Finance and Economic

When Irene B. Rosenfeld, the chief executive of Kraft, was studying marketing at Cornell in the late 1970s, she was determined to get as many people as possible to respond to a survey she mailed out as part of her PhD research on how consumers choose products.

So she attached a crisp $1 bill to the surveys, to entice people to fill them out and mail them back. Rosenfeld now has a much bigger budget, but she is still working hard to persuade people to go along with her plans.

Kraft has just had its $16.7 billion (U.S.) offer for Cadbury, the British candy company, rebuffed – but Rosenfeld, who once headed Kraft’s Canadian operations, appears determined to push the deal forward.

She flew to London last month to lay out her merger plans to Cadbury’s chairman, Roger Carr. After the Cadbury board brushed off the overture, she decided to make the offer public last Monday in hopes of forcing the company’s hand.

In public comments, she has insisted the deal would benefit the shareholders of both companies. And when Cadbury insisted the offer undervalued the company, Rosenfeld said that the chocolate and gum maker had far less potential to grow on its own.

"This announcement just shows how ambitious she is," Erin Swanson, an equity analyst at Morningstar, told The New York Times. "She’s not content with the status quo. She’s striving for continuous improvement and looking to stir growth in what has been a more mature business."

The events have set the stage for a bidding war, meaning Kraft might have to pay substantially more if it wants to acquire Cadbury.

Anticipating that possibility, investors bid down Kraft shares, which dropped nearly 6 per cent last Tuesday. Cadbury shares, as measured in depository receipts, soared almost 40 per cent.

Analysts said that several other companies could also bid for Cadbury, including Nestl? SA and Hershey Co.

The coming battle will certainly test Rosenfeld’s leadership of the company she took over in 2006, vowing to revive sluggish sales of its brands, which include Oreo cookies, Oscar Mayer lunch meats and Velveeta cheese.

Analysts said the company’s results in the past two quarters were promising. "There seems to have been some evidence that she has in fact started to turn things around," said Matt Arnold, a consumer analyst with Edward Jones, a retail brokerage firm based in St. Louis.

Rosenfeld has said she wanted to encourage innovation by giving managers at many different levels of the company more power to make decisions and try new things cheap credit report. Arnold said that appeared to have made the company more nimble and quicker to introduce new or expanded product lines.

He said Kraft had success with an expanded line of DiGiorno frozen pizzas, which the company now sells in single-serve packages and in a premium variety. It has also revamped its Maxwell House coffee blend and packaging and has begun selling Oreo Cakesters, a snack cake based on the cookie.

"They just found ways to cater to consumer wants a little more, and the bet paid off," Arnold said.

Rosenfeld also turned back earlier efforts at cost-cutting that hurt the quality of the company’s products. For instance, she insisted on adding more cheese back into the mix for the company’s signature macaroni and cheese, after it had been cut back to save money.

While the Cadbury deal would be by far her biggest move to date, Rosenfeld has not shied from buying and selling. She sold the underperforming Post cereals division to Ralcorp for $1.7 billion in 2007, and in the same year paid $7 billion for the cookie unit of the French company Groupe Danone.

Several analysts told The Times that a Cadbury acquisition could make sense for Kraft, which would greatly expand its confectionery business. Cadbury would also give it strong sales in emerging markets, such as India, where the chocolate maker has strong sales and has seen impressive growth. But they cautioned that those considerations could change if Kraft winds up paying significantly more.

Rosenfeld, who declined to be interviewed, began working for Kraft in the early 1980s. She soon became a marketing manager with responsibility for Kool-Aid and helped increase sales, in part by changing television ads aimed at children that featured a rock and roll soundtrack. She had similar success with Jell-O and was later made head of Kraft’s Canadian and then North American divisions. But she left the company abruptly in 2003. In 2004 she was hired to be chief executive of PepsiCo’s Frito-Lay division. But two years later, she returned to Kraft, this time as chief executive. She was named chairman in 2007 and now holds both posts.

Rosenfeld’s thesis adviser at Cornell, Vithala R. Rao, still teaches marketing there, and said that he recalled the $1 bills and the innovative way his former pupil conducted her thesis survey nearly three decades ago (she received her PhD in 1980).

Rao said the trick worked, with the survey getting a higher response than might have been anticipated without the incentive.

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Missouri’s struggling dairy farmers are asking Gov. Jay Nixon to call a special session of the state Legislature so lawmakers can approve emergency funding to help keep them in business.

The farmers asked in August for a nearly $16.5 million emergency payment from federal stimulus funds but were told that only the Legislature could approve distribution of the funds, not the governor, according to the Missouri Dairy Association.

The association is pointing to lawmakers in other states who are trying to secure funds from the $787 billion stimulus package for dairy farmers in their states. About $1 billion of that package is eligible for states, according to association leaders.

Dairy farmers are facing their worst economic crisis in decades, with prices $5 below the cost of production, per hundred pounds of milk. The state has about 2,000 dairy farmers with an economic impact of roughly $1.5 billion, the association said.

Jon Hagler, head of the state’s Department of Agriculture, said in a statement Friday: "Producers in Missouri have been faced with challenges and continue to struggle during these hard economic times.

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WPP, the world’s largest advertising group by revenue, could reap huge potential savings from consolidation in its back-office operations and from greater cooperation between its many agencies, its chief executive said on Friday.

WPP employs about 105,000 people directly, working for big-name brands such as Ogilvy & Mather and JWT. But each operates independently, which does not always bring the full benefits of the group to clients, Chief Executive Martin Sorrell told Reuters.

“We have five (advertising) agencies. It is ludicrous that you don’t have a common back office. It is the same business,” said Sorrell on the sidelines of the World Economic Forum.

“We aren’t doing enough. There are colossal savings for our clients and ourselves,” he said. “My ideal is you have one back-office for all the brands within 10 years.”

Sorrell’s comments come amid the backdrop of sagging global advertising revenues as clients cut spending during the economic downturn.

WPP reported a first half like-for-like drop in sales of 8.3 percent, compared to rival U.S. group Omnicom’s 8.8 percent fall and France-based Publicis’s drop of 6.6 percent.

WPP had said previously that it would see flat revenue growth in 2010

WPP has already reduced its headcount by 6 percent this year to counter the headwinds, after adding four percent to staffing last year credit scores for free. Sorrell did not say more layoffs were coming, but he noted that people were his biggest investment and would be a focus.

“We have to make the adjustments, primarily in our investment in people,” he said, making it clear that employees needed to adapt to change.

“Those people who can’t get their mentality around it, probably in the end, will have to go,” he said. “There is a revolution from the bottom, the world has changed.”

The executive said “the closer to the front lines you get, the more you are in the trenches … the younger the people are that you talk to, the more enthusiastic they are about these opportunities of working together.”

TOUGH MARKET

“The clients want us to work together, the clients want the best people working on their business,” he said. “Our people have a loyalty to not only WPP, but primarily to the brand in which they operate.”

“Historically, there has been a reticence to work with other brands. That is slowly being dismantled,” he said.

WPP is increasingly forming internal groups that cut across the different brands within the group on projects for clients as a way to maximize the group’s expertise. 

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Barrick Gold Corp said on Thursday that proceeds from its pending equity offering will total around $4 billion, making the stock sale the biggest in Canadian history, according to Thomson Reuters data.

The world’s top gold miner said underwriters exercised in full their option to purchase an additional 14.21 million shares at a price of $36.95.

The offering, including sale of the overallotment shares, is expected to close on or about September 23, and is subject to customary conditions, including the approval of the Toronto Stock Exchange.

Barrick, in a move that shows its faith that gold will continue to rise, announced an equity sale of at least $3 billion late on Tuesday, to be used to eliminate all of its fixed-price gold hedges and a portion of its floating hedges.

Gold has moved past the $1,000-an-ounce level this week. On Thursday, U.S. December gold futures settled down 30 cents at $996.80 an ounce on the COMEX division of the New York Mercantile Exchange.

Barrick’s said its common shares outstanding are expected to increase to approximately 982.7 million.

(Reporting by Deena Beasley; Editing by Christian Wiessner)

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A gaunt-looking Steve Jobs stepped back into the spotlight for the first time in more than half a year on Wednesday, unveiling new iPods for Apple Inc and drawing a standing ovation.

But Apple’s shares fell nearly 2 percent after hitting a year-high earlier in the session, with some analysts remarking on how thin the 54-year-old chief executive appeared.

Dressed in his trademark black turtleneck and jeans, Jobs took the stage and thanked everyone in the Apple community for their “heartfelt support.” It was his first public appearance since returning to work in June after six months of medical leave, during which the charismatic corporate showman underwent a liver transplant.

“I now have the liver of a mid-20s person who died in a car crash and was generous enough to donate their organs. I wouldn’t be here without such generosity,” an emotional Jobs told the audience, exhorting them to all become organ donors.

Apple shares initially rose about 1 percent to a year’s high before retreating to trade down 1.6 percent at $170.14.

“I’m sure (Jobs) looking so frail — the guy’s had the most extreme surgery you can have — didn’t help matters, but I think people have come to grips that the torch is going to be passed, it’s just a matter of when,” said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.

Jobs, a pancreatic cancer survivor, started off by announcing a new version of Apple’s popular online media store, iTunes, and updated software for the iPhone.

He then unveiled new iPod features and colors, including adding a video camera to the iPod nano, as well as price cuts for other models, ahead of the crucial holiday season free credit reports.

Analysts had expected an appearance by Jobs to give Apple’s stock a boost. The shares rose in the afternoon to $174.47, their highest since August 28, 2008. But they quickly retreated.

“While he was gone, Apple innovated and the product pipeline is set for the next three years,” said Canaccord Adams analyst Peter Misek. “He is clearly a genius. It’s great to have him back. It’s great for the industry, but I don’t think he’s back full-time and I don’t think he’s going to come back full-time.

RUMORS OF MY HEALTH

Jobs’s return is well-timed. The holiday season is a critical period for Apple, as it is for many consumer electronics companies, as shoppers fill stores and spend their precious discretionary income on the latest gadgets.

December-quarter sales made up around 30 percent of Apple’s revenue last fiscal year.

Jobs stepped away from day-to-day operations in January after months of rumors about his health and noticeable weight loss. He returned early this summer, but had not been seen at a public event until Wednesday.

As expectations of a high-profile product launch faded in the run-up to the event, much of the speculation centered on whether Jobs would appear. 

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Massachusetts’ top securities regulator reached an $8 million settlement on Tuesday with Fairfield Greenwich Group for having invested the bulk of its clients money with swindler Bernard Madoff.

Under the agreement, Fairfield Greenwich will make full restitution to Massachusetts residents who invested in its Sentry Funds.

The once prominent hedge fund firm, which put about $7.2 billion, or 95 percent, of its Sentry Funds assets with the man who engineered the biggest-ever Ponzi scheme, will also pay interest to the investors and pay the state a $500,000 fine.

William Galvin, Massachusetts’ Secretary of State, announced the settlement less than 24 hours before Fairfield Greenwich executives were expected to testify at public hearings in Boston this week.

“This Fairfield settlement, which provides restitution and interest for Massachusetts investors, represents the first investor relief ordered by a regulator in the Madoff scandal and I hope that it will become a template for other resolutions,” Galvin said in a telephone interview.

Fairfield Greenwich did not admit or deny allegations it engaged in unethical behavior and dishonest practices.

“Fairfield Greenwich’s goal was to resolve the Massachusetts action in order to avoid drawn-out hearings and significant legal bills, so that the firm could focus its time and resources on other legal claims involving many more investors,” spokesman Thomas Mulligan said.

He added Fairfield Greenwich was in discussions to settle those other claims as well quick payday loan.

“Their acknowledgment by making this settlement is a step in the right direction for investors who lost money to Bernie Madoff,” said Brenda Sharton, a partner at law firm Goodwin Procter.

Less than a month ago, Galvin, who has probed Madoff’s $65 billion fraud since December, rejected Fairfield’s offer to settle the case for $6 million.

At that time, Galvin’s office had identified roughly a dozen state residents who had lost money with Madoff through Fairfield and the regulator said he expected more victims to come forward.

Galvin sued Fairfield Greenwich, one of Madoff’s most prominent feeder funds, on April 1. He charged the firm misled investors about reviewing exactly how the former nonexecutive chairman of the Nasdaq stock market managed to generate strong and steady returns for decades.

Fairfield’s top executives, who earned roughly $300 million in fees from clients invested with Madoff in the last three years, neglected to make meaningful checks into whether the man who orchestrated Wall Street’s biggest-ever investment fraud, was actually making any trades, Galvin charged.

Madoff, 71, is serving a 150-year prison sentence after pleading guilty to engineering the $65 billion fraud for over two decades.

(Reporting by Svea Herbst-Bayliss; editing by Maureen Bavdek and Andre Grenon)

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The 1,400 U.S. mechanics who maintain United Parcel Service Inc’s worldwide fleet of 263 aircraft will hold a strike authorization vote next week, on the cusp of the company’s peak shipping season.

Should investors or customers care?

It depends on whom you ask. UPS, the world’s largest package delivery company, says the vote is meaningless. The union, Teamsters Local 2727, disagrees — and at least one analyst thinks a walkout is possible, though he says a strike like the one that crippled UPS in 1997 is highly unlikely.

“If the mechanics go out,” David Ross, an analyst at Stifel Nicolaus, warned in a recent note to investors, “it could potentially disrupt activity heading into company’s busiest shipping period … and could have a material impact on near-term financials.”

Atlanta-based UPS insists the September 14 vote is just a negotiating feint that will not affect contract talks with the machinists, which began in October 2006 and continue under the supervision of a federal mediator.

It points out that more talks are scheduled for late September, a sign the process is far from deadlocked. And until the talks officially break down, and the union endures at least one cooling-off period, a strike — even one authorized by members — would be illegal.

“This strike vote basically is a union show of solidarity,” said UPS spokesman Mike Mangeot. “It’s contract posturing and it has absolutely no legal significance whatsoever.”

PLAYING WITH FIRE

But Local 2727, frustrated by what it claims is an impasse on central issues and emboldened by the new pro-labor occupant in the White House, insists the vote is deadly serious.

Its president, Bob Combine, warns UPS is “playing with fire” by thinking otherwise. He raises the specter of 1997, when a two-week walkout by ground-side workers cost UPS $850 million and sent customers to rivals. Some never returned.

“This is not a ploy,” Combine said. “This most certainly could result in service failures during their busiest time of the year … This thing may go sour in a hurry.”

Analyst Ross thinks the strike threat is remote but real and that UPS, which is expected to make $1.9 billion this year, according to Reuters Estimates, “is not in the best bargaining position.”

“They could double all the mechanics’ salaries and it would not affect earnings at all,” Ross said of the dispute, which revolves around healthcare costs and the offshoring of routine maintenance work more than pay.

TIMELINE IN DISPUTE

So if the mechanics, who maintain the airplanes that move about 16 percent of the 15.5 million packages UPS handles on an average day, authorize a strike, could the workers walk out during the company’s peak shipping season? 

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ST. CHARLES COUNTY — In the little towns of Defiance and Augusta, the great recession already ended last year.

The reason is the Katy Trail, which is showing a 50 percent increase in bikers, hikers and runners this year in St. Charles County. All that exercise makes people hungry and thirsty, meaning boom times for wineries, eateries and other little businesses along the trail.

"I’m up 22 percent for the year," says Todd White, owner of the Katy Trail Bike Rental in Defiance. "I think we’re benefiting from the down economy. Bicycling is a pretty affordable family-friendly activity."

White rents bikes for $5 per hour or $20 per day.

From January to July, 62,794 people hiked, jogged or biked the section of Katy Trail State Park between St. Charles and Weldon Spring, according to an estimate by the Missouri Department of Natural Resources. That’s up from the 41,661 users in the same period last year. By contrast, usage in the entire state park system is up only 5 percent this year.

This year’s Katy figures are more in line with the 56,800 recorded in the first seven months of 2007 and the 60,200 in 2006.

Rainy, dreary weekends catch the blame for 2008’s slump. Last year was the wettest year on record in St. Louis. But the cool, sunny summer of 2009 is bringing out the bikers.

Among them is Cathy Williams, an intelligence officer at the National Geospatial-Intelligence Agency in Arnold.

"This is like therapy for me," she says. "I feel safe here. I carry pepper spray, but I’ve never had to use it."

One day last week, she pedaled with her teenage daughter and a friend from near their home in Washington, Mo., to have lunch at the Tavern in Defiance, a 36-mile round trip.

Her friend, Whitney Narup, 20, has another motive. "It gets rid of this and this and this," she says, patting her belly, then her thighs, then pinching her upper arms.

Shayne Hummel will help put the pounds back on again. He bought the Tavern last year and has seen business rise by an "easy 20 percent."

The Tavern is part a local hangout and part a rendezvous for two kinds of bikers. Some arrive by pedal power. "I got groups that ride down from St. Charles (20 miles away) for breakfast," he says.

But on weekends, the Tavern and the bar across the street are haunts for motorcyclists who arrive by the pack after winding over the hilly country roads.

On a recent cloudy day, three preschool teachers from west St cash advance. Louis County were walking their bicycles up the steep hill that leads from the Katy to the Sugar Creek Vineyards & Winery.

At the top was Ken Miller, owner of the hilltop restaurant, with a view of the pretty Missouri river valley. Business — as measured by gallons of wine sold — is up 10 to 12 percent this year.

"We’re tracking on probably one of our best years," says Miller, who has run the winery since 1994.

Miller says his business is built on people from St. Charles and St. Louis counties who "want to relax a bit, get a bottle of wine and forget what they heard on the news that week."

A few miles down the trail, Steve Neukomm was thanking nature for the 20-percent boost in business at his Augusta Brewing Co. brew pub, which climbs a hillside between the trail and the town of Augusta.

"A good chunk of it is the weather," says Neukomm. But he also thinks the bad economy is persuading people to forgo expensive vacations and seek fun close to home.

Neukomm opened the restaurant 10 years ago, thinking he’d draw most of his customers from the town itself and tourists visiting area wineries.

"On our first day of business, every table we had was off the Katy Trail. I thought, ‘Wow, I didn’t see that coming,’ " he says.

At the Katy Trail Bike Rental shop, White says he hasn’t raised his rental price in seven years.

"It’s a business model that drives traffic," he says. The goal is to lure people in with a cheap bike rental and hope they’ll buy snacks or a bicycle shirt or something else. "If people are coming through the shop, you’ll make money," says White.

White’s shop is in an old general store built in 1898. He shares the building with his wife, Robin, who runs the Robin’s Nest gift shop. The two have developed a side business hauling bikes and bikers to various points on the trail, sometimes all the way to its beginning in Clinton in western Missouri.

Often, he picks those people up at Lambert-St. Louis International Airport.

"I get a lot of people from California and Colorado. They say the solitude is what’s so appealing," White says. Missouri has no beaches or mountains, but the quiet, rolling countryside contrasts with busy western parks, he says.Gait ad

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LONDON–European countries made a concerted push yesterday to put the thorny issue of bankers’ pay and bonuses at the top of the agenda of a meeting this weekend of finance officials from the Group of 20 nations.

Finance ministers and central bank officials from rich and developing countries representing 80 per cent of world economic output are convening in London amid mounting signs of an economic recovery.

Japan, Germany, France and Australia all recorded growth in the second quarter while Britain is widely expected to do so in the third quarter.

Momentum was growing over the bonus issue ahead of the start of formal talks yesterday, with the finance ministers of Sweden, France, Spain, Germany, Italy, Luxembourg and the Netherlands calling for the end of excessive payouts that have been blamed for fuelling the risk-taking that led to the current financial crisis.

G20 leaders promised at their London meeting in April to pass “tough new principles on pay and compensation," but little progress has yet been made.

The seven European countries called the payouts not only “dangerous" but also "indecent, cynical and unacceptable" in a joint opinion piece published yesterday in Swedish daily Dagens Nyheter.

"Bonuses guaranteed for more than a year should be banned. Bonuses should be paid out over a number of years and should mirror the individual’s and the bank’s actual performance over time," the ministers wrote.

They urged their fellow G20 ministers to join in the work to draw up tighter rules, saying they would "obviously be more effective if they are adopted at an international level.”

The initiative follows a similar move Thursday by the leaders of France, Germany and Britain. In a joint letter to the Swedish government – which currently holds the rotating European Union presidency – French President Nicolas Sarkozy, British Prime Minister Gordon Brown and German Chancellor Angela Merkel said it was especially important to forge international rules to rein in traders’ bonuses.

"Individual compensation is generally key to determining the behaviour and the risk adopted by a trading room," French Finance Minister Christine Lagarde told reporters auto loan rates.

Under government pressure, France’s largest bank BNP Paribas has halved bonus payments this year and, along with others, agreed to link bonuses to performance.

But the European push on bonuses has received a lukewarm response elsewhere within the G20.

Speaking to reporters ahead of yesterday’s meeting, Finance Minister Jim Flaherty said existing pay rules in Canada already “get the job done”, and there is no need to follow Europe’s plan for tougher rules on executive bonuses.

U.S. Treasury Secretary Timothy Geithner has not raised the bonus issue, preferring instead to focus on U.S. attempts to start talks on a new international accord to increase banks’ capital reserves.

British Treasury chief and meeting host Alistair Darling said that both bonuses and boosting capital were international issues that needed to be addressed as the banking sector was key to any economic recovery.

"Nowadays, no one large bank can simply operate in a vacuum, they operate right across the world, so this truly is an international problem," Darling told BBC radio yesterday.

But Britain has stopped short of some of the more stringent rules proposed by France and Germany on curtailing bonuses.

The G20 includes 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the United States.

The European Union, represented by its rotating presidency and the European Central Bank, is the 20th member.

The London meeting of finance ministers is meant to lay the groundwork for the summit of G20 leaders to be held in Pittsburgh later this month.

Sweden, which holds the rotating European Union presidency, announced that European leaders would hold an extra meeting to bolster their plans on Sept. 17, ahead of the Sept. 24-25 leaders summit in Pittsburgh.

From the Star’s wire services

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The G20 will promise this weekend to keep economic support packages in place until recovery is certain and seek to reassure financial markets they have credible plans to withdraw the stimulus when appropriate.

With finance ministers and central bankers from the Group of 20 developed and emerging nations meeting in London, a document obtained by Reuters on Friday showed the International Monetary Fund has revised up its forecast for the world economy this year and next.

The IMF now forecasts global shrinkage of 1.3 percent in 2009, a shade less than its April forecast of a 1.4 percent contraction, and growth of 2.9 percent in 2010, revised up from 2.5 percent previously.

Policymakers are cautious about declaring victory yet, especially given most major economies are still shrinking this year and only expected to post sluggish growth next year.

“Unwinding the stimulus too soon runs a real risk of derailing the recovery, with potentially significant implications for growth and unemployment,” said IMF chief Dominique Strauss-Kahn at a conference in Berlin on Friday.

Ministers laying the groundwork for a G20 leaders’ summit in Pittsburgh are also expected to discuss putting curbs on bank bonuses, tighter financial regulation and reform of international institutions.

G7 sources have told Reuters that the G20’s communique, due on Saturday, will likely maintain the pledge to keep policy accommodative for as long as was needed.

“The biggest risk is to think that the job’s done — that recovery is guaranteed. No country can be complacent — we’ve got to see this through,” British finance minister and meeting host Alistair Darling said late on Thursday Business Card Holders.

Still, with interest rates at record lows and trillions of dollars thrown into their economies to fight the crisis, policymakers are keen to show they have exit strategies in place lest financial markets take fright that inflation will rocket and public finances fall apart.

“Now is not the time to exit. But I would like to make it clear that the ECB has a strategy, and we stand ready to put it into action when the appropriate time comes,” said European Central Bank President Jean-Claude Trichet said in Frankfurt.

BONUS CURBS

With unemployment likely to rise for some while and eat into government poll ratings, the politicians are also looking for someone to blame and will stress that banks cannot return to business as normal.

France, Germany and Britain on Thursday put forward joint proposals to change the bonus culture at banks that many say was the root of the current crisis. These include deferrals and subjecting payments to clawback but fall short of the tax being advocated by some charities and initially the French.

Ministers will look at enhanced regulation of systemically important banks and ways in which these institutions can be wound up if needed without shaking the financial system.

U.S. Treasury Secretary Timothy Geithner is pressing the G20 to back tough new international standards for bank capital and liquidity. The U.S. Treasury said on Thursday a comprehensive agreement should be reached by the end of 2010, with countries implementing the standards by the end of 2012. 

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