Will there be aftershocks from Kraft move?

Many Canadian magazines, particularly in the women's service category, rely heavily on packaged goods advertising. So there are bound to be tremors caused by reports that Kraft Foods Inc. is restructuring its North American operations and having the company's Canadian business answer directly to its Illinois, U.S. headquarters. The move may have significant implications for pages and dollars.

For instance, Kraft is one of the largest volume and most sophisticated buyers of space in such magazines as Canadian Living and Homemaker's, two of Transcontinental's largest titles and the largest circulation Rogers consumer magazine, Chatelaine. Also the French equivalents -- Coup de Pouce, Madame and Châtelaine. Virtually any magazine, from Today's Parent to Canadian Geographic which get any Kraft ads for Cheez Wiz, Planters or Miracle Whip may feel a similar twinge of anxiety, particularly if the American parent's approach and preferences vary from that of Canadian-based marketers.

(The impact may be less on the custom publishing side, where Toronto-based Redwood Custom Communications has the contract to produce both What's Cooking in Canada and the Americanized version Food and Family in the U.S.)

The Globe and Mail reported that, after decades of operating separately from its U.S. parent, Toronto-based Kraft Canada Inc. will be integrated into the main U.S. operation in January as part of a continental strategy to reduce costs and streamline the corporation. Kraft's 84-year-old Canadian operation has 7,000 employees and spread across 16 plants spread across Ontario, Quebec and B.C. Kraft is one of the world's largest food manufacturers, with 97,000 employees around the world. The Kraft product line ranges from frozen pizza to Maxwell House coffee and from Post Cereals to A1 Steak Sauce and dozens of other brands.

Susan Davison, a spokeswoman for Kraft Canada, said the shift will create a “North American structure, as opposed to a Canadian structure and a U.S. structure,” she said. About 250 positions will be cut from Kraft's commercial division in North America, which includes the company's marketing arm.

Kraft says it plans to retain much of its marketing presence in Canada. About 80 per cent of its brands are offered in both Canada and the U.S., however products such as Shreddies and Nabob coffee are uniquely Canadian because they are only sold north of the border. “There are different marketing strategies, different consumer insights we have in Canada for our brands, which is why it's important we maintain the marketing function in Canada,” Ms. Davison said.

"Industry watchers said Kraft had been a bit of a laggard in adopting a more continental strategy," said the Globe story, "noting that many companies have gone that route since the advent of North American free trade."

“I'm actually surprised Kraft has taken so long because most of their competitors, Procter & Gamble for example, have had a fairly strong set of reporting lines to the U.S. for some time now,” said Doug Reid, a professor of strategic management at Queen's School of Business. “The border is artificial in so many ways and for multinational corporations it doesn't have to exist at all. In many respects it probably shouldn't.”

This is not much comfort to account reps for Canadian titles who have spent years developing relationships and working out multi-page contracts and value-added deals with Canadian Kraft marketers.