COMPANY DESCRIPTION

Kraft Foods Group manufactures and markets food and beverage products, including refrigerated meals, refreshment beverages, coffee, cheese, and other grocery products, primarily in the U.S. and Canada, under a range of brands. Co.'s product categories span breakfast, lunch, and dinner meal occasions, both at home and in foodservice locations. Principal brands include Kraft, Maxwell House, Gevalia, Kool-Aid, Crystal Light, MiO, Cracker Barrel, Velveeta, Cheez Whiz, Polly-O, Athenos, Breakstone's, Knudsen, Oscar Mayer, Claussen, Boca, JELL-O, Cool Whip, Stove Top, Jet-Puffed, Velveeta Cheesy Skillets, Shake ‘N Bake, Planters, Miracle Whip, Good Seasons, A.1, Bull's-Eye and Grey Poupon.

 

ECONOMIC MOAT

Moat of branded products.  Merger with Heinz will dig deeper moat.

 

OUTLOOK

Kraft Foods Group has agreed to merge with ketchup king H.J. Heinz Co. (Heinz has been owned by Brazilian private equity firm 3G Capital Partners and Warren Buffett's Berkshire Hathaway since 2013.) The blockbuster deal, which may ultimately be valued at more than $40 billion, would create the fifth-largest food and beverage company in the world.

 

Kraft shareholders would get one share in the new company, plus a special cash dividend of $16.50, for each share of KRFT held. Berkshire Hathaway and 3G Capital have pledged to contribute $10 billion to the deal in order to fund the special cash dividend. The transaction appears well-timed. Indeed, the merger, expected to be completed in the second half of 2015 (there will probably be few regulatory hurdles) and to be earnings accretive to Kraft by 2017,