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Kraft opens plant in Bahrain to pump up developing markets

by Benjamin Miraski
April 09, 2008

Kraft Foods Inc. will officially open a new manufacturing plant in Bahrain on Tuesday. The Northfield-based food processor invested $40 million in the construction of the ISO-certified plant to produce 60,000 tons annually of products such as Tang, Kraft Cream Cheese Spread and Kraft Cheddar Cheese, for the Middle East and Africa.

According to a Kraft press release, the plant, on which construction began in January 2007, will create more than 250 jobs and is expected to contribute $120 million to the Bahrain economy.

Matt Arnold, an analyst who covers Kraft for Edward D.  Jones and Co. LP, said the opening of the plant is in line with the stated strategy of the company.

“Part of the Kraft story … is that the emerging markets are where they are looking to build a bigger base,” Arnold said. “It is known that this developing base is where they will see growth longer term.”

The developing market region, covering Eastern Europe, the Middle East, Africa, Asia and Latin America, was the second-fastest growing market for Kraft in 2007, and saw the biggest increase in sales during the fourth quarter.  In 2007, the company reported $5.3 billion in net revenue in the region, an increase of 17 percent over 2006. By comparison, the U.S. market saw net revenue growth of only 3.6 percent in 2007.

Operating income for the developing market region grew 18 percent to $491 million in 2007.

“They want to improve profitability where they are established and build a bigger footprint where they aren’t,” Arnold said. “This falls into the second half of that.”

The new plant does not affect Arnold’s outlook for the stock.  He has maintained a buy rating on Kraft since March 2007.

“This new state-of-the-art facility will enable us to increase our production and distribution efficiencies to cater for the growing Middle East and Africa market demands,” wrote Claire Regan, a senior director in corporate affairs at Kraft, in an e-mail.

The manufacturing facility, located in the Bahrain International Investment Park, will be christened in the presence of Maurizio Calenti, group vice president of Kraft Foods and president of Kraft Foods Eastern Europe, Middle East and Africa, and Patrick Satamian, vice president and area director for the Middle East and Africa.