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article imageKraft to split company and slash 1,600 jobs

By Leigh Goessl     Jan 18, 2012 in Business
Last summer Kraft Foods, Inc. announced its plans to make some significant changes in the corporation in 2012.
Yesterday the company issued a statement that outlined several moves it intends to make in the near future.
According to the Jan. 17 press release, the company further detailed the company's grocery and snacks divisions, which were slated last summer to be separated and become two independent companies.
Kraft unveiled the company's plan, which describes shifting of operations and downsizing. While some regions will see an increase in jobs, overall 1,600 jobs will be cut during the company's realignment.
There are three major components Kraft is focusing on. Currently as the separation of the two businesses takes place, the company is striving to streamline its corporate and business unit organizations, realign its U.S. Sales organization, and consolidate U.S. management centers.
"When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations," said Irene Rosenfeld, Chairman and CEO.
"For the past year, the North American team has been working to streamline operations to deliver sustainable top-tier performance and continue to invest in our iconic brands. We're confident that this transformational work will improve effectiveness and fuel the future growth of both companies."
As the grocery and snack businesses are split into two, the company intends to create "more focused teams" and provide a structure that will allow each individual company to customize its business approaches. Rosenfeld will continue to head up the snacks business.
As a part of the streamline, Kraft plans to lower costs, which includes approximately 1,600 job cuts in the U.S. and Canada. This downsizing will occur over the next 12 months, and the job losses incurred will be primarily within the sales, corporate and business unit areas. Kraft said in the statement, 20 percent of those cuts are currently empty positions. Manufacturing areas are not impacted by the any of the current changes.
"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, Executive Vice President and President, Kraft Foods North America and CEO of the future grocery company.
Vernon cited the company's looking to become "more nimble" and allow for Kraft to be able to invested in brands and drive growth.
The realignment of U.S. Sales is planned to allow sales teams to be able to focus on their areas. Local retail support is said to be going to be outsourced to two separate sales agencies. Acosta Sales & Marketing will work with the grocery business and CROSSMARK with the snacks .
As the third component of the plan, when the grocery company is created, the management centers will decrease from the current four locations down to just two. The beverage unit in Tarrytown, N.Y. and Planter's brand in East Hanover, N.J. office will move to Chicago by year's end. Employees will have the option to transfer location should they choose. Kraft also said the Glenview, Ill. management center will shut down sometime next year.
Both the snacks business and the new grocery business will be based out of Chicago.
"Consolidating our management locations is a sound business move," said Vernon. "Having the majority of our business units together in one location will provide greater development opportunities for our people and will help us continue building our brands more efficiently and collaboratively."
The Wall Street Journal reported Kraft has approximately 127,000 employees world-wide, with 46,500 working in North America. WSJ said Kenneth Zaslow, BMO Capital Markets said Kraft's job cuts will "result in incremental cost savings of about $50 million."
Business Week reported Kraft Foods (NYSE: KFT) shares rose 1 percent to close at $38.13 in New York yesterday.
In a separate announcement yesterday, Kraft said its net revenue for full year 2011 "is expected to have grown approximately 10 percent."
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