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Kraft Foods Shareholders OK Mondelez

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Kraft Foods, Inc. , which is in the process of splitting into two independent companies, a global snacks company and a North American grocery company, recently announced that its shareholders have approved the name Mondelez International, Inc. for the global snacks business. More than 90% of the shareholders who cast their votes favored the new name. Mondelez literally means a delicious world.

Following the split, global snacks will consist of the current Kraft Foods Europe and Developing Markets units as well as the North American snacks and confectionery businesses. The North American grocery business would consist of the current US Beverages, Cheese, Convenient Meals and Grocery segments and the non-snack categories in Canada and Food Service. The spin-off is expected to be completed before the end of this year.

The North American grocery business, which includes popular brands like Oscar Mayer meat and Kraft cheese, will be an independent public company called Kraft Foods Group, Inc. and will trade under the ticker symbol KRFT. The snacks company, Mondelez will market popular brands like Cadbury, Jacobs, LU, Milka, Nabisco, Oreo, Tang and Trident and will trade under the ticker symbol MDLZ.

Our Recommendation

We currently have a Neutral recommendation on Kraft Foods. The stock carries a Zacks #3 Rank (a short-term ‘Hold’ rating).

Overall, we are encouraged by Kraft’s strategy of continued cost management, price increases, expansion into emerging markets and continued strong momentum from its designated Power Brands. Further, the spin-off is expected to allow Kraft to focus on its distinct strategic priorities and allocate resources optimally. However, we remain concerned about rising input costs and vulnerability to currency translations.

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