With apologies to 3M and any fans thereof reading this missive, it has nothing to do with the maker of those ubiquitous, pale yellow squarettes we stick to every possible surface in our cubicles. This is about breakfast, the most important meal … er, deal of the day. It’s about Post cereals.
A bit of background. It’s been a little over a year since Kraft Foods broke free from the death-rattle ownership of Altria. The smoke is beginning to clear. CEO Irene Rosenfeld took over the show at Kraft two years ago and, recognizing that its sales and stock were going nowhere, instituted a three-year makeover (corporate restructuring in bizspeak) for the biggest food company in the US (and the second biggest in the world, after Nestlé). She’s introducing new products — some 80 new ones this year alone, including microwaveable pizzas and health drinks with probiotic and prebiotic dietary supplements.
Rosenfeld is also spending lots o’ money on marketing for Kraft’s venerable brands, and she’s peeling off operations that don’t fit in with the company’s (more bizspeak, sorry) core products, these being cheese (Philadelphia Cream Cheese), meats (Oscar Mayer), snacks (Nabisco cookies and crackers, Oreos), and beverages (Maxwell House, Kool-Aid).
Post cereals (the #3 breakfast-cereal seller in the US, after #1 Kellogg and #2 General Mills) are next on the old chopping block. Although the Post brands, which include Shredded Wheat, Grape Nuts, Honey Bunches of Oats, and Pebbles, are reliable sellers, they don’t fit in with the core four sectors that Rosenfeld is aiming for. In addition, raw material costs, which are soaring for all food companies, are somewhat less for dairy ingredients than for the grain-based ingredients for breakfast cereals (e.g., commodities such as wheat and corn — ethanol anyone?) So it makes sense to let them go.
Ergo, Post is out the door in a deal said to be valued at $2.6 billion. (Not bad, Ms. Rosenfeld.) The buyer is Ralcorp, a St. Louis-based manufacturer of private-label packaged food products, including frozen bakery items, cereals, crackers, cookies, dressings, syrups, jellies, sauces, snack nuts, and candy. With a line-up like that, it sounds as if Ralcorp is more than capable of taking over the Post cereal operations and the some 1,250 Post employees who are expected to join Ralcorp once the deal is final.
Now, if the Sage of Omaha, Mr. Berkshire Hathaway himself, Warren Buffet, has his way (he owns 10% of Kraft but he’s busy at the moment, trying to get Anheuser-Busch to sell to InBev), Kraft will unload even more brands. Then there’s Nelson Peltz, that lovable old corporate raider, owner of about 2% of Kraft. Surely he has plans, but in 2007, in order to get two Peltz-approved directors on the Kraft board, he had to agree to not publicly advocate for change at the company for two years. He did, however, make it known before the agreement that he thought the Post and Maxwell House businesses should go.
Stay tuned. Now that Post is Toast(ies) at Kraft, more brands are sure to follow.
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