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Off-Balance Sheet: Pass the Lactaid, Altria's Spinning Off Kraft


The bottom line is you can't smoke cheese.


Editor's Note: Relax, it's only money.

Here in the 'Ville we like to keep things smart, but we also love to laugh. All work and no know how it goes. With that in mind we proudly introduce The "Off-Balance Sheet", a place where Minyans can experience humorous takes on the world of finance, personal stories from our Professors and Minyans and all the other stuff that makes life worth living. So take a break from the flickering ticks and dive in.

Today's New York Times reports that Louis C. Camilleri, the chief executive of Altria (MO), is expected to spin off the company's Kraft unit in March.

Investors seem to be responding favorably to the news, as Kraft has been more of an albatross around Altria's neck than the slew of class-action lawsuits brought against the company by cigarette smokers who, strangely enough, got cancer from smoking.

Wall Street seems to think that Kraft's underperformance is the reason behind the move. But it's not. I happen to know Lou Camilleri's gastroenterologist's receptionist, who slipped me a copy of his medical charts.

Lou Camilleri is lactose intolerant.

How can a man who can't eat cheese be expected to helm a corporation whose very bedrock is made of Velveeta? No wonder he wants to get rid of it. Put yourself in his shoes for a moment and imagine if, every time you looked at a jar of the stuff, all you saw was excess gas production, stomach aches, and diarrhea. Makes me want to have a smoke, just thinking about it.

So, Where Does Kraft Go From Here?

For Kraft's part, it announced that Camilleri will step down as chairman while remaining a director. Kraft CEO Irene Rosenfeld will succeed Camilleri as chairman. But is this really the move Kraft should be making?

According to a report by the National Public Health Institute's Department of Molecular Medicine in Helsinki, 68.8 percent of North American Jews are lactose intolerant. The groups with the lowest rates of lactose intolerance are Swedes, Australians, and Danes. Putting Irene Rosenfeld in charge seems like a totally unreasonable risk to me. I don't know anything about her medical history, but why take the chance that she can't digest cheese, becomes disillusioned with Kraft, and steps down six months from now? Then they're right back to square one.

There are plenty of well-qualified executives in Sweden, Australia, and Denmark who would be overjoyed to get a shot at running a big multinational like Kraft. I can name a few right off the top of my head. Like Gustaf Douglas, of Assa Abloy, a Swedish concern that manufactures locks and security doors. Or David Williams, CEO of Chemeq, an Australian company that makes an antimicrobial polymer which controls the spread of disease in commerical animal populations. I'm no expert, but I think I may have even seen some sort of polymer listed as an ingredient on a Velveeta label once. And if Kraft had the good sense to consider a Dane, I'd suggest N.E. Nielsen, Chairman of A/S Dampskibsselskabet TORM, a highly-respected shipping business out of Hellerup.

Before we go any further, tell me what you think about Altria's decision in this poll!

What Do The Experts Say?

Once again, I turned to my go-to guy, Minyanville's Kevin Depew for his insight. Although he said he largely agreed with my analysis of Kraft's leadership issues, he noted that there has always been an unspoken internal conflict between Altria and its Kraft unit; namely, the lack of synergies between tobacco and cheese.

The bottom line is you can't smoke cheese.

Actually, strictly speaking, you can smoke cheese if we're talking about something like smoked gouda or smoked cheddar.

No, I mean you can't literally smoke cheese. Try lighting up what Altria might possibly call a "Cheezarette," like a cigarette, only made of cheese. They taste horrible, like petroleum nachos, and the cheese tends to get all melty, ooze out and drip all over your clothes.

That's disgusting.

No, Justin, that's "Big Cheese."

But Kraft has hundreds of products other than cheese, including Vegemite and…

Smoked it.

You've smoked Vegemite?

Very salty, with a tight draw, burns forever.

OK, what about Tang? Kraft makes Tang too. Have you smoked Tang?

I've probably exhaled more Tang than astronauts drank during the entire Gemini space program.

Why? Why would you do that? Why would you smoke Tang?

Because I was out of ice. Clearly, you know very little about being an astronaut.

I... Ok. We should just stop now.

Remember, you can't smoke cheese.

A Final Note

After I recovered from my customarily unnerving exchange with Kevin, I tried to distill his thoughts into one coherent idea. But I couldn't. So I have only this to say: Mr. Camilleri, Kraft has been a laggard for too long. Wake up and smell the Marlboro Ultra Light. There's no shame in admitting you're making a mistake. People will actually respect you more for being man enough to realize you might be doing the wrong thing. Call Gustaf Douglas. Call David Williams. Call N.E. Nielsen. You can even e-mail me at and I'll give you their phone numbers.

Okay, I've said my piece. Time for an Oreo.

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