Today, were looking at Dow Jones Industrial Average component Kraft Foods
(NYSE: KFT ). The company recently purchased Cadbury, best known for its
chocolate, and is a snack-food powerhouse, but of course the company makes a lot
more than just snacks. Kraft makes beverages, including coffee, juice and
powdered drinks; cheese products, dressings, condiments and desserts; and
processed meat and packaged meals. Youve unquestionably heard of its amazing
brands, which include Oreo, Nabisco, the aforementioned Cadbury, Trident,
Maxwell House, Philadelphia cream cheeses, Oscar Mayer and the inimitable Kraft
Macaroni & Cheese. Through its massive distribution and retail network, the
company sells its products to supermarket chains, wholesalers, supercenters,
club stores, mass merchandisers, distributors, convenience stores, gasoline
stations, drug stores, value stores and retail food stores. I defy you to enter
any store selling snack food in the U.S. and not find a Kraft brand. The key
driving factors regarding Kraft are the economy and competition. The truth is
that in a bad economy, snack foods dont see as much action. People stick to
necessities, and snacks are a treat. As for competition hoo boy! Oreos are
certainly not the only cookies out there. Cadbury isnt the only chocolate.
Trident isnt well, you get the idea. Add in the fact that grocery stores have
launched private brands in many of these same categories and you can see why
Kraft has wars going on many fronts. Stock analysts looking out five years on
Kraft see annualized earnings growth at 10%. At a stock price of $34, on FY 2011
earnings of $2.27, the stock presently trades at a P/E of 15. Normally, this is
where Id get into the company financials, but Kraft is still in flux as the
Cadbury buyout gets absorbed. No, the story of Kraft is really about the synergy
between these two behemoths. I suggest reading over hedge fund manager Bill
Ackmans thesis
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