Kraft names John Cahill new CEO
Published in Senior Living Features
Kraft is having Chairman John Cahill take over the CEO role later this month as the food maker vows to speed up changes following poor results.
News of the surprise change, which includes the retirement of CEO Tony Vernon, 58, sent Kraft shares up more than 5 percent Thursday. The shares rose as high as $62.73, their highest level since the company split from Mondelez International in late 2012.
Northfield-based Kraft has struggled lately with a portfolio that focuses on the United States and a string of price increases that rivals didn't match.
Speculation rose that Kraft could make other big changes, such as a restructuring or breaking up the company.
Vernon has been Kraft's CEO since the company was spun-off from Mondelez. He is set to retire as CEO on Dec. 27, when Kraft's fiscal year ends.
"With the company on solid footing after the spinoff, the time is right for new leadership to fulfill our potential as the industry leader," Mackey McDonald, lead independent director of Kraft's board of directors, said in a statement. "The board and Tony agree that we need to accelerate the pace of change."
Kraft declined to comment beyond its statement or to make executives available for interviews. The company said it would give more details on its plans in early 2015.
"Despite limited details, (Kraft's) management change likely indicates a change in strategic direction," BMO Capital Markets analyst Kenneth Zaslow wrote in a note to clients. "Typically, a new CEO tends not to maintain status quo."
Cahill, a seasoned food and beverage industry executive, said Kraft would "take a fresh look at the business to prioritize" its investments and "focus on sustainable profit growth."
Vernon is largely seen as a marketer, while Cahill is known for his operations prowess. While Cahill was CEO of Pepsi Bottling Group, the soft-drink bottler made several acquisitions.
JP Morgan analyst Ken Goldman guessed that Kraft's board "is looking to take the company in a different direction than Mr. Vernon, a marketer by nature and trade, was heading."
Goldman and others said it was too early to know what ultimately happens with Kraft, suggesting it could be sold, it could sell off some parts of the business or make other changes.
In July, Vernon said Kraft was taking a harder look at its smaller innovations, products and marketing programs "to decide where we continue to fish, and where we cut bait." Three months later, he said the company's "execution has been mixed" in some areas.
"The leadership change may signal that they could look to take more aggressive actions to shed some underperforming brands" such as Jell-O, said Morningstar analyst Erin Lash.
Kraft ran into trouble this year raising prices as rivals waited out increases in commodity costs. Profit has fallen in the past two quarters as Kraft sold fewer items after increasing prices on products ranging from Kraft cheese and Oscar Mayer meat to Maxwell House coffee.
In Kraft's third quarter, its most recent, profit fell almost 11 percent and revenue inched up about 0.1 percent.
Cahill, 57, joined Kraft in 2012. He spent nine years at Pepsi Bottling Group, including serving as CEO from 2001 to 2006. Cahill, who has an MBA from Harvard, was then an industrial partner at private equity firm Ripplewood Holdings from 2008 to 2011.
He stepped into the executive chairman role at Kraft when the company was spun-off from Mondelez and became nonexecutive chairman in March.
Vernon will stay on as a senior advisor through March 31, 2015, and will remain on the company's board until next year's annual meeting, Kraft said.
(With reporting by Corilyn Shropshire)
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