Kraft Preview: All Eyes on Rosenfeld's Vision for the Cadbury Merger

Kraft Foods (KFT) will soon become a $50 billion powerhouse when it completes its merger with the British confectionary company Cadbury (CBY). And on Tuesday morning, when Kraft releases its fourth-quarter 2009 earnings, the focus will be almost entirely on CEO Irene Rosenfeld's vision for the combined company.
When announcing its takeover of Cadbury earlier this month, Rosenfeld said: "This combined company has a phenomenal future, and I firmly believe it will deliver outstanding returns to our shareholders." Exactly how she plans to achieve those "outstanding returns" is something investors are eager to hear. This is the first time the company's management will talk to investors since Kraft acquired control of Cadbury.

Kraft, the largest food company in the world, is expected to post fourth-quarter earnings of 45 cents a share, according to analysts polled by Thomson Reuters. Kraft has increased its full-year profit outlook twice in recent months, after the company managed to eke out gains from cost-cutting. "Going forward, we will generate substantial savings in procurement, manufacturing, customer service and logistics," said Rosenfeld recently.

Out of Step With Americans' New Tastes

However, Rosenfeld is yet to prove herself as someone who can lead the charge for dynamic growth at the company. When Kraft made its initial bid for Cadbury, its chairman, Roger Carr, jeered Kraft in a letter to Rosenfeld, calling her company "a low growth conglomerate ... with a considerably less focused business mix and historically lower growth."

Rosenfeld, who became CEO in 2006, hasn't had an easy reign. Kraft's flagship products, which include Kraft and Velveeta cheese and Oreo cookies, haven't been a good fit with the shift in American tastes toward healthier and organic alternatives. And Rosenfeld has had to rely more on cost-cutting for growth, rather than successful blockbuster new products.

Now, however, with the addition of Cadbury, Rosenfeld's product lineup expands dramatically. Also, Cadbury's broad reach in emerging markets will open a new avenue of growth for Kraft. "Together we have impressive global reach and an unrivaled portfolio of iconic brands, with tremendous growth potential," she said.

But Rosenfeld's tough task begins now with shepherding a smooth integration with Cadbury and executing her global vision. Already, it's proving tough. Some members or Britain's Parliament have formed a committee that will question senior executives of Kraft on the company's plans for the merger. The hearing stems from Kraft's decision to close a Cadbury plant in the U.K. after initially saying that it would likely remain open.
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