Kraft Case Study
Purpose
The purpose of this Case Analysis Report is to advise Philip Morris on the Acquisition of Kraft Inc.
Overview
Kraft is a food-focused company with many well known brand names. In 1987 net sales were $9.9 billion which was an increase of 27% over the previous year., and net income increased by 11% to $435 million. This follows an earlier attempt to diversify where in 1980 Kraft merged with Dart Industries and then acquiring Hobart Corporation in 1981. However, by the end of 1986 Kraft had returned to a food-focused strategy.
Philip Morris is a company that is dependant on the tobacco industry. Most of Philip Morris’ income is from its Marlboro, Benson & Hedges, and Virginia Slim cigarette brands. Though tobacco sales have increased by 15 percent in 1987, Philip Morris wishes to diversify out of the tobacco business, as evidenced by their 1969 acquisition of 53 percent of Miller Brewing Company’s common shares with the remaining shares following in 1970, and their purchase of Seven-Up in 1978 and General Foods in 1985. These acquisitions have had mixed results, with Philip Morris selling its Seven-Up operations in 1986 and General Foods having a declining profit from 1986 to 1987 of $624 million to $605 million.
Why is Kraft a takeover target for Philip Morris
The food industry is a growing one. For Kraft, in 1987 net sales were $9.9 billion which was an increase of 27% over the previous year., and net income increased by 11% to $435 million. It is expected with an increasing population that the food industry will grow. As Philip Morris is seeking to diversify out of the tobacco business and into the food industry, the acquisition of Kraft would strengthen their position as they would then become the largest food company in the world. Kraft is internationally recognised with many well known brand names such as Miracle Whip, Seven Seas, and its range of Kraft salad dressings.
What has occurred thus far
On the 18th of
The purpose of this Case Analysis Report is to advise Philip Morris on the Acquisition of Kraft Inc.
Overview
Kraft is a food-focused company with many well known brand names. In 1987 net sales were $9.9 billion which was an increase of 27% over the previous year., and net income increased by 11% to $435 million. This follows an earlier attempt to diversify where in 1980 Kraft merged with Dart Industries and then acquiring Hobart Corporation in 1981. However, by the end of 1986 Kraft had returned to a food-focused strategy.
Philip Morris is a company that is dependant on the tobacco industry. Most of Philip Morris’ income is from its Marlboro, Benson & Hedges, and Virginia Slim cigarette brands. Though tobacco sales have increased by 15 percent in 1987, Philip Morris wishes to diversify out of the tobacco business, as evidenced by their 1969 acquisition of 53 percent of Miller Brewing Company’s common shares with the remaining shares following in 1970, and their purchase of Seven-Up in 1978 and General Foods in 1985. These acquisitions have had mixed results, with Philip Morris selling its Seven-Up operations in 1986 and General Foods having a declining profit from 1986 to 1987 of $624 million to $605 million.
Why is Kraft a takeover target for Philip Morris
The food industry is a growing one. For Kraft, in 1987 net sales were $9.9 billion which was an increase of 27% over the previous year., and net income increased by 11% to $435 million. It is expected with an increasing population that the food industry will grow. As Philip Morris is seeking to diversify out of the tobacco business and into the food industry, the acquisition of Kraft would strengthen their position as they would then become the largest food company in the world. Kraft is internationally recognised with many well known brand names such as Miracle Whip, Seven Seas, and its range of Kraft salad dressings.
What has occurred thus far
On the 18th of