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Kraft Foods CEO to retire; chairman steps into role
[NEW YORK] Kraft Foods Group Inc on Thursday said Tony Vernon would retire as chief executive officer later this month, with Chairman John Cahill succeeding him as the company battles sluggish demand for packaged food products in the United States.
The CEO change raises the question of whether Kraft could significantly change its portfolio, which includes brands like Oscar Mayer meat, Maxwell House coffee, and Jell-O, investors and analysts said.
Kraft shares rose 6.4 per cent to close at US$63.38, an all-time high since the company was spun off from Mondelez International Inc in 2012. "When you look at their Oscar Mayer business and their Maxwell House business, it kind of makes one wonder if there are opportunities for those to be owned by someone for a higher multiple," said Kevin Dreyer, a portfolio manager at Gabelli Funds which owns 969,273 shares of Kraft. "Certainly, the multiples that meat and coffee businesses have been sold for are much higher than Kraft's overall multiple." A Kraft spokesman declined to comment on the speculation. Mackey J. McDonald, Kraft's lead independent director, said in an earlier statement that "the board and Tony agree that we need to accelerate the pace of change." Kraft said Vernon, 58, would step down as CEO on Dec 27 but remain a director until the company's next annual meeting in 2015. He will also stay on as an adviser until March 31.
Vernon, who has headed the company since the spin off, focused on expanding its reach among growing demographic groups like Hispanics and millennial consumers.
Under his tenure, the company has tried to rejuvenate brands like Philadelphia cream cheese and introduced products meant to satisfy consumers' growing interest in snacking and protein.
But unlike some peers, Kraft has stayed away from expanding into faster-growing areas like natural and organic foods through acquisitions.
McDonald said Cahill, who formerly worked at PepsiCo Inc and was CEO of Pepsi Bottling Group Inc, had "the experience to identify and realize opportunities to grow Kraft's brand portfolio and take the company to greater heights." Cahill, 57, joined Kraft in 2012 as executive chairman designate of the company's North American grocery division and was appointed executive chairman after the spinoff. He will remain chairman after the transition.
Kraft in October reported an 11 per cent drop in third-quarter profit after price hikes aimed at making up for higher commodity costs hit demand.