Next week Ralcorp Holdings is expected to close its deal to acquire Post cereals from Kraft Foods. When it does, the company that has been built on creating store-brands will move into the national brand cereal business. In fact, one-third of its revenues will be generated by brands including Cocoa Pebbles, Grape Nuts, Honey Bunches of Oats and Shredded Wheat. Just how is Ralcorp going to make it work?
The Post division, according to a report in the St. Louis Post-Dispatch, will have a separate sales organization from the private label cereal business and will keep its headquarters in New Jersey. Ralcorp believes that splitting the two functions will allow the company to go to market without dealing with some of the inherent conflicts that arise in the store versus national brand debate.
"It gives us expertise on the items," said David Skarie, co-chief executive at Ralcorp. "It's very difficult to be an expert on all the categories we're in."
Discussion Questions: Are there inherent conflicts of interest in a national brand manufacturing private label products? How does a company that sells a national brand as well as private label deal with competition over shelf space that may arise at individual retail accounts?