Non-GAAP financial
measures at the end of this press release.
ABOUT KRAFT FOODS GROUP
On Oct. 1, 2012, Kraft Foods
Group, Inc. will spin-off from its parent, Kraft Foods Inc.
(NASDAQ: KFT). A major player in grocery, cheese, convenient meals,
beverages and foodservice, Kraft Foods Group will be one of the
largest consumer packaged food and beverage companies in North
America. With a broad portfolio of iconic brands including
Kraft, Maxwell House, Oscar
Mayer, Planters and JELL-O, Kraft Foods Group had
2011 revenue of $18.7 billion.
Kraft Foods Group will trade on the NASDAQ stock exchange under the
ticker symbol "KRFT."
Also on Oct. 1, Kraft Foods Inc.
will change its name to Mondelēz International, Inc., which will be
a high-growth global snacks company with annual revenue of
approximately $36 billion and leading
brands including Cadbury, Jacobs, LU,
Milka, Nabisco, Oreo, Tang and
Trident. Mondelēz International will trade on the
NASDAQ stock exchange under the ticker symbol "MDLZ." Visit
www.kraftfoodscompany.com and
www.facebook.com/kraftfoodscorporate.
FORWARD-LOOKING STATEMENTS
This press release contains a number of forward-looking
statements. The words "plan," "drive," "build," "can," "will,"
"expect," "aim" and similar expressions are intended to identify
forward-looking statements. Examples of forward-looking statements
include, but are not limited to, statements regarding Kraft Foods
Group's strategic plans, financial targets and long-term guidance,
including revenue and operating income growth, EPS and margins;
Kraft Foods Group's future dividends; Kraft Foods Group's
opportunities to improve profitability and generate cash; Kraft
Foods Group's restructuring costs; the timing and completion of the
spin-off of Kraft Foods Group; and Kraft Foods Group's expectations
and goals for efficiency and productivity, resource allocation,
reinvestment in our business, sales execution, cash management,
free cash flow, innovation and employee recruitment, compensation
and investment. These forward-looking statements involve risks and
uncertainties, many of which are beyond Kraft Foods Group's
control, which could cause Kraft Foods Group's actual results to
differ materially from those indicated in the forward-looking
statements. Please see Kraft Foods Group's risk factors, as they
may be amended from time to time, set forth in its filings with the
SEC, including Kraft Foods Group's Registration Statement on Form
10 filed with the SEC and subsequent reports on Form 8-K. Kraft
Foods Inc. and Kraft Foods Group each disclaims and does not
undertake any obligation to update or revise any forward-looking
statement in this press release, except as required by applicable
law or regulation.
NON-GAAP FINANCIAL MEASURES
Kraft Foods Group reports its financial results in
accordance with accounting principles generally accepted in
the United States ("GAAP").
Kraft Foods Group's top-line measure is organic revenue, which
excludes the impacts of related party transactions, divestitures,
currency and accounting calendar changes. The company uses
organic revenue and corresponding metrics as non-GAAP financial
measures. Management believes organic revenue better reflects the
underlying growth from the ongoing activities of Kraft Foods
Group's business and provides improved comparability of
results.
The company also uses free cash flow as a non-GAAP financial
measure. Free cash flow is defined as net cash provided by
operating activities less capital expenditures. Management believes
free cash flow shows the financial health of, and how efficiently
we are running, the company.
Non-GAAP financial measures should be viewed in addition to, and
not as an alternative for, the company's results prepared in
accordance with GAAP. In addition, the non-GAAP measures the
company is using may differ from the non-GAAP measures used by
other companies.
SOURCE Kraft Foods