KRAFT KAVES! Maker of Oreos to Revamp Products: Cites Obesity

CHICAGO (Reuters) - Kraft Foods Inc., the biggest U.S. maker of processed foods, on Tuesday said it would cap portion sizes, eliminate marketing in schools and reformulate some products as the food industry faces increasing legal blame for obesity and unhealthy eating trends.

The maker of Oreo cookies and Velveeta cheese spreads said this year it will develop a range of standards to improve the overall nutritional content of its products and the way it sells them. It will begin making changes to the way it manufactures and markets foods beginning next year.

The cost of the measures, which are sweeping, could not be estimated, according to a spokesman for the company, based in the Chicago suburb of Northfield, Illinois.

Critics are quick to point out that Kraft may be on the defensive at a time of heightened criticism over the role big food companies play in contributing to growing health problems in the United States. No. 1 fast-food chain McDonald's Corp. has already been the target of a highly publicized lawsuit linking its burgers to obesity in children.

"This is sort of a preemptive move to stave off the lawyers and the critics," said Henry Anhalt, an endocrinologist and director of the "Kids Weight Down" program at Maimonides Medical Center in Brooklyn.

"What I think is going on is that the soothsayers are saying that coming down the pike are going to be large lawsuits, class action suits looking at cardiovascular disease, premature death, diabetes, and they're going to turn to the food industry and lay it on their feet," he said.

Still, he applauded Kraft for making changes that he believes will make a difference. Kraft could set standards that other major food companies could follow.

Obesity among adults in the United States has doubled since 1980, and tripled among adolescents, according to the U.S. surgeon general.

Kraft acknowledged that the moves may in part help indemnify the company against potential lawsuits.

"We're making these commitments first and foremost because we think it is the right thing to do for the people who use our products and for our business, but if it also discourages a plaintiff's attorney or unfair legislation, that's fine with us." said Michael Mudd, a Kraft spokesman.

Kraft said its efforts would be global, focusing on product nutrition, marketing practices, information for consumers and public advocacy. It is forming an advisory council to help develop standards for the company's approach to health issues.

Marketing fatty and sugar-laden foods to children has been a hot-button in the news. Last week, New York City's school system decided to remove candy, soda and sweet snacks from school vending machines.

Last month, the head of the U.S. Food and Drug Administration (news - web sites) said that agency plans to push for expanded nutritional labeling on food products.

Kraft said the changes it will make will include advertising and marketing to children to encourage appropriate eating behaviors and active lifestyles.

The company, which used to promote its products on Channel One, a news channel played in secondary schools, will now cease all in-school marketing.

Other big food industry players are also taking defensive measures. McDonald's in March announced worldwide initiatives to help promote healthy lifestyles and provide consumers with expanded product information. It has also assembled an advisory council.

"This is an ongoing battle," said Keith Patriquin, a buy-side analyst with Loomis Sayles, which holds shares of Kraft and other big food names. "Trial lawyers ... are looking for the next big thing."

Earlier this year, a lawsuit was filed in California seeking to ban Kraft's Oreo cookies. The suit, which drew criticism in legal circles for potentially abusing the U.S. court system, was withdrawn less than two weeks later.

Shares of Kraft, which is majority owned by tobacco giant Altria Group Inc., were off 25 cents at $34.30 in mid-morning New York Stock Exchange (news - web sites) trading. (With reporting by Brad Dorfman in Chicago)

Two Key Executives Leave Kraft Foods

July 9, 2003 04:27 PM EDT

CHICAGO - Two key executives have left Kraft Foods Inc. in a shakeup that caused the company's stock to drop Wednesday.

The world's second-largest food company behind Nestle announced the departures of Irene Rosenfeld, president of Kraft Foods North America since October, and Michael Polk, president of the biscuit and snacks group.

Both decided to leave to pursue other opportunities, the company said without elaborating.

Prudential Financial called the departures big losses for Kraft - particularly that of Rosenfeld, an integral part of Kraft's management team. "We think it raises some concerns about current business trends," particularly with sales, analyst John McMillin said in a note to investors.

Kraft shares were down $1.16 to close at $31.32 on the New York Stock Exchange.

According to Prudential, Polk left to become the No. 2 executive at Unilever's North American food division while Rosenfeld is thought to be looking for another top position in the industry.

Daryl Brewster, 46, formerly vice president of the North American food unit, succeeds Polk as snacks chief. The company said no replacement will be named for Rosenfeld.

Kraft spokeswoman Donna Sitkiewicz said the five business heads who reported to Rosenfeld will now report directly to Betsy Holden, co-CEO of Kraft Foods and CEO of Kraft Foods North America - the unit that generates 80 percent of the company's profits.

Lance Friedmann, 47, will take over Brewster's duties overseeing operations in Canada, Mexico and Puerto Rico and will become a member of the Kraft Foods North America management committee.

The personnel moves come with the food giant rethinking the way it markets its foods amid rising concerns, and potential lawsuits, about obesity. Kraft said last week it plans to change some product recipes, reduce portions in some single-serve packages, quit marketing snacks via giveaways at school and encourage healthier lifestyles in an effort to combat obesity.

Kraft Foods North America's business boasts the world's best-selling cheese brand in Kraft as well as the top cookie and cracker business in Nabisco.

The Northfield, Ill.-based company releases second-quarter earnings next Wednesday. The company earned $3.4 billion last year on $29.7 billion in sales.

Woofdog123: In all fairness, a lot of the recent rise in the stock is simply regaining what was lost when that huge appeal bond issue was pending. The stock is only up about 15% in the last 4 months, less than the S&P's approximate 20% gain since march 1.

It's true that large run up in Phillip Morris (Altria, MO:NYSE) is due to the previous lawsuit which depressed the stock price. But for those who follow this stock, ususally they buy when the price is near/below its 52-wk low. When a new lawsuit is initiated, usually its a good practice to buy bits and pieces as the stock begins to tank.

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