Essay 1614

From The Chicago Sun-Times…

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Kraft takes Cream of Wheat off its breakfast menu

BY CHERYL V. JACKSON, Business Reporter

Kraft Foods Inc. is dumping the Cream of Wheat line, selling the century-old hot cereal brand to a New Jersey-based food business for about $200 million.

A new subsidiary of B&G Foods Inc., the canned meat, spices and other food products company that owns Ac’cent, Emeril’s, Ortega and Red Devil brands, also will get the Cream of Rice brand and some manufacturing equipment in the cash deal expected to close this quarter, the companies announced Tuesday.

Cream of Wheat, around since 1893, has been a Kraft operation since 2000 when then-Kraft parent Philip Morris Cos. bought Nabisco Holdings, which owned the cereal.

The hot cereals, which generated about $60 million in sales last year, didn’t jibe with Kraft's slimming portfolio, said spokesman Charlie Simpson.

“We’re focusing on businesses that have the greatest long-term sustainable competitive advantage,” he said.

Kraft, the Northfield-based food and beverage giant that owns Oreo, Kool-Aid and Oscar Mayer, is preparing to be spun off from parent Altria Group Inc. and is putting resources behind brands it thinks have long-term growth potential. New York-based Altria plans on Jan. 31 to announce the date it will separate Kraft from its tobacco units, Philip Morris USA and Philip Morris International.

The cereal sale is part of an initiative to cut about 10 percent of the products accounting for its $34 billion in annual revenue and eliminating 14,000 jobs and about 40 plants to save $1.16 billion by 2010, said Gregg Warren, equity analyst at Morningstar Inc.

“It’s in the same line as Milk-Bone and Minute Rice,” Warren said of brands Kraft sold last year. Milk-Bone pet snacks was sold for $580 million; Minute Rice for $280 million. “They’re going in the direction similar to that of a lot of packaged food companies, trying to narrow down their focus into core categories and spending on growing categories and lines that really resonate with consumers.”

The B&G subsidiary is borrowing money to make the purchase.