Kraft Shakes Up Organizational Structure

Thursday, January 8th 2004, 12:00 am

By: News On 6

CHICAGO (AP) _ Kraft Foods Inc. announced a shakeup of its organizational structure Thursday after more than a year of shaky results, shifting some units to new locations and putting recently demoted co-CEO Betsy Holden in charge of global marketing and new product development.

The world's second-largest food company behind Nestle said the new makeup is designed to give its businesses a more global, unified strategy rather than continuing to focus on a country-by-country basis. Kraft, the maker of such brands as Oreo cookies, Jell-O desserts and Oscar Mayer hot dogs, markets its products in more than 150 nations.

Chief executive Roger Deromedi announced the new organizational blueprint and a reshuffling of executives in a news release but did not address the apparent likelihood of job cuts as part of the restructuring.

Details of the Northfield, Ill.-based company's business plan, including any effect on costs and staffing levels, will be disclosed Jan. 27 when Kraft releases its final 2003 results and discusses its outlook for 2004 in a presentation to analysts in New York, spokesman Michael Mudd said.

Kraft has about 50,000 employees in the United States and a little more than 100,000 worldwide.

``This new structure will help us accelerate our growth and move faster as a company in our decision-making process,'' Mudd said. ``All of it is designed to help us deliver realistic, sustainable growth for our shareholders.''

As part of the realignment, all Kraft units based in Rye Brook, N.Y., will be moving to new locations. Altria Group Inc., Kraft's parent company, announced separately that it is putting the building up for sale because of the relocations of the employees to facilities in Tarrytown, N.Y.; East Hanover, N.J.; Miami; and Kraft's headquarters location in Northfield.

The office complex in New York's suburban Westchester County employs about 1,000 people, most employed by Kraft and some by Altria units Philip Morris International and Altria Corporate Services.

Kraft is moving its Latin American regional headquarters to Miami from Rye Brook, where about 100 executives for that operation were based.

Deromedi announced a three-pronged focus: A new global marketing and category development group is being formed to accelerate growth and global expansion. Individual commercial units will focus on the best local strategies, country by country. And key functions will be worldwide in scope, to increase effectiveness and drive cost savings.

All three groups will work with Kraft's five main consumer businesses: beverages, snacks, cheese and dairy, convenient meals and grocery.

``The most important opportunities and pressing challenges we face today and going forward demand that we become a more unified, global company,'' Deromedi said. ``But in becoming more global, we must keep and strengthen the local expertise that has built our success.''

Holden, 48, a marketing expert who had been one of the nation's best-known female CEOs, will now report to Deromedi on global category strategies and marketing and head a team of senior executives charged with leading Kraft's global consumer sectors.

Prudential Equity Group analyst John McMillin said the move to a global structure from one split into domestic and international focuses was logical in the wake of Kraft's CEO-level shakeup last month. He said Kraft's reported earnings for 2004 will likely be lower because of a restructuring charge reflecting the move out of Rye Brook and headcount reductions, but cost savings could boost 2005 profits.

Kraft has been in turmoil for more than a year as new products failed, high-level executives left and cheese and cookie sales fell. Holden, who had been co-CEO in charge of North American operations, was removed from that post last month as a result of the company's recent struggles, leaving Deromedi as the sole CEO.

A key sign of trouble emerged last July when Kraft reported an earnings shortfall as a result of weak sales. The company said it would invest an extra $200 million in marketing spending to try to boost sales for its most disappointing U.S. products, but no big payoff from that extra expenditure has been evident.

The food giant's market share for some of its best-known products has been eroded in the face of tough competition, some from lower-cost brands, and consumers' growing health concerns. Kraft also hasn't had a blockbuster new brand since it launched DiGiorno frozen pizza in the mid-'90s.

Kraft's earnings sank 7 percent in the third quarter compared with a year earlier but were up 6 percent through the first nine months of 2003.