Kraft Foods Inc.KFT

Morningstar Rating

Stock Research and Analysis

by Erin Swanson, CFA

Kraft continues to expand its global distribution platform, most recently with the acquisition of Cadbury. In our opinion, Kraft is paying a fair price for this attractive asset, but the firm's use of its undervalued stock makes the deal slightly destructive Read more

Bulls Say

Kraft is the largest packaged foods company in North America and the second largest in the world, behind Nestle. The breadth of its product offerings makes it a key supplier for retailers.

With the acquisition of Cadbury, the combined firm will leapfrog Mars/Wrigley to operate as the leading player in the higher-growth, higher-margin global confectionary industry.

The firm's restructuring efforts aim to optimize Kraft's trade spending and eliminate its lower-margin products--moves that we believe will enhance the returns for the firm over the long term and ultimately its shareholders.

Kraft owns powerful brands that generate more than $1 billion in annual sales, including Kraft, Nabisco, Oscar Mayer, Maxwell House, Philadelphia (cream cheese), and Oreo.

Warren Buffett's Berkshire Hathaway BRK.A BRK.B sees value in Kraft's shares and initiated an investment in 2007. It is now Kraft's largest shareholder, owning more than 9% of its shares. Read more

Bears Say

Margins have been squeezed by higher commodity, packaging, and distribution costs, along with increased marketing and promotional spending in the face of private-label growth and retail consolidation.

Kraft generates more than $8 billion in annual sales from packaged meats and cheese, two categories that have become commodified as consumers are less willing to pay up for the company's brands.

The integration of Cadbury could prove to be challenging for the packaged-food firm. Read more

Strategy

Strategically, Kraft has retooled the organization to strengthen its brand portfolio and expand its geographic reach through acquisitions of desirable brands and disposals of less-profitable ones. These Read more

Management

Chairman and CEO Irene Rosenfeld's extensive tenure at Kraft (which spans more than 25 years after accounting for a two-year stint at PepsiCo PEP) is advantageous for the firm and for its shareholders. In our opinion, Rosenfeld has been instrumental Read more

Profile

Kraft operates as the leading packaged foods firm in North America and the second-largest packaged foods company in the world behind Nestle. The firm sells snacks, beverages, Read more

First Name

Last Name

Email Address

Zip Code

Create Password

Verify Password

(6-15 characters; case sensitive)

What is your occupation or job title?

Select...

Your registration indicates agreement to the terms of use.

A Dividend on the Strip, Teen Wallet Angst, and Black Friday
Watch more