Kraft to Trim Sodium Levels in Pre-Packaged Food Products

Reuters

Kraft Foods, the maker of Oreo cookies and Velveeta cheese, plans to cut sodium levels in its North American products by about 10 percent over the next two years, making it the latest food maker trying to address health concerns as pressure mounts from government.

The largest North American food maker said on Wednesday that its plans would eliminate more than 10 million pounds -- or more than 750 million teaspoons -- of salt from some of North America's most popular foods.

The news came a day after the world's No. 2 soft-drink maker, PepsiCo, said it would to stop sales of full-sugar soft drinks to primary and secondary schools on a global scale by 2012.

Lawmakers in more than a dozen U.S. states are campaigning to tax sugary beverages to cover obesity-related health costs.

Earlier this week, U.S. first lady Michelle Obama -- who is leading a major administration initiative on child obesity -- urged food makers to work faster to re-formulate or re-package food to make it healthier for kids.

"We need you not just to tweak around the edges but to entirely rethink the products that you're offering, the information that you provide about these products, and how you market those products to our children," she said.

Last month, President Barack Obama asked Cabinet officers to come up with an interagency plan and asked his wife to head a national public awareness effort.

Two industry groups, the American Beverage Association and the Grocery Manufacturers Association have pledged their help.

The administration also said it would provide $400 million for its Healthy Food Financing Initiative to eliminate "food deserts" where the only food sources are typically convenience stores or gas stations.

Cadbury Faces Rhetoric Shift After Accepting Kraft Bid

The Wall Street Journal

LONDON—Only last week, Cadbury PLC Chairman Roger Carr dismissed the management of Kraft Foods Inc. as unworthy of investor confidence, attacked its track record and said there was "no strategic, operational, managerial or financial reason" why Kraft and Cadbury should become one company.

On Monday, he and the rest of the Cadbury board unanimously voted to accept Kraft's improved, $19.4 billion offer for Cadbury. In a statement, Mr. Carr said he was "pleased" with Kraft's commitment to Cadbury's heritage, values and employees.



The move ends the independence of a 186-year-old icon of U.K. industrial history whose products, beloved by many in Britain and parts of the former British empire, include Dairy Milk, Crème Eggs, Dentyne chewing gum and Halls cough drops.

Mr. Carr now faces the task of demonstrating that his four-month war of words against Kraft succeeded in achieving a better deal for Cadbury shareholders than the one Kraft initially put on the table.

That could be difficult, given the multiple of 13 times Cadbury's earnings that Kraft is paying is less than the multiples paid in other recent food sector deal—a point Mr. Carr himself has made during the takeover battle.

Mr. Carr, who counts "The Art of War" among his favorite business books, personally penned many of Cadbury's tough public statements in the takeover battle. Along with the task of integrating the two companies, Kraft and Cadbury now must find a way to climb down from the belligerent tone between them.

"It will be very difficult," said Allyson Stewart-Allen, director at consulting firm International Marketing Partners, adding that Kraft management faces a challenge persuading Cadbury's work force of the deal's merits. " Irene Rosenfeld, the Kraft [chief executive officer], will have to sell the value, logic and benefits to Cadbury's work force unless she wants to risk having demoralized workers potentially sabotaging the deal. She has a big marketing job ahead of her."

From the start, the battle for control over Cadbury has been marked by some very aggressive rhetoric—much of it from Mr. Carr. His strategy of insulting Cadbury's suitor included calling Kraft an "unfocused conglomerate" with "unappealing categories" and a management that "under-delivers."

"The message has to be very clear in a situation that is complex," said Mr. Carr in an interview last Thursday. "We've left no doubt in anyone's mind about the value of the business."

Even Todd Stitzer, Cadbury's mild-mannered CEO, joined in the Kraft bashing, warning of cost cuts and job losses "all over the Cadbury world."

But Mr. Carr played bad cop. A 63-year-old takeover veteran, Mr. Carr has chaired some of the most prominent boards in corporate Britain, including Thames Water, now a unit of German utility giant RWE AG, pub group Mitchells & Butlers PLC and Centrica PLC, the parent company of British Gas in the U.K. and Direct Energy in North America, where Mr. Carr is still chairman. Buying and selling companies has been part of every post.

Early in his career, Mr. Carr led what came to be known as the "hit squad" at industrial holding company Williams PLC, which acquired and restructured underperforming businesses in the deal-crazed 1980s, when former Prime Minister Margaret Thatcher deregulated the U.K. economy. As the group's CEO, he later led the group's break-up into two companies, which were sold off for a chunky premium. In 2000, as chairman of Thames Water, he got Germany's RWE to raise its bid for the U.K. company four times, eventually convincing the buyer to pay four times revenues, a 46% premium.

"His experience makes him ideal material for a situation like this," says John Parker, the chairman of Anglo American PLC who until last year chaired the Court of the Bank of England, where Mr. Carr is still a director. "He will do what's right for shareholders. He will not sell the company on the cheap."

A low point in Mr. Carr's career, shortly before he was named chairman of Cadbury, came in early 2008 at Mitchells & Butlers, a company operating pubs, restaurants and bowling alleys where financial bets under his chairmanship resulted in massive losses that led to his resignation. Mr. Carr called the event a "tragedy" at the time. Today, he says a long career naturally includes highs and lows, and points out that he also made money for Mitchell & Butler shareholders and fended off unwelcome bids for the company.

To be an effective chairman, he said recently, involves understanding "the choreography of a bidding process." A majority of Cadbury shareholders must now accept Monday's deal.

"I have clearly had involvement in a lot of corporate transactions," Mr. Carr said last week. "I've built something of a reputation for building shareholder value."

Mr. Carr came to Cadbury as a director in 2000 and was named chairman in 2008, two months after the sale of Schweppes, the group's drinks business, turned Cadbury into a confectionery-only business. It is now the world's second-largest sweets company behind U.S. chocolate behemoth Mars Inc. Combined, Kraft and Cadbury will outsize Mars.

Buffet Votes 'No' In Kraft's Bid For Cadbury

Fortune

Kraft's biggest shareholder isn't sweet on the food giant's hostile bid for candy maker Cadbury.

Billionaire investor Warren Buffett said Tuesday he voted against Kraft's plan to issue new shares for the approximately $16 billion cash and stock offer. Buffett said the merger -- which has been opposed by Cadbury's board -- would hurt Kraft shareholders.

Buffett is CEO of Berkshire Hathaway, which owns 138 million Kraft shares. That gives it a 9.4% stake in the Northfield, Ill., maker of Oreo cookies and American cheese slices and makes Berkshire Kraft's largest shareholder.



The news came on the same day that Kraft announced it was selling its North American frozen pizza business to Swiss food giant Nestle for $3.7 billion. Kraft said it would use the proceeds from that sale to increase the cash portion of its offer for Cadbury. Cadbury rejected the new bid, calling it "derisory."

Kraft is asking shareholders to approve a proposal that would let Kraft issue 370 million common shares in the Cadbury deal. Kraft began mailing voting materials to shareholders last month for a vote scheduled for Feb. 1

The company needs shareholder approval for the move to satisfy rules about increases in outstanding shares set by the New York Stock Exchange, where Kraft is listed.

Buffett's opposition to the proposal could complicate Kraft CEO Irene Rosenfeld's efforts to expand her company's global reach. Kraft shares have traded at a discount to food industry peers amid questions about the company's growth prospects. Kraft noted in mailings to shareholders that a "no" vote would prevent it from issuing the planned number of shares in the Cadbury deal.

Kraft proposed in September to buy Cadbury in a transaction it said would create a "global powerhouse in snacks, confectionery and quick meals." London-based Cadbury quickly rejected the unsolicited proposal, saying it "fundamentally undervalues" the company.

Taking that analysis a step further, Buffett said Tuesday he believes the Kraft proposal fundamentally undervalues Kraft, by relying in part on massive stock sales at what he suggests are cut-rate prices.

"Kraft stock, at its current price of $27, is a very expensive 'currency' to be used in an acquisition," Buffett said in a statement Tuesday morning. "In 2007, in fact, Kraft spent $3.6 billion to repurchase shares at about $33 per share, presumably because the directors and management thought the shares to be worth more."

Buffett himself seems to have been in that camp. Starting in 2007, Berkshire paid an average of around $33 a share for the bulk of its Kraft holdings. At current prices Berkshire is under water on that investment, its third-largest in a single public company, by around $900 million.

The price of Kraft shares isn't Buffett's only quibble with the Kraft proposal. He said a "yes" vote would give management the leeway to change the terms of the deal, further damaging shareholder interests.

"The share-issuance proposal, if enacted, will give Kraft a blank check allowing it to change its offer to Cadbury -- in any way it wishes -- from the transaction so carefully described to shareholders in the proxy statement," Buffett wrote. "We worry very much, indeed, that there will be a change."

The Kraft bid is worth about 740 pence per Cadbury shares. But Cadbury shares have traded near 800 pence in London, as investors wager that Kraft would be willing to raise its offer.

Kraft said Tuesday that it expected to offer about 60 pence more in cash to Cadbury shareholders following the completion of the frozen pizza sale to Nestle. But the total value of the offer is not changing. Kraft also said it was extending its offer, which originally set to expire on Tuesday, to February 2.

Hershey (HSY, Fortune 500), the U.S. chocolate company that has been struggling with growth issues of its own, has reportedly been studying a rival bid for Cadbury, but so far has remained on the sidelines.

Nestle (NSRGY), which had also been said to be mulling a bid for Cadbury, said Tuesday that it "does not intend to make, or participate in, a formal offer for Cadbury."

Cadbury maintained in a presentation last month that the Kraft offer is low, given Cadbury's strong growth, rising profit margins and market share gains.

Kraft, in turn, questioned the validity of Cadbury's projections, while promising not to overspend.

"Kraft Foods will continue to maintain a disciplined approach with respect to the acquisition of Cadbury in line with the criteria outlined in our offer documentation," Rosenfeld said in a statement last month.