Investors may not care that Irene Rosenfeld's appointment as CEO makes the food giant the world's largest company led by a woman. What they want is a healthier stock price
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It's a homecoming for Kraft Food's new chief executive officer, Irene Rosenfeld. The 53-year-old Rosenfeld, named to the foodmaker's top spot on June 26, spent more than 20 years at Kraft before leaving three years ago. Rosenfeld has headed Frito-Lay, Pepsi's (PEP) snack's division, since the fall of 2004.
Some insiders say the Kraft (KFT) job is one she should have gotten back in 2001. Instead, the board tapped two other Kraft veterans, Betsy Holden and Roger Deromedi, as co-chief executives. Holden was demoted in 2003, leaving Deromedi as the sole CEO of the nation's top packaged-foods company. Now, Rosenfeld's appointment makes Kraft, with a market value of more than $50 billion, the largest company run by a woman.
"I think there's an optimistic feeling at the company. We're happy to welcome her back." says Jean Spence, Kraft executive vice-president of global technology and quality, who worked for Rosenfeld. "Her focus has always been on growth—growth through innovation."
LACKLUSTER STOCK. Kraft sure could use that. Rosenfeld, who held a town meeting for employees shortly after her appointment was announced, returns at time when Kraft is at a crossroads. It has struggled amid fierce global competition and rising commodity prices. And the company's cupboard of innovation has largely been bare, leaving it especially vulnerable to generic and retailers' brands.
Certainly, Deromedi tried to get Kraft back on track. He undertook a massive restructuring plan that reduced the head count and slimmed the product portfolio—investing some of those savings in product development and marketing. But none of that sparked significant growth. Sales by volume barely budged last year. Operating margins have fallen from 21% in 2002 to 15% in 2005.
Stock performance has also been lackluster. Kraft shares dropped by more than 20% in 2005. The stock is up to around $31, as of June 25. But that's roughly the same price Kraft traded at when it went public back in 2001.
At the same time, Kraft is preparing for a complete spin-off from its parent company, Altria. The cigarette maker owns around 87% of Kraft. Altria management has indicated that it plans to complete the split once the tobacco-litigation environment sufficiently improves. Analysts speculate that decision could come later this year.
HARPING ON HEALTH. "While the fundamentals of the business continue to improve, we are confident that Irene will accelerate the execution of Kraft's growth strategy, build value for shareholders, and lead Kraft when it becomes a fully independent company," Louis C. Camilleri, chairman of the board of Altria and Kraft Foods, said in a press release. Neither Camilleri nor Rosenfeld were available for comment.
Even though Rosenfeld spent less than two years at Frito-Lay, she made an impression. She pushed the company further into healthier snacks, a segment that showed double-digit growth in 2005 compared with high single-digit growth for the traditional products in the portfolio.
Under Rosenfeld, Frito-Lay introduced a 90-calorie Quaker chewy granola bar with 30% fewer calories than the original bar, and the group acquired Stacy's Pita Chips—adding to its drawer of wholesome snacks. In all, net revenues at Frito-Lay grew 8%, to $10.3 billion, last year while operating profits were up 5.5%, to $2.5 billion.
CONSUMER FOCUS. Current and former Kraft executives say Rosenfeld, who holds a PhD in marketing and statistics from Cornell University, is in tune with what consumers want. In her time at Kraft and General Foods (both owned by Altria, then called Philip Morris, and integrated in 1989), Rosenfeld played a key role in the purchase of juice brand Capri-Sun.
That move filled a hole in the product portfolio for Kraft, which took the regional brand national and turned it into a big winner. She also helped turn around Jell-O and is credited with the successful integration of snack maker Nabisco, which Kraft bought for $19 billion in 2000.
"She really understands the consumer. She has the innate ability to translate that into an appropriate business strategy," says former boss John Bowlin, who headed up General Foods when Rosenfeld was there. Rosenfeld, he says, "is an excellent choice."
Carter is a correspondent in BusinessWeek's Chicago bureau
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