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Madison-based Kraft Foods may become independent

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River Falls, 54022
Hudson Star Observer
715-386-9891 customer support
River Falls Wisconsin 2815 Prairie Drive / P.O. Box 25 54022

MADISON -- Kraft Foods, which owns Madison-based Oscar Mayer, may soon become an independent company.

Kraft was bought by Phillip Morris, later called the Altria Group, in the 1980s.

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According to Dan Olszewski, director of the Weinart Center For Entrepreneurship at University of Wisconsin-Madison, many expected Altria to spin off Kraft at a recent board meeting, but so far nothing has happened. He says Kraft has been moving towards a split for some time.

He says they actually announced a couple years ago that they were going down this path of spinning off Kraft, but the CEO said there were three lawsuits that had to be settled before they would do that.

Olszewski says while tobacco companies have bought many other companies, most expected synergies never happened. Many acquired companies have also suffered a "tobacco taint" from negative reactions towards the tobacco industry.

However, Olszewski says that Kraft's primary gain in a spin-off would be a smaller company able to make decisions faster. This size change, however, may lead to the sale of other entities such as Oscar Mayer.

He says one of the benefits of being spun off in a business is that the management has a greater accountability directly to their business and those shareholders, and that greater focus can sometimes result in a greater focus in the strategic businesses, and that means getting rid of some that they don't view as strategic.

Smithfield Foods Inc., a major U.S. pork and beef producer, has been cited in other reports as being interested in Oscar Mayer if it becomes available. Olszewski says this particular sale could mean downsizing, but for now the cost of Oscar Mayer may be too high.

Kraft officials have released a statement saying all spin-off decisions rest with Altria, and that their primary concern is creating quality products. Altria's next board meeting is set for October.

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