Restructuring Kraft Foods Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Kraft Foods’ Situation

There are many brands included in the Kraft foods, which make Kraft a world famous and largest brand of food and beverages industry in the world. Its products are sold in super markets in more than 155 countries of the world.

Kraft was listed on stock exchange in 2001 and when it spun off Altria’s stake into the shareholders, which was about 89 % then it became a fully independent company in the year of 2007. During that period, almost every multinational company was trying to restructure in order to reduce cost and other overheads cost for the purpose of getting competitive advantage against each other. Due to this, the food industry of packaged items was under the price wars from retailers and from the companies as well.

There were many private brands in the market and their number was increasing day by day,this also put pressure on the well-established firms to reduce their prices and cost. In developed countries, the percentage of population decreased, which resulted in low growth in volume in the overall or home market.

The cost of input was increasing day by day and the customers are changing their behavior about food which was prepared at home and they continuously shifted to wards meals that were ready made.

Nelson Peltz intentions to buy 3% of Kraft’s stock

Nelson Peltz operatestra in fund management and he is a famous and well known investor who recently invested in many famous companies like Cad bury and Heinz.He also playsa major role in the restructuring of these organizations.

Kraft is a world famous and leading brand in the food industry and it is included in top 10 brands of food industry in the USA such as Nestle and Unilever. As many multinational firms are considering restructuring in order to compete in the industry with largest competitors and rivals to gain competitive advantage. Kraft announced restructuring and Nelson Peltz took part in restructuring of multinational firms.

Kraft is also considering downsizing his operations and units, which are under performing and has planned to pay more attention in the core areas. It is expected that he will use his experience of restructuring and moving and selling of assets in order to gain the financial benefits.

Therefore, by looking at Kraft’s current strategies and its global image into the world’s food industry, Nelson bought 3% of Kraft stock because he has plenty of experience in restructuring many large and multinational firms. It is expected that the heavy purchase in Kraft’s stock will give Nelson heavy and potential gain.

Question 2

Why Kraft buys Danone’s Biscuit Business

Danone is a famous and multinational group in food industry. Kraft bought the biscuit business of Danone’s group in order to get competitive advantage over its competitors. Before purchasing,Kraft’s management conducted research and performed detail analysis in order to analyze its performance.

Kraft’s management expected that the biscuit business of Danone’s group was performing really well. It was generating 16 % earnings before tax and was expecting 7% of synergies in the profit of Danone in coming years.

It is expected that with the purchase of biscuit business sector,many of its sectors will perform very well. It is expecting that the snack division of Kraft will generate 3 billion of extra sales and targeting a sale of 13 billion dollars from 10 billion dollars from the purchase of biscuit division and segment of Danone Company.

The organic growth in biscuit sector of Danone is nearly similar to the overall growth of Kraft, which is 3 to 5 %. Kraft’s management is expecting that this rate of growth will add synergy when the full integration will take place between Kraft and the biscuit segment of Danone. It is also expected that this rate of growth is possible to achieve in next three years.

By purchasing the biscuit segment, Kraft’s management is expecting that their margins in the EU division will increase significantly because this acquisition will give strength to the core business operations of Kraft in EU.
They are also expecting that by following this purchase, their sales of products will enhance significantly.Moreover, the business will grow globally and it will also add a plus point in the global presence and global image. All these factors are the reasons behind the purchase of the biscuit business of Danone by Kraft.Restructuring Kraft Foods Case Solution

Kraft Financing Strategy

Kraft purchased the biscuit sector of Danone to add synergies into his operations and profit margins as well. Moreover, Kraft purchased the biscuit business of Danone for 7.2 billion dollars. Kraft financed this purchase by borrowings and pay 5.3 billion dollar in cash.....................

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