Kraft talent heading for the exits

Kraft talent heading for the exits

As food giant struggles, hot prospects are moving on Kraft Foods Inc. is losing some top talent as the company struggles to reverse two years of declining profits.

The Northfield-based food giant has a history of churning out consumer-marketing superstars, but observers say Kraft is more vulnerable to employee-raiding by rivals than ever. In the last 18 months, at least nine people at the level of vice-president or above — all considered top management prospects — have voluntarily left Kraft.

Three of the departed managers oversaw divisions accounting for a combined $11.2 billion in sales at the times they left.

Most of the former employees declined comment or didn’t return calls. But two of them, speaking on the condition that their names not be used, confirmed that they left Kraft because they lacked confidence in the struggling food maker’s turnaround prospects.

Kraft has been rocked by rising commodity costs and competition from cheaper store brands and hasn’t been innovating fast enough. Unit volume was flat last year and earnings fell 1.2% to $2.63 billion on $34.1 billion in sales. The profit declines have taken their toll on Kraft’s shares, which have fallen 11% since January 2005, closing at $30.70 Friday.

CEO Roger Deromedi in January announced the second major restructuring in as many years and said he wants to use savings from plant closures and layoffs to spark sales growth. Losing key talent could make that job even harder.

The cast of departing characters includes the head of Kraft’s China division, Andrew Phillips, who left in January, and Daryl Brewster, former president of Kraft’s North American snacks and cereals unit, who left this month to become CEO of ailing Krispy Kreme Doughnuts Inc. Under Mr. Brewster’s watch, the $5.75-billion (sales) snacks and cereals unit’s operating income grew 18% to $871 million last year.

Fred Schaeffer, who was president of Kraft Canada Inc., left the company late last year to become CEO of McCain Foods Canada. Mr. Schaeffer won plaudits at Kraft for integrating the Canadian operations into the North American sector, and for negotiating the sale of Kraft’s Canadian grocery business.

FIRST A PROMOTION, THEN AN EXIT

Irene Britt also left late last year, just a few weeks after becoming vice-president of Kraft’s cereal business — a much bigger unit than the salty snacks business she’d previously run — to take a vice-president post at Campbell Soup Co. At Kraft she was credited with reviving the Planters nuts business with a new advertising campaign and an extended product lineup.

Elizabeth Smith had been group vice-president and president of U.S. beverages and grocery, with sales of $4.97 billion in 2004. She joined Avon Products Inc. in January 2005 and is now the head of its North American business. At Kraft, Ms. Smith was known for making the company’s Altoids mints a huge national brand in the mid-1990s. Kraft sold the Altoids brand to Wm. Wrigley Jr. Co. last year.

Mark Berlind was Kraft’s executive vice-president of global corporate and government affairs before leaving in February. Mr. Berlind, who had reported directly to Mr. Deromedi, hasn’t accepted a new job. “Kraft is going through a difficult time right now, but I wish them the best,” he says.

The departure of such high-ranking executives “is definitely a red flag for me,” says Richard Jacovitz, senior vice-president at Liberum Research, a New York-based management-turnover research firm.

“I know they’re losing people,” says Morningstar Inc. analyst Gregg Warren. “From what I hear, there’s a lot of turmoil there right now.”

Kraft confirmed the departure dates of 10 managers but, citing privacy issues, wouldn’t comment on their reasons for leaving or on the impact of the departures for Kraft.

“It’s certainly fair to assume that in order for these people to have been promoted internally, they had to have performed well in all the previous jobs they’d held at Kraft,” a spokeswoman says.

She won’t disclose defection rates in the upper echelon but says voluntary departures have not increased among Kraft’s 2,900 employees with the title of associate director and above. “We view the level of turnover we’ve had as a good thing since it enables us to both provide opportunities for growth and development for our existing employees as well as opening up opportunities to bring in external talent — something we have been doing more of recently,” she says.

BEATING A PATH TO HERSHEY

Enough employees had defected to Hershey Co. — among them, Michelle Buck, former senior vice-president and general manager of Kraft confections, and Christopher Baldwin, formerly Kraft’s national vice-president of field sales and logistics — that Kraft’s general counsel sent a letter to Hershey last year “regarding our concern over the protection of both Kraft intellectual property and proprietary information,” the spokeswoman says. She says that after the companies’ lawyers exchanged letters, the matter was resolved, although she wouldn’t say how. A Hershey spokeswoman declined comment.

Mr. Deromedi likely hasn’t received his last high-level resignation letter. According to an executive recruiter who works in consumer products, two other Kraft senior vice-presidents have job offers from other companies. “There’s been a steady stream of people leaving Kraft over the last 18 months,” the recruiter says.

©2006 by Crain Communications Inc.