WHAT MURRAY BRINGS TO KRAFT INDUSTRY SPECULATES HIS ROLE IS AS CARETAKER PENDING PM BREAKUP

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Philip Morris Cos.' decision to bring in a tobacco man to run Kraft General Foods has investors and Kraft followers wondering what's in store for the mammoth food company.

With his new job of vice chairman for worldwide food, R. William Murray gives up half his responsibilities and takes more direct control of KGF at a time when Philip Morris is poised to separate its food and tobacco businesses.

"I think they are positioning it for a cleaving," said J. Bruce Harreld, Boston Chicken president and former KGF executive, echoing a theory of dozens of investors and observers.

Mr. Murray, 58, spent 21 of his 24 years at Philip Morris selling cigarettes-and three overseeing both food and tobacco-as president and chief operating officer.

He also moves into the KGF position at a time when growth of food earnings has fallen from the mid-20% range in the late 1980s to about 7% last year.

So who is the man who could end up in charge of a free standing, $30.3 billion food giant that would rank No. 13 on the Fortune 500?

Industry sources, including some former KGF executives, characterize Mr. Murray as a strong administrative and operational executive with close ties to former Philip Morris Chairman Hamish Maxwell. He also provides a liaison to top Philip Morris management, the board and Wall Street.

But Mr. Murray is viewed by some as a caretaker at KGF, having virtually no direct experience managing food businesses.

He's "solid and trustworthy," said one source, but "really doesn't add much," said another.

What Mr. Murray does bring is impressive international business experience.

The Australian native joined Philip Morris in 1970 as a finance manager in Switzerland, later holding jobs as president of the Benson & Hedges brand in Canada, president of the company's Europe/Middle East/Africa division and president-CEO of Philip Morris International. He brings that cosmopolitan background to Kraft General Foods at a time when the company's phenomenal growth overseas has slowed.

Just four years ago, KGF's international sales were growing 66% annually and operating income was surging nearly 80%. By last year, the pace had slowed dramatically, with revenue up 8% and operating income up 3%.

Mr. Murray's new focus also coincides with increased investments overseas. Last year, KGF bought Freia Marabou, a Scandinavian candy company, for $1.3 billion, and Terry's Group, a U.K. candy concern, for $295 million.

The company also expanded its coffee business in the Czech Republic and China, its cheese business in Poland and other food categories in Australia, Turkey, Argentina and Brazil.

As Europe's fourth-largest food company and the Asia/Pacific's leading U.S. food marketer, Kraft General Foods International generated $1.11 billion in earnings on $9.43 billion in sales last year-12% and 15%, respectively, of Philip Morris' totals.

International expertise aside, some observers say Mr. Murray's lack of food industry depth is a detriment. But his impact will be significantly buffered by a thick layer of seasoned KGF executives, experts say.

"As long as he and [Mike] Miles work together, I think they'll be a good team," said Bruce Gregory, portfolio manager for Progressive Partners, a New York money management company pushing for a breakup.

Mr. Murray continues reporting to Philip Morris Chairman-CEO Michael A. Miles, as he did as president. Under a breakup, though, KGF might lose Mr. Miles, its former president, as a safety net. Only he-and presumably, his board-know whether a split will occur.

The investment community is pushing that scenario.

After a board meeting late last month, Philip Morris said it would take no action on plans to consider separating its businesses. A day later, the company said it didn't anticipate the board would take up the issue again "in the foreseeable future."

But Philip Morris hasn't completely closed the door on tearing apart the tobacco and food businesses, and management remained flexible on the subject in a meeting with six large institutional investors.

"They have indicated a willingness to meet," said Anne Hansen, deputy director of the Council of Institutional Investors.

Ms. Gallagher is a reporter for Crain's Chicago Business.

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