Summary
Mondelez International, Inc. (operating as Kraft Foods Inc. at the time of this filing) announced a significant non-cash asset impairment charge of $245 million related to its Tassimo single-serve hot beverage system. This charge, approved by the Board on January 3, 2007, and to be reflected in the fourth quarter of 2006, stems from over-investment in Tassimo-related assets, specifically due to lower-than-anticipated utilization of manufacturing capacity. Despite the impairment, the company views Tassimo as a strategic component of its coffee business in the growing on-demand segment and has developed a revised, more targeted business strategy for the product based on consumer feedback and market learnings. The company anticipates minimal related cash expenditures of approximately $3 million for decommissioning idle production lines.
Key Highlights
- 1Kraft Foods Inc. (now Mondelez International) recorded a $245 million non-cash asset impairment charge for its Tassimo single-serve hot beverage system.
- 2The impairment charge relates to the Tassimo business model and lower-than-expected utilization of manufacturing capacity.
- 3The company views Tassimo as strategically important to its coffee business within the growing on-demand coffee segment.
- 4A revised, more targeted business strategy for Tassimo has been developed based on consumer feedback and market learnings.
- 5The impairment charge will be recognized in the fourth quarter of 2006 financial results.
- 6Associated cash expenditures are estimated to be approximately $3 million, primarily for decommissioning idle production lines.
- 7The Tassimo system has achieved notable market share in the on-demand coffee segment where it is sold.