Kraft Beats on Profit, Looks to Cadbury for Growth

Kraft Foods (KFT) hopes to write a new and exciting chapter in its corporate history this year as it sets its sights on the global market for growth with the acquisition of Cadbury.The British confectioner will give a badly-needed boost to Kraft, the largest U.S. food company, which saw fourth-quarter sales declines in several of its key lines of business. In the fourth quarter, its U.S. cheese revenue fell 13.7%, beverage sales fell 1.9% on weak sales of Maxwell House and Starbucks coffee, and its U.S. snacks business saw a sales fall 2.8% on weakness in cookies and crackers.

Still, as the company slashed costs, its fourth-quarter profit more than tripled to $710 million, or 48 cents per share. Analysts polled by Thomson Reuters expected earnings of 45 cents per share. Fourth-quarter sales, which rose 3.2% to $11 billion due to currency conversions, missed Wall Street's expectations of $11.07 billion. Its shares were trading down 1.13% to $28.76 Tuesday afternoon.

In the newly-created food conglomerate, more than half of sales will come from outside America. Kraft will enter new markets like India, which accounts for $400 million of Cadbury's sales, and will expand in other markets such as Brazil, which will account for $1.5 billion of revenue, compared to $1.1 billion prior to the merger.

"The new Kraft Foods will deliver top tier organic growth with focus on higher growth, higher margin categories and expanding our footprint in developing markets," said Kraft CEO Irene Rosenfeld, who made a presentation to investors at a conference, where she also released the company's earnings for the fourth quarter and the year.

Kraft has had a tough time in the last couple of years as the economic downturn has changed many consumers' habits. In their search for value, many shoppers are increasingly turning away from more expensive brands to store brands for basic foods like cheese and coffee. That has forced Kraft to reduce prices, which eats into sales and profits.

Now, Kraft's Rosenfeld faces a different kind of challenge in ensuring a smooth merger with Cadbury, while also navigating new and growing markets overseas.
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