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Layoffs coming at Kraft?
Maker of Oreo and Chips Ahoy cookies could cut 10% of salaried workers, person familiar says.
January 7, 2004: 6:51 PM EST
By Joseph Lee, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Kraft Foods Inc. plans to lay off 10 percent of its salaried work force as the company tries to revamp its slow-growing North American business, a person familiar with the situation said this week.

In addition, the nation's largest food company, maker of Maxwell House coffee and Chips Ahoy! cookies, will cut some employee salaries, said the person, who declined to be named.

David Adelman, an analyst at Morgan Stanley, said Kraft is probably looking to "reduce its cost structure, and there are only two ways of doing that. The two big costs in the industry that are controllable are your plant infrastructure and your work force."

The company will also relocate employees currently sharing a building with its corporate parent, Altria Inc., in Rye Brook, N.Y., to other locations.

In addition, the Latin American piece of Kraft Foods International will be relocated to Miami, and the Balance Bar division will be merged into the snacks division, the person told CNN/Money.

Altria, formerly Philip Morris Cos., owns about 84 percent of Kraft's shares, but the tobacco company's smoking-related litigation has weighed on Kraft's stock.

Kraft (KFT: Research, Estimates), which went public in June 2001, has seen its stock tumble about 16 percent last year, hurt by earnings shortfalls linked to possible management missteps such as overpricing many of its products in a tight economy.

The company, which purchased Oreo cookie maker Nabisco in 2000, has also experienced problems in the competitive cookie category.

Kraft Foods Incorporated
Altria Group

Last month, the company removed Betsy Holden from the top post of co-CEO and named her counterpart, Roger Deromedi, as the sole CEO of the company.

The food company, which also owns cereal brands such as Frosted Shredded Wheat and Honey Bunches of Oats, has long been speculated about as a possible spinoff from Altria (MO: Research, Estimates).

"If you look at what they have done at 120 Park Avenue, where Altria is located, they are in the process of relocating their domestic tobacco headquarters to Richmond, Virginia," said Adelman.

"Moving Kraft's employees out of the Altria building (in Rye Brook) would be consistent with wanting to have independent corporate identities for these entities, ultimately separation," he added.

Donna Sitkiewicz, spokeswoman at Kraft, declined to comment on the story but said Deromedi will make an announcement about the company's structural and strategic changes in mid-January.

The source told CNN/Money that the company is expected to announce the move later this week or early next week.  Top of page

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