Kraft Foods Gains Independence, Shares Fall
On Monday, April 2, 2007, Kraft Foods Inc. Chairman and CEO Irene Rosenfeld joined 11 Kraft employees from around the world to ring The Opening Bell at the New York Stock Exchange, marking the company's first day of trading as a fully independent company. Altria Group Inc. completed the spin off of Kraft on March 30, distributing the approximately 88.9 percent of outstanding Kraft shares it owned to Altria's shareholders. First day market trading closed with a loss of 3 percent to $30.85 -- with stock market evaluation levels lower then when Kraft was acquired by Phillip Morris in 1985 -- while Altria Group gained 3.5 percent to $68.22.
However, JP Morgan analyst Pablo Zuanic told Forbes that he expects Kraft stock to strike $40 by June 8 in part due to a possible increase in the company's proposed $5 billion stock buyback. Zuanic also says this strong portfolio of brands makes Kraft a solid investment, much like Heinz and ConAgra Foods, two best performers in 2006. "Neither was a growth story; instead, they were stories largely about restructuring," says Lora Cecere, an analyst with AMR Research. She points out that Kraft is not alone in its struggle to rewire the organization for growth. "One of the struggles that we see is the translation of this requirement into supply chain strategy to look at the supply chain as a value network and an enabler of growth."
Whatever the challenges that lay ahead: "Our board, executive team and 90,000 employees are energized and ready to write this new chapter in Kraft's history," says Charlie Simpson, a spokesperson for Kraft Foods. "We are thrilled with the opportunity to stand on our own as a fully independent company, and are prepared to take advantage of greater financial flexibility to get our business growing faster."
It's more than likely that Kraft won't be the last unit divested by Altria. According to Forbes, analysts are expecting management to hint at the possible split of Altria and Phillip Morris, a move that could be approved around the time of the company's August shareholder meeting.