Kraft Foods Inc., the nation’s largest food company, on Tuesday sold one of its brands, while the Wm. Wrigley Jr. Co., the world’s largest chewing gum-maker, stepped further into the chocolate candy business by taking a stake in a Russian company.
Northfield-based Kraft, less than a week before it is to report fourth-quarter results, announced the $200 million sale to B&G Foods Inc. of the Cream of Wheat and Cream of Rice hot cereal business along with manufacturing equipment used in the business. The sale is another step aimed at better focusing Kraft’s portfolio of brands.
Cream of Wheat, introduced in 1893, remains one of the leading hot cereals sold in the U.S. Its growth, however, has been minimal in recent years.
Kraft said it would also be taking a $69 million fourth-quarter asset impairment charge in connection with the sale.
“The divestiture allows us to focus our resources on businesses that offer potential long-term competitive advantages to us, creating value for Kraft shareholders, while providing B&G Foods with a great business,” said Rick Searer, president of Kraft North America Commercial.
While Kraft is restructuring its portfolio, Wrigley is adding to its lineup.
The chewing gum company, which acquired the Altoids mint brand from Kraft in 2005, said it is spending $300 million to acquire an 80 percent interest in A. Korkunov, a privately owned Russian chocolate candy company. The sale price is three times the company’s 2006 estimated sales.
It is Wrigley’s second foray into chocolate. Last year, it began distribution of a chocolate-covered Altoid mint.
It is also the second time in the company’s history that it has taken on debt to fund an acquisition. Wrigley said it will finance the purchase with available cash and “a modest component of debt.”
“We have always said we would enter the chocolate segment of the total confectionery business if the right opportunity to create value for the Wrigley Company became available–and this acquisition presents such an opportunity,” said Bill Wrigley Jr., executive chairman of the company.
“A. Korkunov has strong brands and is a key player in the premium chocolate segment in Russia,” said Wrigley. He noted that Russia is an important market for Wrigley.
Korkunov was founded by two Russian entrepreneurs in 1999. It is now the second-largest brand in the premium-boxed-chocolate segment.
It currently operates a small export business to the United States, which will be maintained, according to Brian Wright, a Wrigley spokesman, who said its present management will be retained.
David Nelson, an analyst at Credit Suisse, said it appears Wrigley is trying to gain “some degree of experience in the chocolate business, but there does not seem to be a significant opportunity for revenue synergies or cost synergies.”
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