Kraft to cut 1,600 positions in North America

(McClatchy-Tribune Information Services) Jan 17 02:31 PM EST 

Kraft Foods plans to cut 1,600 positions in the U.S. and Canada this year as it prepares to split into two companies, the Northfield-based packaged food giant announced Tuesday.

Representing 3.4 percent of Kraft's North American 46,500 employees, the positions are primarily in sales, corporate and its business units, as the company plans to close three corporate offices.

As part of its restructuring, Kraft will shut down its center in Glenview, home to the company's grocery, food service, cheese and dairy businesses and its test kitchens. A Kraft spokesman said the company has yet to make a decision regarding the future of its Northfield headquarters. Both new companies will be based in the Chicago area.

About 40 percent of Kraft's cuts will be part of a realignment of its U.S. sales team as the new North American grocery company plans to outsource distribution. About 20 percent of the cuts are from open positions. 

Manufacturing jobs will not be affected.

"When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations," Kraft CEO Irene Rosenfeld said in a statement. "We're confident that this transformational work will improve effectiveness and fuel the future growth of both companies."

Kraft spokesman Mike Mitchell said it's too soon to estimate how many Chicago area jobs will be lost. However, with two corporate offices moving here, he said, the local job impact will be a "net positive."

Kenneth Zaslow, an analyst with BMO Capital Markets, estimated that the cuts should save Kraft $50 million. In tandem with the jobs announcement, Kraft released updated 2011 outlook, raising its operating earnings per share guidance by a penny, to $2.28. Organic net revenue, or sales adjusted for price increases, is expected to increase 6.5 percent, up from "at least" 6 percent.

Company shares rose slightly in late-morning trades, up 1.6 percent to $38.36.

Kraft plans to create an approximately $17 billion North American grocery business and an approximately $31 billion global snack business in late 2012. In a statement, Kraft said that the sales reorganization is aimed at creating customized routes to market for each new company.

The yet-to-be named global snacks business, which will include brands such as Oreo, Ritz and Trident, will use a direct-to-store delivery model and will bring aboard many employees from Kraft's North American grocery sales unit.

Kraft's North American grocery business, with brands such as Oscar Mayer, Planters and Kraft Macaroni & Cheese, will use Acosta Sales & Marketing for its grocery and other retail distribution. Acosta is the company Starbucks selected for its own grocery distribution when it terminated its arrangement with Kraft in 2011.

Kraft anticipates the completion of its sales reorganization by April 1.

Kraft will close two other offices besides its Glenview center: Its beverage division in Tarrytown, N.Y., and its Planters division in East Hanover, N.J, both by the end of this year.

"Making these tough choices is never easy, and we recognize the impact these changes will have on many of our people and their families," said Tony Vernon, future CEO of the North American grocery business. "But our plan for a more nimble company, combined with the current economic and competitive pressures, led us to this point. Taking the necessary steps now will enable us to continue investing in our beloved brands to drive growth."

The Oscar Mayer management center in Madison, Wis., will remain the site for the Oscar Mayer business unit.

The global snacks company will be also be headquartered in the Chicago area, with site choices currently under consideration.

(c)2012 the Chicago Tribune

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