Mondelez International (NASDAQ:MDLZ), the world's biggest chocolate, candy and biscuit maker, will begin trading Tuesday after being spun off from Kraft Foods Group (NASDAQ:KRFT).
Creation of the two entities gives investors the option to either bet on fast-growing snacks or the more stable dividends offered by groceries.
Kraft Foods decided to spin off its global snack business in March. That company, called Mondelez International, will be home to global brands including Oreo, Cadbury and Nabisco. The North American grocery business will continue to carry the name Kraft and include Velveeta, Miracle Whip and Oscar Mayer.
"There is no question these are very challenging times for us in Europe ... The good news is people must eat and drink," Tim Cofer, head of Mondelez Europe, said in a recent interview.
"Snacking categories are growing faster than non-snacking categories," Cofer said. "We see consumers increasingly having busy lifestyles and evolving over time from three fixed meals to many meals, or snacking in between when they don't have time for a fixed meal."
Mondelez, which also takes in Jacobs coffee, Trident gum, LU and Oreo biscuits, has annual revenue of about $36 billion - more than a third from Europe - and about 100,000 employees in more than 80 countries.
Cofer said Mondelez had taken action to address a poor performance in the gum business, which is particularly exposed to the downturn and rising unemployment given people tend to chew gum while at work, or on their way to work.
"Given the current economic environment, particularly in southern Europe, where unemployment and youth unemployment is high, we do see an impact," he said. "Having said that, I do feel very good about our innovation pipeline in gum," such as a breath-freshening version.
Kraft has said extra costs associated with the demerger will hurt earnings in the near term, but it forecasts long-term earnings-per-share growth in the double digits for Mondelez and in the mid-to-high single digits for Kraft.
"We feel very good about our prospects to deliver on that long-term guidance," said Cofer, who is based in at Mondelez's European headquarters in Zurich.
"The benefits associated with the split certainly outweigh the costs ... The benefits will be evident from year one."
Kraft warned last month that 2013 earnings for Mondelez - to be headed by Kraft Chief Executive Irene Rosenfeld - would likely be lower than some forecasts due to the weakening of various currencies versus the U.S. dollar.
Cofer said Mondelez was well positioned to cope with volatile commodity prices but declined to give an outlook for those markets.
"We have proven over the last couple of years our ability to pass on those higher costs in order to retain good margins," he said. "We have robust risk management structures to manage the volatility and to ensure margin."
Analysts seem, on the whole, to be bullish.
Scott Mushkin of Jefferies started coverage of Kraft Foods Group with a "Buy" rating and $50 price target. The analyst said while the company only runs in the slower growing North American market, it is a shareholder friendly operator with strong brands.
"Management's strong track record in the consumer products space gives us confidence that it can execute on the ambitious plans for Kraft," Mushkin wrote in a note.
Citi Investment Research's David Driscoll gave Kraft Foods Group a "Neutral" rating and $48 price target. The analyst feels that Kraft can increase its sales by 2 per cent to 3 per cent and boost earnings per share by 7 per cent to 9 per cent over the long term by improving margins and reinvesting savings into new products and marketing.