Kraft Foods Inc. said it plans to eliminate about 1,600 positions in North America this year as it works toward splitting into two separate companies.
The company also raised its 2011 estimates. It now expects full-year operating earnings of at least $2.28 a share on organic revenue growth of 6.5%, compared with its November guidance for operating earnings of at least $2.27 on 6% organic revenue growth.
Tuesday, Kraft unveiled the groundwork to turn its North American grocery business into what Kraft Chief Executive Irene Rosenfeld has said the business could become: a "lean, mean, center-of-the-store machine." The plan includes the job cuts as well as consolidation of management centers and streamlining other operations.
The plan comes after Kraft announced in August that it would separate into a North American grocery business and a world-wide snacks business.
About 40% of the job cuts are related to Kraft's realignment of its U.S. sales force. The company said about 20% of the total job cuts are currently open positions. Kraft currently has about 127,000 employees world-wide, with 46,500 in North America.
The grocery business, which is retaining the Kraft Foods name, will outsource distribution of Maxwell House coffee, Philadelphia Cream Cheese and other brands to two sales and marketing companies. Acosta Sales and Marketing will handle distribution to grocery stores and other mass retailers, while Crossmark will continue to handle distribution to convenience stores.
Kraft's snacks business, which uses a higher-cost, direct-to-store delivery model, will see most of its U.S. retail sales employees shifting to the North American region of the as-yet unnamed global snacks company.
BMO Capital Markets analyst Kenneth Zaslow estimates that the job cuts will result in incremental cost savings of about $50 million at Kraft.
When the North American grocery business is spun off later this year, it will reduce its U.S. management center locations to two from four.
As part of the split up, Kraft said it will relocate the beverages business unit in Tarrytown, N.Y., and the Planters brand in East Hanover, N.J., to the Chicago area by December, where the grocery business will be based. The future of the beverage research-and-development center at Kraft's Tarrytown campus hasn't been determined, said a spokesman for Kraft.
The global snacks business will also have its headquarters in the Chicago area, and will house its North American snacks operations in East Hanover.
The grocery business will be headed by Anthony Vernon, the current president of Kraft's North America operations, while Rosenfeld will head the global snacks business.
contributed to this article.