Analyst Report

Khoa Huynh Professor LaRosa Samantha Schoenberg Business 101 December 2, 2009

CONTENTS
I. II. Executive Summary Company Profile a. Company Name and Stock Symbol b. Corporate Headquarters Location c. Website d. Number of Employees e. Key Executives Stock Price Information a. Graphs b. Analysis Company Strategy/Mission Industry/Market Sector a. Overview b. Outlook c. Competitive Environment Key Financial Information Current Issues a. Current Event 1 b. Current Event 2 c. Current Event 3 Recommendations Work Cited

III.

IV. V.

VI. VII.

VIII. IX.

Executive Summary
With their variety of different brands and their drive to meet consumers needs, Kraft Food is now one of the top food companies in the world. Krafts stock price reflects the different activities that Kraft partakes in as their stock grows and declines. Most of Krafts stock volatility revolves around Kraft most recent activity in Cadbury. The merging of Kraft Food Inc. and Cadbury will bring together a new line of products and positive performance. However Kraft Food is still waiting for Cadbury to respond to their offer of $16 billion. Kraft food has room to expand and the potential to be at the top of the food industry.

Company Profile
Company Name: Kraft Foods Inc. Stock Symbol: NYSE: KFT (Common Stock) Corporate Headquarters Location: 3 Lakes Dr. Northfield, IL 60093 United States Website: www. kraftfoodscompany.com Number of Employees: 98,000 Key Executives: Chief Executive Officer and Chairman: Irene Rosenfeld Chief Financial Officer: Timothy Mclevish

Stock Price Information

Over the past month Krafts Food stock experienced a lot of incline and decline in their stock price. As presented in the graph, the first week going into November, Krafts Food was slightly above $27.5 in value. On November 4th Krafts Food dropped down to nearly $26.5. Krafts Food stock dropped again on November 9th to $26.5 when they presented a lower bid for Cadbury. However, after the 9th, Krafts Food started to experience an upward trend going well above $27.5 in value. After November 17th, Krafts Food stock started to decline, ending at $26.6 on November 27th.

Compared to the Dow Jones Industrial Average, Krafts Food follows the same trend percentage wise. There was a period of time from October 28th to November 5th where Krafts Food was well above the Dow Jones. When Krafts Food started declining on October 5th, it started to drop below Dow Jones. Krafts Food constant decline from November 17th kept their percentage well below Dow Jones stock trend as can be seen on the graph.

Company Strategy/Mission

Kraft Food sets out to make delicious food and connections with its consumers. Consumers inspire the company make decisions with the consumers wants and needs in mind. Whether its watching your weight, preparing to celebrate, grabbing a quick bite or sitting down to a family night, Kraft creates food that is wholesome and delicious. Kraft is constantly looking for fresh ideas to improve their workplace, their partnership, their communities, and their world. Krafts biggest drive is their consumer (Kraft).

Industry/Market Sector

Overview:
Kraft was founded in Chicago, Illinois in 1903 and is now the second largest food and beverage company in the world. They manufacture and market packaged food products, including snacks, beverages, cheese, convenient meals, and various grocery products. Kraft has operations in more than 70 countries and sells their products in approximately 150 countries. They have nine brands with revenues exceeding $1 billion: Kraft cheeses, dinners and dressings; Oscar Mayer meats; Philadelphia cream cheese; Maxwell House and Jacobs coffee; Nabisco cookies and crackers and its Oreo cookie brand; Milka chocolates; and LU biscuits. The company operates with more than 50 brands that generate revenues of at least $100 million (Kraft).

Outlook:

In 2008, Kraft implemented some new changes. U.S. cheese was organized as a standalone operation segment in order to create a more self-contained and integrated business unit in support of faster growth. The macaroni and cheese category, as well as other dinner products, were moved from Krafts U.S. Convenient Meals segment to the U.S. Grocery segment to take advantage of operating synergies. Canada and North America Foodservice were structured as a standalone reportable segment. This change allowed Kraft to deliver on the unique requirements of the Canadian consumer and customer while maintaining strong North American linkages to innovation, new product development, and new capabilities to drive the business. Furthermore, it allows the company to manage strategic customer decisions and continue to capture cross-border sales and marketing synergies within the Foodservice operations (Kraft).

Competitive Environment
Kraft is #1 in the U.S. food industry and keeps up with demands driven by consumer taste and health consideration. It is a big producer that caters to a wide variety of clients by introducing different brands and products. Three major competitors of Kraft are ConAgra Foods, Inc., Nestle S.A., and Sara Lee North American Retail. Krafts major competitors offer different variations of the same product. ConAgra Foods Inc. are known for their frozen dinners, Nestle offers great tasting and healthy baby formula, milk and bottled water mixes, and Sara Lee North American Retail has a widen pantry of ready to eat frozen cake, pies and cheesecakes. Kraft surpasses the competitors with innovative ideas and offers products at the right price.

Key Financial Information

Kraft: All Data Shown in Millions of U.S. Dollars

Financial Data Sales Net Income Cash
2008 $42,201 $2,901 $1,244 2007 $36,134 $2,590 $567 %Chg 16.80% 12.00% 119.40% Actual Change $6,067 $311 $677

Profit Margin
Current Ratio Liquidity

Net Income Sales

$2,901 $42,201

7%

$2,590 $36,134

7%

Current Assets Current Liabilities

$11,366 $11,044

1.03x

$10,737 $17,086

0.63x

Kraft 2008 Sales grew almost 17% from 2007 net sales. Kraft also experienced an increase in Net Income of about 12% from 2007 and an increase in Cash of about 119%, almost tripling their cash from 2007. In the Chart above, Kraft maintains the same profit margin in 2008 as in 2007. But the speed by which their company can turn assets into cash increased from 0.63x in 2007 to 1.03x in 2008.

Current Issues
Kraft Bank Ties Pose Problem for Other Cadbury Suitors
Kraft, who already secured enough money for the Cadbury offer that they proposed on November 9th, has prevented many banks from making major loans to other Cadburys bidders. Kraft had taken loans from nine banks lead by Citigroup and the number of banks financing Krafts bid could grow to eighteen. Also stated in Cauchis article, Kraft preemptive measure has shrunk the pool of banks available to finance counter offers, though its not clear whether Kraft has hobbled its rivals enough to discourage them from bidding. This strategy from Kraft could ensure their bid for Cadbury (Cauchi).

Kraft Given November 9th Deadline to make Cadbury Offer

On September 30th, 2009 Kraft Food was given six weeks notice to make an official formal proposal on Cadbury or end their interest, according to Britains mergers and acquisitions regulator. Cadbury had already declined Krafts original offer of $15.8 billion proposed on August 28th. Cadbury wanted a higher offer from CEO Irene Rosenfeld. Rosenfeld responded by saying that Kraft will remain disciplined in its actions and will not make any higher offers (Cleary).

Kraft: No Need to Sell Assets for Cadbury Bid

Kraft claims that they do not need to sell any brand to make the purchase of Cadbury for $16 billion. Kraft spokeswomen Yeatman made that claim in response to a report in the New York Times that said, Kraft, the worlds second-largest food company, could sell assets to finance its bid for Cadbury. However Cadbury had rejected the $16 billion offer because they believed that being absorbed into Kraft would be unappealing. The article ended saying that Kraft will likely have to raise its bid to get a deal with Cadbury (Dorfman).

Recommendations

I would buy and advise clients who are looking for more of a long term investment to buy this stock based on the data and key industrial information provided in this analyst report. Although the stock chart shows a lot of activity happening in the recent four weeks, Kraft stock shows a lot of potential to grow. Many news releases also give a good preview to where Kraft Food Inc. is heading. The merge of Kraft and Cadbury will dramatically increase the stock. Right now, this stock is a very good stock to invest in because of their stable increase and their recent activities.

Work Cited
Cauchi, Marietta, and Kate Haywood. UPDATE: FOCUS: Kraft Bank Ties Pose Problem for other Cadbury Suitors. CNNMoney. 24 Nov. 2009. Web. 25 Nov. 2009. < http://money.cnn.com/news/newsfeeds/articles/djf500/20091. 1241003DOWJONESDJONLINE000263_FORTUNE5.htm> Cleary, Andrew. Kraft Given Nov. 9 Deadline to Make Cadbury Offer. Bloomberg. 30 Sep. 2009. Web. 20 Nov. 2009. < http://www.bloomberg.com/apps/news?pid=20601103&sid=asl bZPFOfDWA> Dorfman, Brad. Kraft: No Need to Sell Assets for Cadbury Bid. Reuters. 15 Sep. 2009. Web. 20 Nov. 2009. < http://www.reuters.com/article/hotStocksNews/idUSN1576962 0090915>. Kraft Foods. Oct 2007. Kraft Foods Global, Inc. 14 Nov 2009. <www.kraftfoodscompany.com>