Officials hope Kraft IPO boosts plant in Avon

Lynette Haaland//June 15, 2001//

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Livingston County officials hope Kraft Foods Inc.’s near record-breaking initial public offering can deliver economic benefits to the company’s 500-employee plant in Avon.
“Kraft is certainly Livingston County’s largest private sector employer. And (it’s) Niagara Mohawk’s largest energy user between Syracuse and Buffalo,” said Patrick Rountree, director of the Livingston County Industrial Development Agency.
The local plant produces Oscar Mayer Lunchables and is home to the only Cool Whip whipped topping manufacturing operation in the United States and Canada.
Kraft this week raised $8.7 billion in the nation’s second-largest IPO. Rountree hopes for a trickle-down effect now that Kraft is publicly traded.
The Northfield, Ill.-based Kraft (NYSE: KFT) is the nation’s largest food company, posting $34.7 billion in pro forma sales last year. It does not disclose local sales.
Cool Whip and Oscar Mayer are two of 61 Kraft company brands that log more than $100 million in sales each, Securities and Exchange Commission documents state. Other brands include Kraft Macaroni & Cheese Dinners, Kool-Aid drink mix and Original Milk-Bone Brand dog biscuits.
Oscar Mayer is one of Kraft’s seven, billion-dollar brands, posting 2000 U.S. revenues of $1.36 billion. It ranks No. 1 in the processed meats category. Lunchables posted $778 million in sales last year.
In the United States, Cool Whip is ranked No. 1 in the frozen whipped topping category, posting $368 million in sales last year.
The company’s staff in Avon declined from 600 to 500 employees during the last year, according to the most recent Rochester Business Journal list of private sector employers. Kraft ranked No. 37.
The company began in Avon in the mid-1980s when the food giant acquired General Foods Corp., which operated a Birds Eye frozen vegetable plant in the facility.
The company abandoned the frozen food business several years later. Kraft Jello Pudding Pops were made at the plant, but the product was discontinued; plant capacity was down to 40 percent at one point, Rountree said.
“Our first step was (to figure out) how do you grow the facility,” said Rountree, who helped put together the deal to keep Kraft in Avon.
Cool Whip was the answer in the mid-1990s.
State and county officials worked with Kraft officials to help land the Cool Whip plant in Avon. Niagara Mohawk utility incentives also were instrumental.
The Cool Whip operation here has affected supplier companies, including plastic, trucking, railroad and sweetener firms, Rountree added.
At one point there were three national sites manufacturing Cool Whip, but they consolidated here shortly after the move to Avon, Rountree said.
“Avon is affectionately referred to as the Cool Whip capital of the world,” Rountree said.
In the late 1990s, Kraft added Lunchables production to the facility, making it the company’s first non-Oscar Mayer facility to produce an Oscar Mayer product, Rountree said.
Statewide, Kraft is one of the largest employers, Rountree said. It operates a good number of dairy product plants in the Southern Tier.
After the IPO is completed, Kraft’s parent company, Philip Morris Cos. Inc., will hold 84 percent of Kraft and will have 98 percent control of the voting stock. Philip Morris is based in New York City.
Some 280 million class A common shares were offered Tuesday at $31 a share. The price hovered around that mark at midweek.
Philip Morris plans to use some of the IPO proceeds to pay down more than half, or $11 billion, from the $19.2 billion purchase of Nabisco Holdings Corp. last December.
The Kraft IPO trails only last year’s $10.6 billion AT&T Wireless Group IPO.
Kraft ranks as the largest U.S. food and beverage company and the second largest in the world based on last year’s revenues. Kraft Foods North America accounted for 73 percent of the revenues.
In the last decade, Kraft has acquired more than 50 other domestic and international food businesses. It now has 117,000 employees in 228 manufacturing facilities worldwide.
Over the next three years, the company projects annual net earnings growth of 18 percent to 22 percent, SEC filings state.
Kraft aims to become the undisputed leader of the global food and beverage industry by growing its core brands, including expanding its presence in faster-growing distribution channels and by adding products in faster-growing and more profitable categories.
A key element of Kraft’s strategy is to expand sales in developing markets, including Central and Eastern Europe, Africa, the Middle East, Latin America and Asia Pacific. These developing markets are home to 86 percent of the world’s population.