Kraft Says CEO To Retire, Names Chairman As Successor--2nd Update

By Annie Gasparro 

Kraft Foods Group Inc. announced that Chairman John Cahill will replace Chief Executive Tony Vernon next week, saying the packaged-food giant needs to change more quickly amid challenges for the food industry.

The announcement on Thursday surprised analysts, because Mr. Vernon is just 58 years old, and his planned retirement on Dec. 27 will come just over two years after he took the job when Kraft spun off from the global snacks company now named Mondelez International Inc. Mr. Vernon will stay on as an adviser through March and remain a director until the company's next annual meeting in 2015.

Mr. Cahill, who will remain chairman, and the board praised Mr. Vernon in a statement for his work getting the company on solid footing after the spinoff, but they indicated the need for a shift to realize the company's potential.

"The board and Tony agree that we need to accelerate the pace of change, " lead independent director Mackey McDonald said in the statement.

Shares of Kraft Foods were trading at all-time highs Thursday morning after the news, recently rising 5% to $62.58. The split left Kraft with supermarket mainstay brands such as Oscar Mayer, Maxwell House, Velveeta and Kool-Aid, while Mondelez includes brands such as Oreo, Cadbury and Ritz.

Mr. Cahill, 57, was previously chief executive of Pepsi Bottling Group Inc., a leading bottler in the PepsiCo network, after spending nine years at the beverage and food company. He joined Kraft in 2012 as an executive chairman-designate ahead of the spinoff.

Mr. Cahill said he plans to take a fresh look at the business and will have more to say about that early next year.

"The industry is undergoing a great deal of rapid change, and it is important that we keep pace and indeed stay ahead of these changes as we build a stronger Kraft," he said in the release.

The management change comes as Kraft struggles to combat changing consumer tastes and high commodity prices. Food companies also are grappling with tougher competition and pressure from investors to improve margins.

At an industry conference in February, Mr. Vernon said that the 2013 private-equity takeout of H.J. Heinz Co. and subsequent cost-cutting there left the rest of the industry with a higher bar for efficiency and margin expansion.

Meanwhile, consumers are changing. They no longer want traditional, highly-processed food--putting brands like Kraft's Shake 'N Bake and Cheez Whiz in a tough spot. Many shoppers "have a whole new set of expectations of food and beverages and the companies who make and deliver them," Mr. Vernon said in October.

Under his leadership, Kraft has been trying to update and revive older brands like Jell-O and Planters to attract today's shoppers. But it hasn't been easy. In October, Kraft reported that its quarterly earnings fell 11% and revenue was flat, as high costs pushed the company to raise prices, which can deter cost-conscious consumers.

Chelsey Dulaney contributed to this article.

Write to Annie Gasparro at [e-mail]

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