Analyst Report

Khoa Huynh
Professor LaRosa
Samantha Schoenberg
Business 101
December 2, 2009
CONTENTS
I. Executive Summary
II. Company Profile
a. Company Name and Stock Symbol
b. Corporate Headquarters Location
c. Website
d. Number of Employees
e. Key Executives
III. Stock Price Information
a. Graphs
b. Analysis
IV. Company Strategy/Mission
V. Industry/Market Sector
a. Overview
b. Outlook
c. Competitive Environment
VI. Key Financial Information
VII. Current Issues
a. Current Event 1
b. Current Event 2
c. Current Event 3
VIII. Recommendations
IX. Work Cited
 Executive Summary

With their variety of different brands and their drive to

meet consumer’s needs, Kraft Food is now one of the top food
companies in the world. Kraft’s stock price reflects the different
activities that Kraft partakes in as their stock grows and
declines. Most of Kraft’s stock volatility revolves around Kraft
most recent activity in Cadbury. The merging of Kraft Food Inc.
and Cadbury will bring together a new line of products and
positive performance. However Kraft Food is still waiting for
Cadbury to respond to their offer of $16 billion. Kraft food has
room to expand and the potential to be at the top of the food
industry.
Company Profile
Company Name: Kraft Foods Inc.
Stock Symbol: NYSE: KFT (Common Stock)
Corporate Headquarters Location: 3 Lakes Dr. Northfield, IL
60093 United States
Website: www. kraftfoodscompany.com
Number of Employees: 98,000
Key Executives:
Chief Executive Officer and Chairman: Irene Rosenfeld
Chief Financial Officer: Timothy Mclevish
 Stock Price Information

Over the past month Kraft’s Food stock experienced a lot of

incline and decline in their stock price. As presented in the graph, the
first week going into November, Kraft’s Food was slightly above $27.5
in value. On November 4th Kraft’s Food dropped down to nearly $26.5.
Kraft’s Food stock dropped again on November 9th to $26.5 when they
presented a lower bid for Cadbury. However, after the 9th, Kraft’s Food
started to experience an upward trend going well above $27.5 in value.
After November 17th, Kraft’s Food stock started to decline, ending at
$26.6 on November 27th.
 Compared to the Dow Jones Industrial Average, Kraft’s Food
follows the same trend percentage wise. There was a period of time
from October 28th to November 5th where Kraft’s Food was well above
the Dow Jones. When Kraft’s Food started declining on October 5th, it
started to drop below Dow Jones. Kraft’s Food constant decline from
November 17th kept their percentage well below Dow Jones stock trend
as can be seen on the graph.
 Company Strategy/Mission

Kraft Food sets out to make delicious food and connections with
its consumers. Consumers inspire the company make decisions with the
consumer’s wants and needs in mind. Whether it’s watching your
weight, preparing to celebrate, grabbing a quick bite or sitting down to
a family night, Kraft creates food that is wholesome and delicious. Kraft
is constantly looking for fresh ideas to improve their workplace, their
partnership, their communities, and their world. Kraft’s biggest drive is
their consumer (Kraft).
 Industry/Market Sector

Overview:

Kraft was founded in Chicago, Illinois in 1903 and is now the

second largest food and beverage company in the world. They
manufacture and market packaged food products, including snacks,
beverages, cheese, convenient meals, and various grocery products.
Kraft has operations in more than 70 countries and sells their products
in approximately 150 countries. They have nine brands with revenues
exceeding $1 billion: Kraft cheeses, dinners and dressings; Oscar Mayer
meats; Philadelphia cream cheese; Maxwell House and Jacobs coffee;
Nabisco cookies and crackers and its Oreo cookie brand; Milka
chocolates; and LU biscuits. The company operates with more than 50
brands that generate revenues of at least $100 million (Kraft).
Outlook:

In 2008, Kraft implemented some new changes. U.S. cheese was

organized as a standalone operation segment in order to create a more
self-contained and integrated business unit in support of faster growth.
The macaroni and cheese category, as well as other dinner products,
were moved from Kraft’s U.S. Convenient Meals segment to the U.S.
Grocery segment to take advantage of operating synergies. Canada and
North America Foodservice were structured as a standalone reportable
segment. This change allowed Kraft to deliver on the unique
requirements of the Canadian consumer and customer while
maintaining strong North American linkages to innovation, new product
development, and new capabilities to drive the business. Furthermore,
it allows the company to manage strategic customer decisions and
continue to capture cross-border sales and marketing synergies within
the Foodservice operations (Kraft).
Competitive Environment

Kraft is #1 in the U.S. food industry and keeps up with demands

driven by consumer taste and health consideration. It is a big producer
that caters to a wide variety of clients by introducing different brands
and products. Three major competitors of Kraft are ConAgra Foods,
Inc., Nestle S.A., and Sara Lee North American Retail. Kraft’s major
competitors offer different variations of the same product. ConAgra
Food’s Inc. are known for their frozen dinners, Nestle offers great
tasting and healthy baby formula, milk and bottled water mixes, and
Sara Lee North American Retail has a widen pantry of ready to eat
frozen cake, pies and cheesecakes. Kraft surpasses the competitors
with innovative ideas and offers products at the right price.
 Key Financial Information

Kraft: All Data Shown in Millions of U.S. Dollars

Financial Data 2008 2007 %Chg Actual Change
Sales $42,201 $36,134 16.80% $6,067
Net Income $2,901 $2,590 12.00% $311
Cash $1,244 $567 119.40% $677

Profit Margin Net Income $2,901 7% $2,590 7%

Sales $42,201 $36,134

Current Ratio -
Liquidity Current Assets $11,366 1.03x $10,737 0.63x
Current Liabilities $11,044 $17,086

Kraft 2008 Sales grew almost 17% from 2007 net sales. Kraft also
experienced an increase in Net Income of about 12% from 2007 and an
increase in Cash of about 119%, almost tripling their cash from 2007.

In the Chart above, Kraft maintains the same profit margin in 2008
as in 2007. But the speed by which their company can turn assets into
cash increased from 0.63x in 2007 to 1.03x in 2008.
 Current Issues

Kraft Bank Ties Pose Problem for Other

Cadbury Suitors

Kraft, who already secured enough money for the Cadbury offer
that they proposed on November 9th, has prevented many banks from
making major loans to other Cadbury’s bidders. Kraft had taken loans
from nine banks lead by Citigroup and the number of banks financing
Kraft’s bid could grow to eighteen. Also stated in Cauchi’s article, “Kraft
preemptive measure has shrunk the pool of banks available to finance
counter offers, though it’s not clear whether Kraft has hobbled its rivals
enough to discourage them from bidding.” This strategy from Kraft
could ensure their bid for Cadbury (Cauchi).
Kraft Given November 9th Deadline to make
Cadbury Offer

On September 30th, 2009 Kraft Food was given six weeks notice to
make an official formal proposal on Cadbury or end their interest,
according to Britain’s mergers and acquisitions regulator. Cadbury had
already declined Kraft’s original offer of $15.8 billion proposed on
August 28th. Cadbury wanted a higher offer from CEO Irene Rosenfeld.
Rosenfeld responded by saying that Kraft will remain “disciplined in its
actions” and will not make any higher offers (Cleary).
Kraft: No Need to Sell Assets for Cadbury Bid

Kraft claims that they do not need to sell any brand to make the
purchase of Cadbury for $16 billion. Kraft spokeswomen Yeatman made
that claim in response to a report in the New York Times that said,
“Kraft, the world’s second-largest food company, could sell assets to
finance its bid for Cadbury.” However Cadbury had rejected the $16
billion offer because they believed that being absorbed into Kraft would
be “unappealing.” The article ended saying that Kraft will likely have to
raise its bid to get a deal with Cadbury (Dorfman).
 Recommendations

I would buy and advise clients who are looking for more of a long
term investment to buy this stock based on the data and key industrial
information provided in this analyst report. Although the stock chart
shows a lot of activity happening in the recent four weeks, Kraft stock
shows a lot of potential to grow. Many news releases also give a good
preview to where Kraft Food Inc. is heading. The merge of Kraft and
Cadbury will dramatically increase the stock. Right now, this stock is a
very good stock to invest in because of their stable increase and their
recent activities.
 Work Cited
Cauchi, Marietta, and Kate Haywood. “UPDATE: FOCUS: Kraft Bank
Ties Pose Problem for other Cadbury Suitors.” CNNMoney. 24
Nov. 2009. Web. 25 Nov. 2009. <
http://money.cnn.com/news/newsfeeds/articles/djf500/20091.
1241003DOWJONESDJONLINE000263_FORTUNE5.htm>
Cleary, Andrew. “Kraft Given Nov. 9 Deadline to Make Cadbury
Offer.” Bloomberg. 30 Sep. 2009. Web. 20 Nov. 2009. <
http://www.bloomberg.com/apps/news?pid=20601103&sid=asl
bZPFOfDWA>
Dorfman, Brad. “Kraft: No Need to Sell Assets for Cadbury Bid.”
Reuters. 15 Sep. 2009. Web. 20 Nov. 2009. <
http://www.reuters.com/article/hotStocksNews/idUSN1576962
0090915>.
Kraft Foods. Oct 2007. Kraft Foods Global, Inc. 14 Nov 2009.
<www.kraftfoodscompany.com>