UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 27, 2009
KRAFT FOODS INC.
(Exact name of registrant as specified in its charter)
| Virginia | 1-16483 | 52-2284372 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
| Three Lakes Drive, Northfield, Illinois | 60093-2753 | |
| (Address of Principal executive offices) | (Zip Code) |
Registrant’s Telephone number, including area code: (847) 646-2000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01. | Regulation FD Disclosure. |
On March 27, 2009, Kraft Foods Inc. issued a press release announcing that Tim McLevish, Executive Vice President and Chief Financial Officer, would be meeting with analysts in New York City on Friday, March 27, 2009. The meeting is solely to discuss Kraft Foods’ revised presentation of financial results from prior periods, coinciding with previously announced changes in the company’s operating structure and other accounting changes, primarily a change from the use of the LIFO inventory method for some domestic inventories to the average cost method. Copies of the slides used in the discussion and a copy of the press release are attached as Exhibit 99.1 and Exhibit 99.2 and are incorporated by reference into this Item 7.01.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | The following exhibits are being furnished with this Current Report on Form 8-K. |
| Exhibit |
Description | |
| 99.1 | Kraft Foods Inc. Slide Presentation, dated March 27, 2009. | |
| 99.2 | Kraft Foods Inc. Press Release, dated March 27, 2009. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KRAFT FOODS INC. | ||||
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Date: March 27, 2009
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| /s/ Carol J. Ward | ||||
| Name: | Carol J. Ward | |||
| Title: | Vice President and Corporate Secretary | |||
 Kraft
Foods Review of Changes to Financial Reporting March 27, 2009 Exhibit 99.1 |
 2 Forward-looking statements This slide presentation contains forward-looking statements that there are two critical aspects
of Kraft Foods' financial turnaround, including returning to sustainable growth and
improving transparency, accountability and decision-making; the five ways we're improving transparency, accountability and decision-making, in particular, that we are
reorganizing European operations for faster decision-making and for better
trade-offs, revising cost assignment methodology and moving to LIFO to reduce accounting costs; our U.S. beverages key initiatives, including that we will invest in value-oriented marketing,
increase top-line momentum of powdered beverage stick and premium coffee platforms
and improve profitability of ready-to-drink and mainstream coffee; our U.S. cheese key initiatives, including that we will apply an adaptive pricing model for more consistent profit
delivery, enhance product mix through incremental marketing behind advantaged
categories and segments, and that we will leverage our scale to create retail advantage; our U.S. convenient meals key initiatives, including our focus on quality, marketing and innovation
around sandwiches, that we will sustain top-line momentum of pizza, and grow our
margins through "end to end" productivity opportunities; our Grocery initiatives, including focusing our resources on fewer, bigger core platforms, leverage in-store presence
with better trade planning and execution tools, and streamline overhead and
manufacturing through "end-to-end" initiatives; our U.S. snacks initiatives, including continuing to revitalize core cookie and cracker brands by further investments and building margin-accretive
platforms that leverage core equities, grow share in nuts through quality upgrades and
participation in growing segments, selectively invest in bars, and invest to optimize manufacturing infrastructure; our Canada and North American Foodservice key initiatives, including
growing vol/mix, leveraging scale, optimizing our Canadian manufacturing network,
improving product mix by focusing on Kraft brands, and building profit margins by leveraging growth in profitable customer segments; our Europe key initiatives, including focusing
where we make money, investing behind the highest margin opportunities, pruning less
profitable product lines, improving effectiveness at retail, eliminating inefficient trade spending, driving portfolio availability, reducing costs by streamlining overheads and
manufacturing, and integrating our Kraft Foods and LU businesses; our Developing
Markets key initiatives, including growing through locally relevant business models, continuing to focus investments behind priority categories, brands and markets and expanding in
traditional trade channels; our 2009 goal to build profit margins and market share; and
our long-term goals with regard to organic revenue growth, manufacturing, overhead
leverage, cash flow leverage, tax rate, and long-term EPS growth. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such
forward-looking statements. Such factors, include, but are not limited to,
continued volatility of input costs, pricing actions, increased competition, our ability to differentiate our products from private label products, increased costs of sales, FDA or other
regulatory actions or delays including widespread product recalls, unanticipated
expenses such as litigation or legal settlement expenses, our indebtedness and ability to pay our indebtedness, the shift in our product mix to lower margin offerings, our failure to expand
into emerging markets, risks from operating internationally and tax law changes. For
additional information on these and other factors that could affect our forward- looking statements, see our filings with the SEC, including our most recently filed Annual Report
on Form 10-K and subsequent reports on Forms 10-Q and 8-K. We disclaim and
do not undertake any obligation to update or revise any forward-looking statement in this slide presentation.
|
 3 Agenda for today • Rationale Behind Changes to Financial Reporting • Reportable Segments Review |
 4 There are two critical aspects of Kraft Foods’ financial turnaround • Return to sustainable growth • Improve transparency, accountability and decision-making |
 5 Five ways we’re improving transparency, accountability, decision-making • Reorganizing European operations – For the EU, transitioning core categories to fully integrated business units • Full ownership of operating results at category level • Faster decision-making, better trade-offs – Combining Central Europe with Developing Markets segment • Grouping markets along economic, go-to-market lines • Continue to operate on a country-led model |
 6 Five ways we’re improving transparency, accountability, decision-making • Reorganizing European operations • Revising cost assignment methodology – Shifting towards activity-based costing versus driver-based allocations – Operations IT and administrative costs moved to Cost of Sales from Marketing, Administration & Research Costs |
 7 Five ways we’re improving transparency, accountability, decision-making • Reorganizing European operations • Revising cost assignment methodology • Moving from LIFO to Average Cost in U.S. – Aligns with way we manage business • All of Kraft Foods now on Average Cost – Better reflects economics of the business – Improves comparability with competitors – Reduces accounting costs |
 8 Five ways we’re improving transparency, accountability, decision-making • Reorganizing European operations • Revising cost assignment methodology • Moving from LIFO to Average Cost in U.S. • Reclassifying excise taxes to Cost of Sales – Provides better clarity to revenues and profit margins – Improves comparability of revenue between countries |
 9 Five ways we’re improving transparency, accountability, decision-making • Reorganizing European operations • Revising cost assignment methodology • Moving from LIFO to Average Cost in U.S. • Reclassifying excise taxes to Cost of Sales • Adopting new accounting principles – SFAS 160 (noncontrolling interests in subsidiaries) – EITF 03-6-1 (restricted, deferred stock recognition) – Provides consistent treatment with 2009 results |
 10
Five ways we’re improving transparency, accountability, decision-making • Reorganizing European operations • Revising cost assignment methodology • Moving from LIFO to Average Cost in U.S. • Reclassifying excise taxes to Cost of Sales • Adopting new accounting principles |
 11
Agenda for today • Rationale Behind Changes to Financial Reporting • Reportable Segments Review |
 12
Total Kraft: Overview North America North America 2008 Net Revenue Developing Markets Developing Markets Europe Europe 2008 Segment Operating Income – ex. Items* North America North America Developing Markets Developing Markets Europe Europe * Segment Operating Income – ex. Items excludes the impacts of our Restructuring Program, other asset impairments, one-time costs related to our Kraft Foods Europe Reorganization,
and gains/losses on divestitures. |
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Our portfolio today • More than 40% of revenue outside North America • More than 50% from snacks and quick meals • More than 80% from #1 share positions • More than 50% from categories where market share is twice the size of nearest competitor |
 14
North America: Overview U.S. Beverages U.S. Beverages 2008 Net Revenue Canada & N.A. Foodservice Canada & N.A. Foodservice U.S. Snacks U.S. Snacks 2008 Segment Operating Income – ex. Items* U.S. Cheese U.S. Cheese U.S. Convenient Meals U.S. Convenient Meals U.S. Grocery U.S. Grocery U.S. Beverages U.S. Beverages Canada & N.A. Foodservice Canada & N.A. Foodservice U.S. Snacks U.S. Snacks U.S. Cheese U.S. Cheese U.S. Convenient Meals U.S. Convenient Meals U.S. Grocery U.S. Grocery * Segment Operating Income – ex. Items excludes the impacts of our Restructuring Program, other asset impairments, and gains/losses on divestitures. |
 15
U.S. Beverages: Overview Coffee Coffee Coffee 29% 0.8 Folgers (Smucker) RTD Aseptics 59 3.2 Coke Foods Powdered Bev. 52 2.6 Retailer Brands 2008 Net Revenue % Relative Category Share* Share* Competitor Powdered Powdered RTD RTD * Source: 4-Outlet data; The Nielsen Company. RTD: Coffee: Powdered: Primary Brands |
 16
U.S. Beverages: Key Initiatives • Invest in value-oriented marketing behind Kool-Aid, Country-Time powdered beverages • Increase top-line momentum of powdered beverage stick and premium coffee platforms • Improve profitability of ready-to-drink and mainstream coffee behind restaging of CapriSun and Maxwell House |
 17
U.S. Cheese: Overview Sandwich, Recipe & Grated Sandwich, Recipe & Grated Processed Slices 54% 1.8 Retailer Brands Grated / Hard Italian 44 1.4 Retailer Brands Natural Cooking 22 0.5 Retailer Brands Breakfast Spreads 66 2.1 Retailer Brands Snacking 23 1.5 Retailer Brands 2008 Net Revenue % Relative Category Share* Share* Competitor Cultured & Snacking Cultured & Snacking Natural Natural Cream Cheese Cream Cheese Natural: Sandwich, Recipe & Grated: Cream Cheese: Cultured & Snacking: Primary Brands * Source: 4-Outlet data; The Nielsen Company. |
 18
U.S. Cheese: Key Initiatives • Apply adaptive pricing model for more consistent profit delivery • Enhance product mix through incremental marketing behind advantaged categories, segments – Revitalize Kraft Singles – Expand Philadelphia usage • Leverage Kraft Foods scale to create retail advantage |
 19
U.S. Convenient Meals: Overview Cold Cuts & Hot Dogs Cold Cuts & Hot Dogs Cold Cuts 36% 2.4 Retailer Brands Hot Dogs 23 1.0 Sara Lee Bacon 24 1.2 Retailer Brands Lunch Combos 91 10.7 ConAgra Pizza 39 1.7 Schwan 2008 Net Revenue % Relative Category Share* Share* Competitor Bacon, Boca & Pickles Bacon, Boca & Pickles Pizza Pizza Meal Combos Meal Combos Bacon, Boca & Pickles: Cold Cuts & Hot Dogs: Meal Combos: Pizza: Primary Brands * Source: 4-Outlet data; The Nielsen Company. |
 20
U.S. Convenient Meals: Key Initiatives • Focus quality, marketing, innovation around sandwiches – Fresher, less processed ingredients – Expand Deli Fresh, Deli Creations platforms • Sustain top-line momentum of pizza – Build “For One” single-serve platform • Grow margins through “end to end” productivity opportunities |
 21
U.S. Grocery: Overview Dressings Dressings Salad Dressings 26% 1.5 Hidden Valley (Clorox) Spoonable Dressings 39 0.9 Best Foods (Unilever) Dry Desserts 82 7.5 Retailer Brands Refrigerated Desserts 59 3.1 Kozy Shack Dinners 80 4.9 Retailer Brands 2008 Net Revenue % Relative Category Share* Share* Competitor Mac & Cheese Mac & Cheese Desserts Desserts Other Grocery Other Grocery Desserts: Dressings: Mac & Cheese: Other Grocery: Primary Brands * Source: 4-Outlet data; The Nielsen Company. |
 22
U.S. Grocery: Key Initiatives • Focus resources on fewer, bigger core platforms – Mac & Cheese, Dressings, Desserts – Improve volume through investments in quality, marketing and innovation • Leverage in-store presence with better trade planning, execution tools • Streamline overhead, manufacturing through “end-to-end” initiatives |
 23
U.S. Snacks: Overview Biscuits Biscuits Cookies 45% 2.8 Kellogg Crackers 47 1.6 Kellogg Bars 7 0.3 General Mills Nuts 24 0.7 Retailer Brands 2008 Net Revenue % Relative Category Share* Share* Competitor Bars & Nuts Bars & Nuts Primary Brands Biscuits: Bars & Nuts: * Source: 4-Outlet data; The Nielsen Company. |
 24
U.S. Snacks: Key Initiatives • Continue to revitalize core cookie and cracker brands – Further investments in innovation and A&C – Build margin-accretive platforms that leverage core equities • Grow share in nuts through quality upgrades, participation in growing segments • Selectively invest in bars • Invest to optimize manufacturing infrastructure |
 25
Canada and North America Foodservice: Overview Canada Canada 2008 Net Revenue North American Foodservice North American Foodservice Primary Brands Canada: Foodservice: |
 26
Canada and North America Foodservice: Key Initiatives • Canada – Grow vol/mix through marketing, innovation linked to U.S. category initiatives – Leverage scale to win with customers – Optimize Canadian manufacturing network • N.A. Foodservice – Improve product mix by focusing on Kraft brands, innovation – Build profit margins by leveraging growth in profitable customer segments |
 27
Europe: Overview Biscuits Biscuits Biscuits 22.2 0.9 Private Label Chocolate 12.7 0.7 Ferrero Coffee 21.8 1.0 Private Label Cream Cheese 40.0 1.7 Private Label Process Cheese 38.3 2.3 Private Label 2008 Net Revenue % Relative Category Share* Share Competitor Chocolate Chocolate Coffee Coffee Cheese Cheese Local Categories Local Categories Chocolate: Biscuits: Coffee: Cheese: Primary Brands Local: * Source: The Nielsen Company, value shares |
 28
Europe: Key Initiatives • Focus where we make money – Invest behind the highest margin opportunities – Prune less profitable product lines • Improve effectiveness at retail – Eliminate inefficient trade spending – Win in-store – Drive portfolio availability • Reduce cost – Streamline overheads, manufacturing – Integrate Kraft Foods and LU businesses |
 29
Developing Markets: Overview CEEMA CEEMA 2008 Net Revenue Latin America Latin America Asia- Pacific Asia- Pacific Primary Brands |
 30
Developing Markets: 2008 Revenue Russia, Ukraine & Baltics Russia, Ukraine & Baltics CEEMA Latin America Central Europe & Other Central Europe & Other Middle East & Africa Middle East & Africa Brazil Brazil Mexico Mexico Southern Cone Southern Cone Andean Andean Caribbean & C. America Caribbean & C. America Australia & New Zealand Australia & New Zealand Asia-Pacific Southeast Asia Southeast Asia China China Japan & Korea Japan & Korea Southeast Europe & Turkey Southeast Europe & Turkey |
 31
Developing Markets: Key Initiatives • Grow through locally relevant business models – Competitive cost structures – Appropriate product formulations and price points – Grassroots marketing and sales • Continue to focus investments behind priority categories, brands, markets – Further expansion in traditional trade channels • Integration of Kraft Foods and LU businesses |
 32
Summary • Making steady progress toward sustainable growth – 2007: Rejuvenated top-line growth – 2008: Grew both top and bottom lines – 2009: Build profit margins and market share • Improving our transparency, accountability and decision-making Organic Revenue
Growth 4%+ Manufacturing, Overhead Leverage 2-3pp Cash Flow Leverage & Tax Rate 1-2pp Long-Term EPS Growth 7%-9% |
 |
Exhibit 99.2
| Contacts: | Michael Mitchell (Media) | Christopher M. Jakubik (Investors) | ||
| +1-847-646-4538 | +1-847-646-5494 | |||
| news@kraft.com | ir@kraft.com |
KRAFT FOODS MEETS WITH ANALYSTS TODAY
NORTHFIELD, Ill. – March 27, 2009 – Kraft Foods Inc. (NYSE: KFT) announced that Tim McLevish, Executive Vice President and CFO, will meet today with analysts in New York City. The meeting is solely to discuss Kraft Foods’ revised presentation of financial results from prior periods, coinciding with previously announced changes in the company’s operating structure and other accounting changes, primarily a change from the use of the LIFO inventory method for some domestic inventories to the average cost method.
On March 26, 2009, Kraft Foods filed a Form 8-K with the U.S. Securities and Exchange Commission (SEC) with financial schedules for 2008, 2007 and 2006 reflecting these changes. As disclosed in its Annual Report on Form 10-K for the year ended Dec. 31, 2008, which was filed with the SEC on Feb. 27, 2009, Kraft Foods announced changes in its operating structure, effective January 2009.
Today, Kraft Foods also filed a Form 8-K with the SEC with the slides used in the discussion with analysts. These slides are available at http://www.kraftfoodscompany.com and http://idea.sec.gov.
Kraft Foods makes today delicious in 150 countries around the globe. Our 100,000 Kraft Foodies work tirelessly to make delicious foods consumers can feel good about. From American brand icons like Kraft cheeses, dinners and dressings, Maxwell House coffees and Oscar Mayer meats, to global powerhouse brands like Oreo and LU biscuits, Philadelphia cream cheeses, Jacobs and Carte Noire coffees, Tang powdered beverages and Milka, Côte d’Or, Lacta and Toblerone chocolates, our brands inspire millions of delicious moments every day. Kraft Foods is the world’s second largest food company with annual revenues of $42 billion. The company is a member of the Dow Jones Industrial Average, Standard & Poor’s 500, the Dow Jones Sustainability Index and Ethibel Sustainability Index.
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