Kraft finds Dubai much to its taste

Dubai is set to become a key hub for the company that makes Cadbury chocolate and Oreo cookies after Kraft Foods splits its operations next week.

Kraft Foods, which includes brands such as Tang, will be renamed Mondelez International on October 1. Rich-Joseph Facun / The National

Dubai is set to become a key hub for the company behind Cadbury chocolate and Oreo cookies after Kraft Foods splits its operations next week.

On October 1, Kraft Foods will spin off part of its operations, creating a second publicly traded company.

Kraft Foods is to be renamed Mondelez International and will concentrate on the global snacks business, with brands also including Tang, Ritz biscuits and Trident, while the new Kraft Foods Group will focus on the North American grocery business, with brands such as Maxwell House and Planters.

Traditionally, 70 per cent of Kraft's business was in the United States but that has declined as the company acquired more global brands. At the time of the Cadbury acquisition two years ago, half Kraft's business was in the US, a quarter in Europe and the remaining quarter elsewhere, according to Vishal Tikku, the managing director at Kraft Foods GCC.

But almost half, 44 per cent, of Mondelez's business, which will include its Dubai operation, will be in developing markets.

"[After the split] our status in the global organisation becomes bigger. As the biggest business unit in the Middle East and Africa, we punch well above our weight," said Mr Tikku.

The North American grocery side of the business is "highly profitable" but slow growing, while sales in the rest of the world, particularly developing markets such as India, China, the Middle East and South America, expand rapidly, he said.

"That reflects different shareholders, so they are spinning it off.

"If you grow fast and put profits into growth you don't give profits back to the shareholders," he said.

The split will result in stronger and more "streamlined" portfolios, allowing the companies to concentrate on core brands and markets, said Ildiko Szalai, a senior company analyst with Euromonitor.

The Kraft Foods chief executive Irene Rosenfeld has identified priority markets for Mondelez including Brazil, Russia, India and China, saying they will drive sales for the snacks company.

But Ms Szalai said Mondelez, a name derived from the Latin word for "world," and a proxy for "delicious", was likely to face stiff competition in some of those markets.

"For example in China, Mondelez's market share in confectionary is going to be just above 1 per cent.

"Mars, the market leader, has a near 18 per cent market value share. In some of the core areas they identify as a key growth driver [Mondelez will] face some strong challengers from other multinationals, and these are more specifically the Chinese and the Russian confectionery markets," she said.