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Breaking News: H.J. Heinz and Kraft Foods Mega-Merger Portend Additional Tremors Across CPG Supply Chains


This morning, financial headlines reveal the rather stunning but not unexpected news that H.J. Heinz will merge with Kraft Foods Group in a combined public company that will be named Kraft Heinz Company. According to The Wall Street Journal, this deal will likely top $40 billion in valuation with the combined entity having revenues of approximately $28 billion. It would create what is expected to be the world’s fifth largest food and beverage company featuring many well-known consumer brands. From the lens of this blog, this development reinforces a clear message to other traditional consumer product goods supply chains that business-as-usual is no longer acceptable, and that further industry changes and developments are inevitable. This Heinz-Kraft deal is backed by infamous private equity firm 3G Capital Partners, and the financing of Warren Buffet’s Berkshire Hathaway, which are each contributing $5 billion in financing. The terms call for Heinz shareholders to […]

Starbucks Cited in a $2.8 Billion Arbitration Award

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If our community needed any additional reinforcement regarding how important, and perhaps how expensive, open contract management terms and supplier relationships have become, than today’s headlines involving Starbucks and Kraft Foods should be the reminder. (Paid subscription or tiered free viewing) Yesterday an arbiter ordered Starbucks to pay Kraft’s new spinoff, Mondelez International a total of roughly $2.8 billion dollars after the early termination of a Kraft’s supply coffee agreement with Starbucks. The coffee supply agreement dates back to 1998 when Kraft was contracted to market and distribute Starbucks branded coffee among U.S. grocery and supermarket channels. In a November 2010 Supply Chain Matters commentary, we noted reports that the deal with Kraft was designed as an indefinite arrangement subject to certain conditions and limitations. In order to terminate the supply arrangement, Starbucks accused its partner of failure to actively market the brand and not maintaining appropriate promotional campaigns. Notice […]

Mondelez International- When Cost Savings Pressures Reach Extremes

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This week, the Wall Street Journal reported that Mondelez International, the snack foods spinout of Kraft, has set expectations of a large revamp of its complex supply chain.  The goal of this latest effort is to facilitate a 5 percentage point improvement in operating income margin by 2016. The effort itself has large expectations for overall savings which include $3 billion in gross productivity, $1.5 billion in net productivity and $1 billion in incremental cash over the next three years, all stemming from supply chain improvements. At face value, this type of concentrated supply chain cost savings initiative would probably be perceived as challenging. For the supply chain related teams associated with this chocolate, biscuit and candy producer with brands such as Nabisco, Trident and Cadbury it is doubly challenging because of earlier cost-saving efforts initiated when Kraft purchased Cadbury Foods. At the time of the Cadbury merger announcement, Kraft management […]

Nestle is Cited for Cocoa Supply Chain Labor Abuse

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Supply Chain Matters has had a number of commentaries pointing out that supply chain risk mitigation not only includes the threat of physical supply disruption, but also matters of social responsibility and fair labor practices.  The risk is fundamental, it involves the reputation of your business and your brand. There have been a number of previous high profile past examples including Nike, who’s brand came under enormous pressures with discoveries of child labor violations involving offshore manufacturing.  Then there are top of mind examples, including Gartner’s number one ranked supply chain Apple, who continues to both react to and respondto audit findings regarding labor practices at its prime contract manufacturer as well as some of its suppliers. In our prior and other subsequent commentaries, we noted that when a company like Apple is deservedly ranked number one on nearly every researcher’s top supply chain listing, the ranking comes with a […]

Kraft Announces New Management Structures for Split Companies

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In August of 2011, consumer goods provider Kraft Foods made a surprising announcement that included global supply chain implications.  The company announced that it would split into two independent public companies, one to be focused on a global snacks business with the other being the company’s core grocery business.  The timing of this split is slated for late this year. The snacks business unit will have responsibility for $32 billion in global revenues while Kraft Foods (Grocery) will be responsible for half that amount, namely $16 billion in revenues. At the time of this announcement, Supply Chain Matters provided a commentary with an open question, namely how will the company respond with its corresponding supply chain and distribution strategy alignment. The essential challenge is that the global snacks business is driven by fundamental different performance metrics and investment needs than grocery. The former is high touch, complex channels driven while […]

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