Reuters recently reported that Kraft Foods, Inc. (MDLZ) discontinued its Greek yogurt product under the Athenos brand in March this year. The highly nutritional yogurt had become popular in the US in the last few years. The company’s increased focus on building new products under the Athenos brand was cited as the reason behind the discontinuation of the high protein yogurt. Kraft Foods currently markets feta cheese, hummus and pita chips under the Athenos brand.
In a separate incidence, the company voluntarily recalled single code date of its Planters Cocktail Peanuts as it believed the product might have been exposed to water not suitable for consumption during the production process.
Kraft Foods is in the process of separating into two independent public companies: a high-growth global snacks business and a high-margin North American grocery business. Global snacks will consist of the current Kraft Foods Europe and Developing Markets units as well as the North American snacks and confectionery businesses. The North American grocery business would consist of the current US Beverages, Cheese, Convenient Meals and Grocery segments and the non-snack categories in Canada and Food Service. The spin-off is expected to be completed before the end of this year.
Following the spin-off, the North American grocery business, which includes popular brands like Oscar Mayer meat and Kraft cheese, will be an independent, public company and will be called Kraft Foods Group. The Global Snacks unit will be named Mondelez International, Inc.
Our Recommendation
We currently have a Neutral recommendation on Kraft Foods. The stock carries a Zacks #3 Rank (a short-term ‘Hold’ rating).
Overall, we are encouraged by Kraft’s strategy of continued cost management, price increases, expansion into emerging markets and continued strong momentum from its designated Power Brands. Further, the split of its North American business is expected to allow Kraft to focus on its distinct strategic priorities and allocate resources optimally. However, we remain concerned about rising input costs and vulnerability to currency translations.
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