Analyst Report

Khoa HuynhProfessor LaRosaSamantha SchoenbergBusiness 101December 2, 2009

CONTENTSI. Executive SummaryII. Company Profile

a. Company Name and Stock Symbolb. Corporate Headquarters Locationc. Websited. Number of Employeese. Key Executives

III. Stock Price Informationa. Graphsb. Analysis

IV. Company Strategy/MissionV. Industry/Market Sector

a. Overviewb. Outlookc. Competitive Environment

VI. Key Financial InformationVII. Current Issues

a. Current Event 1b. Current Event 2c. Current Event 3

VIII. RecommendationsIX. Work Cited

Executive Summary

With their variety of different brands and their drive to meet consumer’s needs, Kraft Food is now one of the top food companies in the world. Kraft’s stock price reflects the different activities that Kraft partakes in as their stock grows and declines. Most of Kraft’s 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 ProfileCompany 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 Kraft’s Food stock experienced a lot of incline and decline in their stock price. As presented in the graph, the first week going into November, Kraft’s Food was slightly above $27.5 in value. On November 4th Kraft’s Food dropped down to nearly $26.5. Kraft’s Food stock dropped again on November 9th to $26.5 when they presented a lower bid for Cadbury. However, after the 9th, Kraft’s Food started to experience an upward trend going well above $27.5 in value. After November 17th, Kraft’s Food stock started to decline, ending at $26.6 on November 27th.

Compared to the Dow Jones Industrial Average, Kraft’s Food follows the same trend percentage wise. There was a period of time from October 28th to November 5th where Kraft’s Food was well above the Dow Jones. When Kraft’s Food started declining on October 5th, it started to drop below Dow Jones. Kraft’s 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

consumer’s wants and needs in mind. Whether it’s 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. Kraft’s 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 Kraft’s 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. Kraft’s major competitors offer different variations of the same product. ConAgra Food’s 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 2008 2007 %Chg Actual Change

Sales $42,201 $36,134 16.80% $6,067

Net Income $2,901 $2,590 12.00% $311

Cash $1,244 $567 119.40% $677

Profit Margin Net Income $2,901 7% $2,590 7% Sales $42,201 $36,134

Current Ratio - Liquidity Current Assets $11,366 1.03x $10,737 0.63x Current Liabilities $11,044 $17,086

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 Cadbury’s bidders. Kraft had taken loans

from nine banks lead by Citigroup and the number of banks financing

Kraft’s bid could grow to eighteen. Also stated in Cauchi’s article, “Kraft

preemptive measure has shrunk the pool of banks available to finance

counter offers, though it’s 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 Britain’s mergers and acquisitions regulator. Cadbury had

already declined Kraft’s 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 world’s 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 CitedCauchi, 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>