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Smoking
verdict won't hurt Kraft, Use of genetically modified food protested |
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EAST HANOVER - Kraft Foods' stock sank nearly 14 percent Jan. 28, when the company announced barely rising food volume sales and projected 2003 earnings below Wall Street analysts' estimates. The price has stayed down since then. Yet questioning at the annual meeting Tuesday never touched on how to persuade consumers to buy more cheese and cookies. It did cover a buffet line of social issues, including genetically modified food, the plight of Third World coffee farmers and, most prominently, tobacco litigation. On the latter point, chairman Louis C. Camilleri sought to assure shareholders that Kraft would be largely insulated from a recent $12 billion smokers' class action verdict against Altria Group, which owns 83.6 percent of Kraft. Also chairman of Altria, formerly known as Philip Morris, Camilleri foreswore any notion of divesting Kraft, guaranteed the safety of employee benefits and pensions and pledged not to tap Kraft's cash flow to pay for any tobacco litigation. "Altria's interests as a shareholder in Kraft are exactly aligned with other shareholders," he said. "Altria has no intention, and I want to be emphatic about this, of getting any money upstreamed from Kraft." To John M. McMillin, an analyst at Prudential Securities, this was the most reassuring part of the management presentation. Earlier this year, Altria said it might file for Chapter 11 bankruptcy protection if it had to post a $12 billion bond to appeal the verdict. The bond requirement was later abated. Still, McMillin noted the irony of the meeting being held in the former headquarters of Nabisco, which was sold to Kraft after its stock was depressed by the litigation woes faced by its then-parent company, tobacco giant RJ Reynolds. Nabisco is now a Kraft division, with 2,000 employees in East Hanover and Parsippany. "To some extent, Kraft is being pulled down now by the problems of (Altria)," he said. Earlier this month, Kraft announced that its borrowing costs would rise after credit rating agencies downgraded it because of the risk posed by the verdict against Altria. However, the company said that would not reduce its ability to make acquisitions. Comedian Chevy Chase, a Kraft shareholder, headlined several speakers and a small demonstration outside the company against the use of genetically modified ingredients in the company's products. "I don't
want my family to ingest a pig vaccine when they eat an Oreo,"
he said. "And as a shareholder, I expect you do to whatever you
can to protect my investment" by eliminating modified foods from
the Kraft inventory. Camilleri countered that numerous regulatory bodies and studies have shown no ill effects from genetic modification. Consumers who want to stay away from the products can buy those branded as organic, he said. He showed no sign of changing the company's coffee-buying habits to help farmers in developing countries that have been hurt by low coffee prices. The meeting was held amid extraordinarily tight security, as was true last year. "They are a controlled company," said McMillin, who traveled to the meeting from New York to take advantage of the rare opportunity to pose a question to top management. Activists protest genetically engineered food Activists protested the use of genetically engineered ingredients by Nabisco and its parent company, Kraft Foods, outside the annual meeting Tuesday. The activists, with Genetically Engineered Food Alert, say the products are poorly regulated and poorly understood, lacking any long-term studies on health effects in humans. A Kraft spokesman, Larry Bauman, said, "The technology holds promise for significant nutritional and environmental benefits." He said safety and quality are the company's top priorities. Tim O'Reiley can be reached at toreiley@gannett.com or (973) 428-6651.
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