The Cheese Queen's Bid for a Bigger Slice

After years in the doldrums as part of a tobacco company, food giant Kraft is finally back out on its own. Can new CEO Irene Rosenfeld spice it up?

By Matthew Boyle

May 25, 2007

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Rosenfeld has made a living by breathing new life into tired brands. Can she do it again? "She's always had that constant turnaround mentality," says her former General Foods boss Jim Kilts, who went on to run Gillette and knows a thing or two about bringing companies back from the brink. "She reminds me of me."

Natural Born Marketer

Sipping Maxwell House coffee (a Kraft brand, of course) in her spacious office about 20 miles north of Chicago, Irene Rosenfeld recalls her upbringing in suburban Long Island: "We grew up on Kraft mac-and-cheese and Jell-O." She still seems to be that sort of person: unpretentious and direct.

Rosenfeld enjoys getting inside people's heads. "I've always been fascinated by how people think," she says. That fascination led her to major in psychology at Cornell, where she explored the psychology of advertising. After getting a doctorate in marketing and statistics—"which makes it harder for people to snow me with numbers"—she joined the market research department at General Foods in 1981.

One day, Rosenfeld gave a presentation to Jim Kilts about Kool-Aid, which was struggling at the time, since moms were growing hesitant to serve the sugary drink to their kids. Kilts was impressed and eventually asked Rosenfeld to work for him. She later repositioned Kool-Aid as a healthier alternative to Coke and Pepsi, and sales improved. More prominent assignments followed: head of beverages in 1991, then desserts in 1994, where she rejuvenated Jell-O with sugar-free snack cups.

"I've been reframing categories my whole life," she says. In 1996, a year after Philip Morris merged General Foods and Kraft, Rosenfeld took over Kraft's Canadian unit, a role previously held by Kraft's then-CEO Bob Morrison. Heading a microcosm of Kraft's U.S. operations, Rosenfeld grew the business through savvy marketing.

Back in Northfield, Altria had anointed two co-CEOs: Betsy Holden, who had turned around Kraft's pizza business, and international executive Roger Deromedi. That turned out to be a disaster, as lines of responsibility blurred, problems festered, and employees chose sides. (Holden was demoted in late 2003 and left the company in 2005.) The turmoil at the top gummed up the innovation pipeline and also led to bad decisions, like Kraft's refusal to lower cheese prices to compete with supermarket labels.

Then there was the ever present shadow of Altria, which, Kilts says, "added a layer of complexity" to Kraft's already challenging situation. Altria, meanwhile, now wanted to rid itself of non-tobacco holdings but had to resolve major tobacco litigation first. (Spinning off Kraft with big cases pending might have looked like an illegal attempt to hide assets.)

"We had a number of issues, and we were not addressing them," Rosenfeld says. "When I didn't feel I could have the impact I wanted, I made a decision to leave." Snatched up by PepsiCo to head Frito-Lay, Rosenfeld pushed the salty-snacks maker to offer chips made with better-for-you sunflower oil. Kraft, meanwhile, continued to flounder. Altria's board ran out of patience with Deromedi last summer and asked Rosenfeld to return as CEO.

The Love of Cheese

Nineteen seconds: That's how long the average shopper takes to pick out a cheese product during a typical grocery visit. (She spends almost twice as much time in the soda aisle.) Both Kraft and its retail customers want shoppers to linger, as those who buy cheese spend, on average, twice as much in the store as those who do not buy cheese.

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