Snacks & Candy

Kraft, Cadbury C-Store Synergies

Rosenfeld hopes to leverage Cadbury's strength in U.S. convenience channel
NORTHFIELD, Ill. -- Kraft Foods Inc. CEO Irene Rosenfeld wants to use newlyand contentiouslyacquired Cadbury PLC's strength in U.S. convenience stores, where it sells Trident and Dentyne gum, to sell more Ritz crackers, according to a Wall Street Journal report.

She also plans to use Cadbury's distribution network in emerging markets such as India and Mexico to sell more Kraft products by sharing trucks and store contacts, said the report.

But to smoothly integrate her new brands, she must mend fissures caused by the $19 billion hostile takeover of the iconic [image-nocss] British confectioner, which angered U.K. lawmakers and Cadbury employees.

The bid's initially stock-heavy mix also vexed Kraft investors including Warren Buffett, whose Berkshire Hathaway Inc. is Kraft's biggest shareholder. Rosenfeld ultimately increased the cash component, but Buffett still thought she overpaid. And her shareholders are anxious to see if she can wring out enough savings to increase earnings by a promised 9% to 11% over the next three to five years. The deal became effective February 2, the report said.

In an interview with the Journal, excerpted here, Rosenfeld shared her plans for Kraft after the merger:

WSJ: How will the deal help you grow in the U.S.?

Rosenfeld: Kraft is strong in traditional supermarket channels and Cadbury is very strong in gas marts and convenience stores. In the U.S., with the strong distribution system that Cadbury has for their gum business, we see excellent opportunity to take [Kraft] biscuit productsOreos, Ritz crackersinto convenience stores.

WSJ:How is Cadbury's business doing so far?

Rosenfeld: Everything we have seen so far would suggest that it is as good as we had hoped and perhaps better.

WSJ: Are you seeing an upturn in U.S. consumer spending?

Rosenfeld: Not yet. In a number of our categories we are still seeing growth trends that are considerably slower than what we had seen historically.

WSJ: Which products are slower?

Rosenfeld: A number of our categories tend to be discretionarygum and candy, biscuits and cookies. It's not so much that consumers aren't eating them [but] they are working hard to use up what they already have before they buy again.

The good news is the most significant impact to our business from the recession was the shift from [restaurants] to food at home, which benefited us. Brands like Oscar Mayer cold cuts, cheese slices, Kool-Aid, play well as value offerings.

WSJ: What are you doing to prepare for an upturn?

Rosenfeld: We make sure we have a range of price points. In coffee, for example, we've got Starbucks [coffee beans] at the upper end and Maxwell House kind of mainstream.
We saw a strong resurgence [in the downturn] of our [lower-priced] Oscar Mayer cold cuts business, but we did not stop investing in more upscale products like Deli Creations [ready-to-assemble sandwiches that Kraft is advertising more heavily].

In [discretionary] categories like gum, candy, biscuits, the [consumer] use rate is a little slower. [But] we are [increasing advertising] in those categories because we believe that companies can benefit from making investments during the downturn to emerge stronger as the economy improves.

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