Why Has Kraft Foods Group Inc (KRFT) Stock Soared After Its Spinoff?

Page 1 of 2

When shares of old Kraft stock broke into two components last fall, most investors expected the higher-growth Mondelez International Inc (NASDAQ:MDLZ) global snacks business to be the more attractive segment of the two post-spinoff companies. Yet the North American grocery business that now trades as Kraft Foods Group Inc (NASDAQ:KRFT) has shown surprising success as an independent company, and as it’s turned out, shares of the new Kraft stock have done a lot better than Mondelez during the first nine months of their separate existence. Let’s take a closer look at exactly how the new Kraft has done so well and what’s in store for its stock going forward.

Kraft Foods Group Inc (NASDAQ:KRFT)

The appeal of the food business
The old Kraft Foods Group Inc (NASDAQ:KRFT) was a monster food company, so it’s important to know which company got which brands in the spinoff. Mondelez kept its global snack-food business, which include brands like Nabisco, Cadbury, Oreo, and Trident. Meanwhile, Kraft got equally familiar grocery-store brands including Jell-O, Oscar Mayer, Velveeta, and Capri Sun, as well as its namesake Kraft lines of products such as macaroni and cheese.

The original reason for the split was to allow Mondelez International Inc (NASDAQ:MDLZ) to free itself from what was perceived as a mature, slow-growth grocery business. With North America having fewer high-growth prospects than international markets, especially in emerging markets, the new Kraft Foods Group Inc (NASDAQ:KRFT) was expected to lag behind while Mondelez could be more nimble in taking advantage of growth opportunities around the world.

But Mondelez has suffered some headwinds. In its most recent earnings report last month, Mondelez reported weakness in its coffee segment, forcing it to cut prices in Europe in order to stay competitive. Moreover, The Hershey Company (NYSE:HSY) has stepped up its presence in the lucrative emerging market regions, where Mondelez has enjoyed substantial revenue growth. In addition, the rise of private-label offerings from ConAgra Foods, Inc. (NYSE:CAG) as it works with grocery store chains to offer competing products to those Mondelez offers has hit the global snack company especially hard, given its many premium-priced snack offerings that especially lend themselves to private-label knockoffs.

Meanwhile, Kraft Foods Group Inc (NASDAQ:KRFT) has been the one to seek to breathe new life into some of its products. By converting its once-popular Kool-Aid from powder to liquid, Kraft is hoping to get new customers interested in the product as sales have been weak lately. Moreover, the company has reported 16% growth in its Velveeta sales, and other important brands, such as Miracle Whip and its Oscar Mayer packaged meat line, might well have similarly surprising potential.

Making shareholders happy
But what’s really pushed Kraft Foods Group Inc (NASDAQ:KRFT) stock higher has been its attention to shareholder-friendly initiatives. Understanding that revenue growth isn’t the only important factor for investors, Kraft has moved to make its business more efficient, cutting costs and reducing unnecessary bulk in its operations. By producing more free cash flow and generating greater returns on its invested capital, Kraft hopes to follow in the dividend-paying footsteps of the old company.

KRFT Total Return Price Chart

Kraft/Mondelez Total Return Price data by YCharts.

Page 1 of 2

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!