Irene Rosenfeld had hoped Wall Street would give her until 2009 to produce the results from $300 million to $400 million being spent to fix the underperforming brands of Kraft Foods Inc., the nation’s largest food company.
That’s probably not going to happen now that an investment fund operated by billionaire investor Nelson Peltz has spent as much as $1.7 billion to acquire a 3 percent stake in Northfield-based Kraft.
Instead, Rosenfeld, Kraft’s chairman and chief executive, will likely end up meeting with Peltz as early as next week to find out what he thinks she should be doing. At least that’s the road map Peltz has followed at other food and consumer products companies in which he has invested since the creation two years ago of New York-based Trian Fund Management LP.
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If anything, Peltz likes to shake things up at the companies in which he takes positions, often throwing around his weight to force brands to be sold or bolstered.
A source close to Peltz has already made it known that Peltz wants Kraft, the maker of Oreo cookies, Oscar Mayer hot dogs and DiGiorno pizza, to sell its Post cereal and Maxwell House coffee brands and focus on improving its core frozen food and cheese businesses.
Kraft didn’t return phone calls or e-mail messages on Friday seeking comment about whether Peltz had been in touch with Rosenfeld or if a meeting has been scheduled.
Disclosure of Trian’s investment roiled Kraft’s stock Friday. It soared before ending down 1.3 percent, or 49 cents, at $36.25 a share on the New York Stock Exchange.
“He’s a believer in the value of brands and that there’s more value to be had for these things,” said one long-time Peltz watcher.
But Wall Street and Wal-Mart make it difficult for managers to spend on brand marketing. Such outlays usually don’t produce dramatic results on a quarterly schedule, so companies tend to cut costs and discount their products in an effort to increase market share and sales. The splintering of the mass media has also made it difficult for companies to make efficient national advertising buys to support brands.
“Sometimes these guys need a pass” to increase spending, and Peltz gives it to them, this source said.
Peltz’s pattern of pushing his plans was established more than a year ago with Dublin, Ohio-based Wendy’s International Inc. In December 2005, then-CEO John Schuessler refused to meet with Peltz. By April 2006 Schuessler was gone.
Last summer Wendy’s agreed to Peltz’s demands after several other funds joined him in demanding changes. The hamburger chain spun off the Tim Hortons doughnut division to shareholders and earlier this week put itself up for sale.
The CEO of the H.J. Heinz Co didn’t exactly repeat Schuessler’s mistake.
But Bill Johnson refused to consider Peltz’s recommendations after a contentious March 2006 dinner during which Peltz lectured Johnson about what he needed to do to fix the ketchup and condiments company. Peltz ended the dinner saying he was going on Heinz’s board. A brutal proxy fight ended with Peltz and a supporter becoming Heinz directors.
Tiffany & Co. and Cadbury Schweppes PLC earlier this year apparently both decided that discretion was preferable to a fight.
Tiffany, the jewelry concern, in February quickly agreed to consider changes suggested by Peltz. Trian reduced his investment to about 1 percent of outstanding shares after Tiffany agreed to expand offerings to include designer scarves and women’s handbags.
In March, London-based Cadbury, a beverage and candy company, didn’t even wait to hear Peltz’s demands. Three days after he announced his investment, the company said it would split itself into two parts and sell its beverage unit.
But Wall Street analysts, who have cheered Peltz’s actions in the past, were less enthusiastic about his move on Kraft.
“There is little excess value to be unlocked,” Christopher Growe, an analyst with A.G. Edwards & Sons Inc., wrote in a note sent Thursday to investors.
“If the goal is to improve the value of Kraft’s shares, the battle is over,” wrote Tim Ramey, in a note sent Friday, noting the stock had risen to more than $36 per share from $33 in the past month. “Congrats Mr. Peltz, your work is done here.”
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Peltz’s score card
Peltz vs. Wendy’s
Mid-December 2005: Trian acquires a 5.5 percent stake in Wendy’s and Peltz demands a meeting with the company.
Late December 2005: CEO John Schuessler refuses.
April 2006: Schuessler resigns.
Summer 2006: Wendy’s agrees to spin off its Tim Hortons doughnut chain and pay a special dividend to shareholders as demanded by Peltz.
Peltz vs. Heinz
March 2006: Trian acquires a 5.47 percent stake in H.J. Heinz. Peltz invites CEO Bill Johnson to dinner, lectures Johnson on how he should be running the company and announces he is going on Heinz’s board.
August 2006: Peltz runs a slate of five people for the board in a proxy fight. He and one supporter are elected.
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Fall 2006: Company begins an expensive marketing campaign for its ketchup and launches an aggressive foreign expansion, both of which had been sought by Peltz.
Peltz vs. Tiffany & Co.
Feb. 26, 2007: Trian announces a 5.5 percent stake in Tiffany & Co.
Feb. 27, 2007: Jewelry concern says it will consider Peltz’s proposals.
Peltz vs. Cadbury
March 12, 2007: Trian and Peltz confirm a 3 percent stake in London-based Cadbury Schweppes PLC.
March 15, 2007: The candy and soft drink company says it will split itself into two parts and sell its beverage division.
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