That's how the Kraft cookie crumbles
That's how the Kraft cookie crumbles
Date: Friday, February 03, 2006 1:42 AM
JOB DESTRUCTION NEWSLETTER
February 03, 2006 No. 1409
There are many popular theories about why the media is so bad in the United
States. We can put most theories under some major categories.
>>> Conspiracy Theories - Many believe that media in the United States
completely controlled by the corporate oligarchs that run the country.
Journalism is dead because newspapers are nothing more than corporate press
releases. Variations of the conspiracy theories claim control of the press
is by commies, globalists, or many other types of subversive organizations.
>>> Incompetence Theories - Others believe that the reason we have such
lousy reporting is because of the stupidity of the journalists and editors.
Since journalism is an easy degree it tends to attract the dumbest
students, and by the time they graduate and get a job their brains are
probably fried from doing too many illicit drugs.
>>> Ratings and Advertising - The corporations that own the press pander to
the lowest common denominator - which in the United States is usually
someone that has never voted and probably thinks educational TV is the
reruns of the Brady Bunch. In order to maximize profits the corporate
networks and newspapers have to dumb everything down to improve ratings.
I'm not sure which theory is true, but I offer the Kraft Foods layoff
announcement as a case study so you can decide.
If you haven't heard, Kraft just announced that it's going to eliminate
about 8,000 more jobs in the USA and close up to 20 factories. Total job
reductions will be over 13,000.
The New York Times says that the reason for the plant closings is that
Americans are going to junk food restaurants instead of buying cheese and
cookies at the store.
Packaged-food companies, which aim their products at ordinary
shoppers, are beginning to see slower growth as consumers are
choosing the convenience of eating out at restaurants or
relying on take-out - while making fewer trips down grocery aisles.
The Pennsylvania Times Leader says it's all a matter of cutting cost to
boost profits.
"Further cost reduction is a necessity in the current
environment," Chief Financial Officer Jim Dollive told
analysts during a conference call.
The Associated press reports that Kraft is being hurt by the high cost of
coffee and meat.
THE PROBLEM: Kraft says the high cost of coffee, meat, packaging
and other commodities is eroding profits and sapping volume growth.
As for the location of the factories that are going to be closed, very
little information appears in the press because Kraft wants to keep it
secret, and most reporters are too busy nowadays to do even cursory
investigative reporting. The NYT gave some clues - plant closings will be
in the United States and Australia.
The company said it intends to shut plants in Broadmeadows,
Victoria in Australia and Hoover, Ala., but did not
announce the other facilities it plans to close.
By now I hope you are suspecting that something very cheesy is going on
with the reporting on the Kraft layoffs. Wouldn't you think that there
would be at least a single reporter in the United States that would ask one
simple question:
"IS KRAFT OFFSHORING THEIR PRODUCTION OVERSEAS, AND IF SO WHERE?"
The Kraft stories I could find in the U.S. media had as many holes as a
rotten piece of Swiss cheese. On a hunch I googled Kraft and Australia and
hit the ol' paydirt. In Australia every newspaper has a story about Kraft
moving to China - it's no secret down under.
Here's something interesting: I found out that in Australia "biscuit" means
the same thing as "cookie". The reason that's significant is because the
Australian press reports that Kraft makes biscuits in China. I assumed that
this is something made for export to Australia - that is until it occurred
to me that biscuits and cookies are the same thing. So next time you go
shopping for a bag of Oreo cookies you might want to check if it's made in
China. Kraft is so interested in making cookies in China it has invested
over $200 million there.
Kraft started building its fifth plant in Beijing last October.
The plant, which is due to be completed by the end of 2007, will
increase the company's total investment in China to US$200
million since its entry, the company said.
The new Beijing plant will manufacture key biscuit brands such
as Oreo and Ritz for the domestic market and for export as well.
So how could it be that Australian newspapers are all reporting what Kraft
is up to while our esteemed papers like the New York Times are totally
clueless? Choose your theory, or come up with another, but something is
very wrong when Australians are being told the truth while the truth is
being withheld from Americans. Aren't we supposed to be the land of the
free?
Articles Used for this Newsletter
http://www.chron.com/disp/story.mpl/ap/business/3623642.html
Summary Box: Kraft to Cut 8,000 Jobs
http://www.timesleader.com/mld/timesleader/13761660.htm
Kraft stock falls on news more cuts are planned
http://www.nytimes.com/2006/01/31/business/31kraft.html
Kraft Plans to Cut Jobs and Plants
http://www.theaustralian.news.com.au/common/story_page/0,5744,17796963%255E2702,00.html
Out of a job? That's how the Kraft cookie crumbles
http://www.smh.com.au/news/National/Kraft-closes-factory-jobs-go-to-China/2006/01/11/1136956236150.html
Kraft closes factory, jobs go to China
http://www.news.com.au/story/0,10117,17799436-1243,00.html
150 sacked as cheese giant moves offshore
http://www1.zhaopin.com/Publish/Company/Kraft/profile.htm
Kraft Foods Global
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.chron.com/disp/story.mpl/ap/business/3623642.html
Jan. 30, 2006, 7:20PM
Summary Box: Kraft to Cut 8,000 Jobs
By The Associated Press
) 2006 The Associated Press
THE CUTS: Kraft Foods Inc. will cut 8,000 jobs and shut 20 production
facilities on top of 5,500 jobs and 19 plants it has eliminated since 2004.
THE PROBLEM: Kraft says the high cost of coffee, meat, packaging and other
commodities is eroding profits and sapping volume growth.
THE GOAL: The cuts aim to save $700 million a year atop the $450 million
targeted by the original cost-cutting program launched in 2004.
REACTION: Some analysts say the cuts are unexpectedly large considering
Kraft's recent layoffs and plant closures.
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.timesleader.com/mld/timesleader/13761660.htm
Posted on Wed, Feb. 01, 2006
Kraft stock falls on news more cuts are planned
The giant food companys earnings beat expectations, but shares fall 56
cents.
The Associated Press
CHICAGO - Shares of Kraft Foods Inc., the nations biggest food company,
fell more than 3 percent Tuesday after disclosing plans to broaden the
cost-cutting effort it launched two years ago to boost profits.
The maker of Oreo cookies and DiGiorno pizza announced after the markets
closed on Monday a three-year plan to slash an additional 8,000 jobs, or 8
percent of its workers, and close 20 production plants worldwide.
The announcement came even as Kraft reported fourth quarter financial
results that surpassed Wall Streets expectations.
But in trading on Tuesday, Kraft shares fell 56 cents to close at $29.44 in
trading on the New York Stock Exchange, closer to the lower end of their
52-week range of $27.44 to $34.30.
Kraft is in the midst of a three-year cost-cutting program begun in early
2004 that has laid off 5,500 workers and shuttered 19 plants. The latest
moves would result in a total of about 13,500 layoffs and nearly 40 closed
facilities by the end of 2008.
Kraft said it would trim its product line by another 10 percent, atop a 20
percent cut since 2004. The company said it intends to shut plants in
Broadmeadows, Victoria in Australia and Hoover, Ala., but did not announce
the other facilities it plans to close.
A spokesman said Tuesday that it was too soon to say if there would be any
effect on the companys service center in the Hanover Industrial Estates.
More than 300 people work there, providing customer service, online sales
and financial services.
When complete, Kraft said the cuts should save $700 million annually,
bringing its total savings to $1.15 billion.
"Further cost reduction is a necessity in the current environment," Chief
Financial Officer Jim Dollive told analysts during a conference call.
Kraft is 86 percent owned by Altria Group Inc., the parent of tobacco
company Philip Morris. Altria has repeatedly stated it plans to spin off
Kraft once it settles outstanding litigation hanging over the tobacco
business.
Investors are still awaiting word on when Altria will split up its
businesses. But the company must first clear one high hurdle - the
appellate review of the $145 billion Engle tobacco liability case in
Florida. That states Supreme Court is reviewing the punitive award in
the case that was overturned on appeal.
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.nytimes.com/2006/01/31/business/31kraft.html
January 31, 2006
Kraft Plans to Cut Jobs and Plants
By MELANIE WARNER
Americans are spending more at restaurants and less at the supermarket. Now
Kraft Foods, the world's second-largest food company, is paying the price.
Kraft, which makes brands like Oreo Cookies, Oscar Meyer, Velveeta and
Jell-O, announced a second revamping yesterday, one that would eliminate
8,000 jobs, or 8 percent of the work force, and close 20 plants. The
overhaul comes on top of 5,500 layoffs and 19 plant closures that were
announced two years ago.
Packaged-food companies, which aim their products at ordinary shoppers, are
beginning to see slower growth as consumers are choosing the convenience of
eating out at restaurants or relying on take-out - while making fewer trips
down grocery aisles.
The American restaurant industry has forecast a 5.1 percent increase in
sales this year; the packaged-food industry is expecting growth of about 2
percent.
The packaged-food industry is also feeling pressure from higher oil prices.
Manufacturers like Kraft must transport products mostly by truck to
distribution centers and supermarkets and petroleum is used to make the
plastic used in the packaging of products.
Amid those challenges, Kraft has struggled more than its rivals. It has
been criticized for failing to come up with successful new products that
excite consumers and would allow the company to charge higher prices.
"When you think of Kraft's portfolio, it's plain vanilla right up the
middle," said Eric Katzman, an analyst at Deutsche Bank.
Kraft said yesterday that it would close plants in Broadmeadows, Victoria,
in Australia and in Hoover, Ala., although it did not announce the other
plant closings. It also said it would trim 10 percent of its brand
portfolio.
Kraft reported sales yesterday that were up 10 percent for the quarter, to
$9.66 billion. Earnings for the quarter were $773 million, or 46 cents a
share, up from $628 million, or 37 cents a share, a year earlier. The
United States is Kraft's largest market, comprising about 65 percent of
total sales.
Analysts, however, looked beyond sales and earnings to Kraft's operating
margins. Those margins, according to Deutsche Bank, were 15.3 percent for
2005, down from 16.5 percent in 2004 and down from 21 percent in 2002.
An analyst at Citigroup, David Driscoll, said he worried that the declining
margins meant that Kraft was unable to raise its prices to keep pace with
its higher costs. Last year, Kraft saw an $800 million increase in raw
material costs from the previous year, much of it stemming from high oil
prices.
"Other companies have done a much better job of handling those commodity
costs," Mr. Driscoll said, "and also maintaining the sales growth."
Operating margins at its rivals were better; Kellogg's were 18.7 percent
for the last four quarters and at General Mills, they were 17.9 percent.
Raising operating margins for food products can be tricky. If a food
manufacturer raises prices too much, consumers are likely to migrate to a
cheaper competitor or to the supermarket's own brand, which can be priced
as much as 30 percent less.
If a company keeps prices low, market share may improve, but margins are
hurt, which, many analysts say, is Kraft's problem.
In November, the company announced a 4 percent price increase on certain
categories. Mr. Driscoll says that the increase applied to 14 percent of
the company's portfolio and will not be enough to offset the huge increases
in costs.
In a conference call yesterday with investors, the chief executive, Roger
K. Deromedi, acknowledged that the company's financial results were "not
where we wanted them to be when we started the year."
But he highlighted some bright spots, including the South Beach Diet line
of products, which have had $170 million in sales in 10 months, and the 100
Calorie Packs of Kraft's popular cracker and cookies, which pulled in more
than $100 million in 2005.
Mr. Deromedi also said that Kraft's efforts in health and wellness were
starting to pay off. American sales of the company's healthier Sensible
Solutions products are growing at a rate three to four times faster than
other products, he said.
"We get very positive feedback from consumers on our healthier products,
whether the 100 Calorie Packs or whole-grain Mac & Cheese," said Mr.
Deromedi, who took over as Kraft's sole chief executive in late 2003, after
his co-chief executive, Betsy D. Holden, accepted blame for market share
losses and missed earnings projections. Ms. Holden has since left Kraft.
Analysts say that while Kraft has made progress in stemming its market
share losses, its big challenge remains innovation. The creator of modern
culinary mainstays like processed cheese slices, Cheez Whiz and Shake 'N
Bake has failed to dazzle the market in recent years.
Mr. Katzman of Deutsche Bank said Kraft lacked a significant presence in
the areas where the food business was expanding - premium products; ethnic
foods; and organic and natural products.
General Mills and Kellogg, for instance, have built strong natural food
brands, General Mills with Cascadian Farms and Kellogg with Kashi. Kraft's
Back to Nature brand, which it acquired in 2003, remains a distant third.
David Adelman, an analyst at Morgan Stanley, said that Kraft was also late
to offer a cereal bar, a booming business as consumers sought on-the-go
breakfast options. Mr. Deromedi said that Kraft had caught up with its
South Beach cereal bars, which were now second in sales in the category.
The challenge this year will be for Kraft to find more successful brands
like South Beach. "With a $34-billion-a year company, one new successful
product is not enough to move the whole system," said Mr. Driscoll, the
Citigroup analyst. "You've got to have more like six or seven."
Successful new products are essential because they allow food manufacturers
to charge higher prices and stay ahead of the grocery store's in-house
brands. David Palmer, an analyst at UBS, says Kraft has the greatest
exposure to in-house supermarket brands, largely because some of its
primary products of cheese, lunch meats and nuts are big areas for in-house
labels.
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.theaustralian.news.com.au/common/story_page/0,5744,17796963%255E2702,00.html
Out of a job? That's how the Kraft cookie crumbles
James Madden
12jan06
FOOD giant Kraft, maker of Vegemite, is to shift a large chunk of its
Australian manufacturing to China after closing its biscuit factory in
Melbourne's northwest yesterday, leaving 151 workers out of a job.
The closure comes just four years after Kraft took over the Broadmeadows
plant from Lane's Biscuits, the makers of Ritz and Premium crackers.
The company claimed yesterday that it was shutting the factory because
"manufacturing costs remain too high for the facility to remain sustainable
within the highly competitive biscuits category".
Several popular national snacks such as Chicken in a Biscuit and Captain's
Table will now be produced by Chinese manufacturers and sold back to
Australia, with local distribution to be contracted to a third party.
Australian jobs have been lost in several industries as companies shift
manufacturing to countries such as China, where labour costs are
significantly cheaper. However, the decision by US-based Kraft, is one of
the few examples of Australian food manufacturing being shifted to China.
Yesterday's announcement that the factory would close on March 31 caught
most of the plant's workers by surprise, as most had expected to have kept
their jobs until July.
The closure was foreshadowed by Kraft 12 months ago when it began building
a biscuit factory in China to replace its Melbourne operation.
However, union leaders said the company had shown little respect for the
151 workers who are set to lose their jobs by giving them such short notice
of their redundancies.
On-site organiser Chris Bridley, of the Liquor Hospitality and
Miscellaneous Union, said that the "cold, hard reality" of unemployment
would hurt workers, many of whom would struggle to find other jobs in the
industry.
"This plant was a vibrant, profitable place until Kraft took over. Now four
years later, it's gone," Mr Bridley said.
"In the end, the company is going to where it will make the most profit
and, as usual, the workers are left to suffer the consequences." Elia
Andrade, who has worked at the factory for 15 years, said she was "in
shock" after hearing she would lose her job at the end of March.
"I can't believe it, I have worked there for so long and they came out and
said they're closing it down - just like that," she said. "I have three
kids and I have to pay the bills. It's not easy to find another job."
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.smh.com.au/news/National/Kraft-closes-factory-jobs-go-to-China/2006/01/11/1136956236150.html
Kraft closes factory, jobs go to China
Email Print Normal font Large font January 11, 2006 - 7:14PM
Advertisement
AdvertisementChina has bitten off another section of Australia's
manufacturing industry as Kraft Foods announced it is closing one of its
two Melbourne factories, making 151 workers redundant.
The food giant said in a statement on Wednesday it was closing its
Broadmeadows biscuit plant because "manufacturing costs remain too high for
the facility to remain sustainable within the highly competitive biscuits
category".
But union leaders representing workers at the factory slammed the company
for not reinvesting in the country - Australia - that bought its products
and supplied its profits.
The multinational will shift production of its dry biscuit brands to "a
regional facility in China" while distribution within Australia will be
contracted to a "third party logistics provider", it said.
The company has promised it will pay its workers all entitlements as well
as a redundancy package and provide "career transition" support.
Jane Farrell, assistant branch secretary of the Liquor Hospitality and
Miscellaneous Union which covers production workers at the plant, said
Kraft should have warned workers and made redundancy preparations well
before Wednesday's snap announcement.
The food giant had taken over local biscuit manufacturer Lanes which
previously owned the Broadmeadows operation.
But 12 months ago it began building a biscuit factory in China to replace
its Melbourne operation, she said.
"A very wealthy, large multi-national moves in, takes over in recent years
and guts the place and puts everyone on the dole queue," she said.
"It's about recognising the contributions those workers make to the success
of that company and the profits of that company and the pay packets of
those bosses.
"The only reason it's cheaper to make it in China is they don't pay award
or minimum standards, there's poorer health and safety.
"We've got grave concerns about what conditions those people in China work
under."
Maintenance workers at the Broadmeadows factory are represented by the
Australian Manufacturing Workers Union. Its state president, Chris
Spindler, accused Kraft of abandoning its responsibility to "reinvest in
the society that buys their products".
"If we just fall into the argument of saying `Well, labour is cheaper in
China than Australia' well, we might as well pack up everything now," he
said.
Instead governments - both state and federal - should show more support for
the manufacturing sector by investing in research, development and
infrastructure, just as the Chinese government did, he said.
Victoria's Acting Premier John Thwaites said his government would help the
retrenched workers look for other manufacturing jobs in the area.
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.news.com.au/story/0,10117,17799436-1243,00.html
150 sacked as cheese giant moves offshore
By Kate Rose
12-01-2006
AMERICAN-owned food giant Kraft yesterday sacked 151 Australian workers in
favour of cheap offshore labour.
Unsuspecting morning shift workers arrived at Kraft's Broadmeadows factory
to discover it would close on March 31.
Shocked workers were sent home for the day and ordered not to talk to the
media, while afternoon and night workers heard about their pending
unemployment from friends or on the news.
The factory will be replaced by one in regional China, where production
costs are lower.
Liquor, Hospitality and Miscellaneous Union assistant state secretary Jane
Farrell said the sackings came as a surprise after 40 jobs went last year,
followed by company assurances no more would be lost.
"It's shameful," Ms Farrell said.
"How many times do we have Australian businesses bought out by large,
wealthy American manufacturing businesses and then have a kick in the
guts?"
Ms Farrell said though the workers were loyal to Kraft, with an average of
12 years' service, Kraft didn't have the same allegiance to its employees.
Under their enterprise bargaining agreement, sacked workers will receive
about four weeks' pay for each year they have worked, as well as accrued
sick leave.
Elia Andrade, employed for 15 years, said the redundancies had come at a
bad time. She had just bought a new car to get to her afternoon shifts,
while bills from Christmas and the mortgage were mounting.
"It's very bad, and I still have the bills to pay," she said. "You never
think one morning you will hear from a friend that this happened. I'm in
shock."
My Doi has worked at Broadmeadows for 17 years and said Kraft had long been
getting rid of workers and this was the final insult.
"It's very bad for the workers. They took over and then they cut the
people, and now they want to cut more. They buy the factory and then they
don't want it," she said.
Marlies Zielke, a worker for 11 years, found out about the impending
closure from friends.
"It is very disappointing," she said.
Kraft corporate affairs manager Andrew Kilsby said the factory was not
competitive enough to remain viable.
He said Kraft would go beyond the requirements of the workers' award by
offering training and counselling to those sacked.
"We're not only offering a fair compensation for the loss of their jobs,
we're also going a few extra steps to help with transition services," he
said.
"Our focus is really on the employees at the facility. They have worked
closely with us and we've been working closely with them to get the plant
on its feet, but unfortunately it hasn't worked out."
Acting Premier John Thwaites promised Government help.
"Obviously we're disappointed with the decision, but we will be working
with the workers in that area to see what alternative employment we can
find in that region," he said.
Opposition state development spokesman Philip Davis said the Government
needed to work harder to keep manufacturers in Victoria, because investment
had dropped by 17 per cent since 1999.
Kraft has owned the plant taking over from Lanes biscuits in 2002
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://www1.zhaopin.com/Publish/Company/Kraft/profile.htm
Kraft Foods Global
Kraft Foods is a global leader in branded foods and beverages with 2003 net
revenues of more than $31 billion. Built on more than 100 years of quality
and innovation, Kraft has grown to become the second largest food and
beverage company in the world, marketing many popular brands in more than
150 countries.
Kraft Foods ha s more than 100,000 employees operating in 68 countries
worldwide. With headquarters located in Northfield, IL , Kraft owns f ive
key research & development centers and a pproximately 199 manufacturing
facilities worldwide.
The Kraft brand portfolio is one of the strongest of any packaged goods
company. Kraft holds the number-one share position in 11 global categories
and 22 of the top 25 categories in the U.S. Our superior brand portfolio
includes many well-known products that have earned the trust and
satisfaction of millions of consumers worldwide .
We recognize that our business success is not sustainable if it ignores the
economic, social and environmental foundation on which it is built. At
Kraft, we are committed to responsible business conduct and we constantly
strive to stay in touch with society's changing expectations of us to
determine where we can help make a meaningful difference.
Kraft is committed to making a difference in the communities where we live
and work, contributing more than $97 million in food and financial support
in 2003 to non-profit organizations throughout the world.
Kraft Foods Greater China
Kraft Foods recognized the growth potential of the China market very early
and was among the first group of leading international food and beverage
manufacturers to enter China. It established two joint ventures in 1984,
bringing its powdered beverages and coffee products into the market. Other
manufacturing plants were set up over the subsequent years and, in 2000,
Kraft Foods merged with Nabisco and its subsidiary United Biscuits,
including their China operations and manufacturing plants. Kraft has since
consolidated its manufacturing sites in Beijing, Tianjin, Suzhou, Guangzhou
and Tainan.
Kraft Foods is committed to China for the long term. With headquarters
located in Beijing, Kraft Foods has 46 offices across the Greater China
region and employs around 3,000 people.
Kraft Foods is one of the leading food and beverage companies in China
today. We are the number one player in two categories - Powdered Beverages
and Biscuits and No. 2 in Coffee. In each category, the Company has
developed strong brands including Pacific, Oreo, Ritz, Chips
Ahoy!,Trakinas, TANG, Maxwell House and Sugus in mainland China.
Additionally, Kraft Cheese, Philadelphia and Toblerone are successful
brands in Hong Kong and Taiwan.
+++++++++++++++++++++++++++++++++++++++++++++++++++
http://en.ce.cn/Business/Enterprise/200601/13/t20060113_5817237.shtml
Kraft moves more output to China
Last Updated(Beijing Time):2006-01-13 10:21
Kraft Foods, the world's second-largest food producer, said it will shift
production of its dry biscuit brands to China from Australia to cut costs.
Under a US$1.2 billion global restructuring plan, the largest US based
packaged food firm will close the plant, one of its two in Melbourne by
March.
It announced in January 2004 that it would axe 6,000 jobs and close up to
20 factories across the globe by 2007.
It is closing its biscuit plant in Australia because "manufacturing costs
remain too high for the facility to remain sustainable within the highly
competitive biscuits category," the company said in a statement.
The company will shift its production to a wholly-owned plant in Suzhou,
Jiangsu Province, which it set up 10 years ago when it entered the Chinese
market as one of the first batch of multinational food companies.
The Suzhou plant now produces biscuits for export to more than 10 countries
besides supplying the Chinese market.
Kraft, which operates four plants in China, didn't reply to an e-mail
yesterday on how much production will be added in China after the shift.
Kraft started building its fifth plant in Beijing last October. The plant,
which is due to be completed by the end of 2007, will increase the
company's total investment in China to US$200 million since its entry, the
company said.
The new Beijing plant will manufacture key biscuit brands such as Oreo and
Ritz for the domestic market and for export as well.
Kraft Foods said last month that it will halt the use of genetically
modified ingredients in all products sold in China starting in 2007.
Some market analysts believe Kraft made the decision because its sales have
been adversely affected by concern among Chinese consumers over the safety
of GM food.
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