NEW YORK (AP) — Kraft Foods Inc. said Wednesday it will focus on higher-margin, priority brands to boost productivity in Europe as the food maker hopes to expand worldwide following its $16.7 billion cash-and-stock offer for Cadbury PLC.
Chief Executive Irene Rosenfeld, speaking at a Barclays Capital conference, continued to push for the deal, which was rejected Monday by Cadbury, the second-largest global candy maker. Cadbury said the offer undervalues the company.
Rosenfeld reiterated that the deal would boost Kraft's presence in developing countries, as Cadbury has a strong presence in emerging markets like India and Mexico.
"The time is right for this combination to happen," Rosenfeld said.
Rosenfeld also said the acquisition would lift earnings and revenue for Kraft, the world's second-largest foodmaker. She cited projections for long-term earnings per share growth between 9 percent and 11 percent and revenue growth of at least 5 percent.
A tie-up between Kraft and Cadbury would have more than $50 billion in combined revenue.
In its existing European business, Kraft said Wednesday it plans to focus on profitable brands such as Milka and Cote d'Or chocolates; Oreos and Mikado biscuits; Carte Noire and Kenco coffee; and Philadelphia cream cheese. Kraft hopes this emphasis will help boost European revenue growth from businesses it already owns between 1 percent and 3 percent.
Kraft also is still looking for areas to cut costs. Chief Financial Officer Tim McLevish said Kraft expects significant short-term savings in productivity from cost-cutting. Kraft has already streamlined production and gotten rid of unprofitable brands following its three-year turnaround plan.
Also, Kraft expects operating income margins will rise to the mid-teens by 2011, up from 12.3 percent in 2008.
Northfield, Ill.-based Kraft last month boosted its 2009 earnings outlook after posting an 11 percent increase in second-quarter profit. The company expects earnings of at least $1.93 per share, up from previous guidance of $1.88. Analysts polled by Thomson Reuters expect $1.96 per share.
Consumers can already find Kraft's products in 150 countries worldwide, such as its namesake Kraft cheese, Maxwell House coffee and Oscar Mayer meat.