Corporate Close-up: Kraft (chart)
The new Kraft (chart)
KRAFT RETIRES GENERAL IN REORGANIZATION
SALES FORCE TO WORK IN INTEGRATED SALES TEAMS
Three years ago, Kraft General Foods required major surgeries to right its struggling business: cutting prices of key products, divesting lower-margin brands, closing plants and slashing its work force.
Today, Bob Morrison says happily, the top priorities are "more simple-like outpatient procedures."
Still, Mr. Morrison wasted no time instituting a reorganization plan for Philip Morris Cos.' North American package-food unit, just weeks after being named chairman-CEO of the rechristened Kraft Foods.
To some observers, the reorganization announced last week is little more than title shuffling. Though some units will move from Illinois to New York and vice versa, and the corporate General Foods name will be retired, insiders expect the reorganization to have little impact on marketing, and only a small fraction of Kraft's total 55,000 employees will be cut.
But symbolically, at least, the plan brings Kraft full circle. Many analysts said Philip Morris bought Kraft in 1988 to take over its dismal General Foods unit. Words like synergy and efficiency were tossed out as lofty goals of the new food conglomerate.
Then, oddly enough, Kraft's brands began sliding, and General Foods' brands were in the driver's seat-and the food industry began to question whether sheer size yielded clout. Kraft itself slimmed down; after divesting such brands as Birds Eye and Budget Gourmet, the new Kraft Foods claims trimmed sales of $17 billion and now will rank as the nation's No. 2 food marketer behind ConAgra.
"It's fair to say that with size there are clear benefits-but with size, if not managed very carefully, there can be potential negatives," Mr. Morrison said. "We think this reorganization into a single company will make us more efficient and more effective."
In its six years, the old Kraft General Foods did realize synergies in coordinated purchasing, from corrugated cardboard to TV time. And it was able to save money by eliminating duplicate staffers.
But with separate Kraft and General Foods headquarters-plus a largely independent Oscar Mayer Foods unit-the company could never really take advantage of synergies in marketing, sales and sharing brand equities.
Notably, Kraft last week filled a vacant position by again naming a senior VP-marketing services, Paula Sneed, who will oversee advertising, media, research, consumer affairs and direct marketing as did the departed Lorraine Scarpa.
One Kraft marketing executive said each unit "had its own structures and priorities; it was very difficult to make things happen."
Said Mr. Morrison: "What we've been trying to do since day one is to operate as one company-when we were really two or three or five separate units. Though we made quite a bit of progress in merging our cultures, the time had come to take the next step. We said, `Let's get on with it."'
He said the biggest change will occur in sales, where Kraft Foods will now have one sales force, compared with four originally. Its 3,500 sales staffers, except those representing the direct-store-delivered frozen pizza and Entenmann's lines, will be responsible for the entire product portfolio.
In spring, Kraft will begin setting up single sales forces in a few markets, and hopes to have the entire U.S. converted by the end of 1995. In addition, Kraft, which already has an integrated sales team for Wal-Mart Stores, is setting up similarly integrated teams-combining representatives from marketing, logistics, finance and sales-for other key retailers.
With the reorganization, some salesmen will be let go-"We will need substantially fewer people," Mr. Morrison said-but he promises the plan will yield "better customer service."
Kraft continues to experiment with its distribution "megacenter" in Norcross, Ga., which ships all the company's brands, but Mr. Morrison said he's not sure there's much to be gained from further distribution consolidation.
He does hope for more idea "stealing" in marketing and new-product development, such as the Jell-O refrigerated yogurt and the Maxwell House instant cappuccino originated in Europe.
News of the reorganization came as Kraft wrapped up 1994, which Mr. Morrison described as a good year; he said market shares were up for businesses representing two-thirds of the Kraft portfolio.
While cooing over the continued strong performance of Post cereals, he said the $2.5 billion Kraft cheese business is back on track, and the Oscar Mayer and Louis Rich lunch meat businesses have rebounded, with Louis Rich sales up 17%.
"Right now there's nothing that's broken, just some businesses that we'd like to have growing faster," Mr. Morrison said, pointing specifically to Jell-O mixes and the powdered drink brands.
Gary Levin contributed to this story.