20-Year Kraft Alum Irene Rosenfeld Returns as CEO

Her Marketing Background May Signal Shift in Food Giant's Strategy

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NEW YORK (AdAge.com) -- In abruptly replacing CEO Roger Deromedi with company alum Irene Rosenfeld, Kraft Foods sent a strong signal that it's relying on marketing to turn the ailing food giant around.
Irene Rosenfeld
Irene Rosenfeld

Ms. Rosenfeld, Kraft's former head of North America and a 20-year alum, is returning after holding the top job as CEO of PepsiCo's Frito-Lay North America division for two years. Mr. Deromedi has been Kraft's chief since 2001.

Egghead approach criticized
Kraft has been lambasted in recent years for its long-established reliance on research and statistics rather than risk-taking, a school of thought that Ms. Rosenfeld (who holds a doctorate in marketing and statistics) was weaned on during her two decades at the marketer.

The change in leadership came as no surprise to analysts, who have intently watched Kraft's mostly uphill battle in recent years to innovate and execute itself back to better earnings growth.

Lehman Bros. analyst Andrew Lazar said the shift in management just ahead of a likely spin-off from parent Altria Group gives Kraft a chance to drive the stock price up but, investors may, in fact, be disappointed by the news of Ms. Rosenfeld's arrival. "Many were looking for a Kraft 'outsider' to come in and lead the company," Mr. Lazar said in a note yesterday.

'May raise investor concerns'
Mr. Lazar also added that the change is likely to be negatively received because it "may raise investor concerns that near-term business trends or momentum are still challenged." Mr. Deromedi's aggressive restructuring, which has included cuts to hundreds of product lines and eliminating almost 14,000 jobs, has failed to wow Wall Street.

Kraft's net sales for its first quarter grew 2.6% to $8.5 billion. Analyst estimates peg Kraft's annual sales growth at roughly 0.2%, vs. average food company goals of anywhere between 6% and 10%.

Like Mr. Lazar, Credit Suisse analyst David Nelson indicated in a note that the shift in the top job shows that the "company's turnaround was not yet gaining sufficient traction and we believe that any potential turnaround for Kraft is not near-term." Mr. Nelson said, however, that Ms. Rosenfeld's strong marketing skills provide an ingredient necessary to the turnaround that Mr. Deromedi -- who came up from operations and finance -- was lacking.

Ms. Rosenfeld will be replaced at Frito-Lay by Al Carey, most recently president of PepsiCo Sales and Service and chief customer officer.
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