Kraft Foods Wants to Grow, But is THIS the Right Way?

 

Kraft, one of the largest food companies in the world, is publicly traded on the New York Stock Exchange. It is worth over $55 Billion. Every year we get to glimpse into the company’s financials, and to hear about plans for continued growth and success. In 2010, Kraft’s revenues were close to $50 Billion, half outside the country.

While the company’s growth strategy includes activity in Europe and Asia, there is plenty that Tony Vernon, President of Kraft Foods North America, thinks can be done in the US. The plans include:

Revitalizing the company’s iconic brands through advertising, innovation and differentiated marketing…increase marketing and sales excellence in grocery and instant consumption channels while delivering significant cost savings. read more…

And, there will be “several exciting new products hitting the market” in 2011, including:

  • Trident Vitality and Stride Spark vitamin-fortified gums,
  • Oreo Fudge Cremes,
  • Philadelphia Cooking Creme,
  • MiO liquid water enhancers, “the company’s largest beverage brand introduction in a decade”.

What you need to know:

Dear Kraft, is this the best you can do?

Vitamin fortified gum? Are you kidding? We can just see the advertisements waiting for us – “forget fruit! Get the same flavor, all the vitamins, and keep your breath fresh for hours…”

More Oreos? Aren’t there about 5 millions variations already?

And isn’t Kool-Aid, with its artificial colors driving kids ballistic, bad enough? Now there’s liquid Kool-Aid, with artificial sweeteners to boot. Here’s what’s in it:

water, malic acid, propylene glycol, citric acid, sucralose, acesulfame k, red 40, yellow 5, blue 1, potassium sorbate

Come on Mr. Vernon – Where are the products that are actually good for us? Why not figure out ways to utilize your amazing economies of scale, distribution, and presence to get more real foods and fresh foods to people?

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  • http://ithinkitneedsmoreturbinado.blogspot.com/ SL

    A while ago I requested a free bottle of MiO just to be one of the first to read the label. One can only imagine.

  • http://twitter.com/Mama__B Mama B

    I think you expect far too much of a company known for foods of dubious quality in the health department.

  • Brooke

    “Malice acid”? That sounds really sinister. . . .

    • http://www.fooducate.com/blog Fooducate

      LOL
      Freudian slip. fixed. thanks!

  • Gavin James

    You can wish all you want, but when Kraft is involved, healthy and/or fresh are things that aren’t going to happen. When you think of Kraft, isn’t the word “processed” one of the first words you think of?

  • http://www.UrbanOrganicGardener.com Mike Lieberman

    As consumers we have the power to not support these big brands by not giving them our money. When enough people start to do that, they will listen.

    • http://www.thefrugaldietitian.com Nancy – The Frugal dietitian

      So true!!!

  • http://www.UrbanOrganicGardener.com Mike Lieberman

    As consumers we have the power to not support these big brands by not giving them our money. When enough people start to do that, they will listen.

  • Scooter

    It won’t be long before all of our nutritional needs will be encased in a stick of gum and we won’t have to eat at all.

  • Food-ivore

    You took the words right our of my mouth!
    I just love this site! Thanks for putting all this information out there in such an easy to relate to format!
    I will plug it to my readers every chance I get!

    http://www.food-ivore.blogspot.com

  • Truthscuit

    Wait, give Kraft some freaking credit, They give away herb seeds with every purchase (but don’t bother asking them how to grow winter wheat so you can make your own crackers…that’s propriatary.)
    http://www.fooducate.com/blog/2010/03/15/grow-a-triscuit-tree-in-your-backyard/

  • Truthscuit

    Your link to the press release is dead.

    Here’s the full text:

    Virtuous Growth Cycle At The Heart Of Kraft Foods’ Strategy

    Financial Schedules and GAAP to Non-GAAP Information
    News Release
    Listen to the Webcast

    Power Brands Drive Top-Tier Revenue Growth
    End-to-End Cost Management Enhances Margins, Fuels Marketing & Innovation Investments

    BOCA RATON, Fla., Feb. 22, 2011 /PRNewswire via COMTEX/ — At the 2011 conference of the Consumer Analyst Group of New York (CAGNY) today, executives of Kraft Foods reviewed the company’s growth strategy and highlighted progress toward top-tier financial performance.

    At the heart of this strategy, Chairman and CEO Irene Rosenfeld described a “virtuous cycle” in which focus on Power Brands, Categories and Markets drives top-tier revenue growth. Concurrently, End-to-End Cost Management expands margins and generates savings that fund additional investments in marketing and innovation. These investments generate further growth, which perpetuates the cycle.

    “Kraft Foods is a much stronger company than it was just four years ago,” Rosenfeld said, citing various actions that have positioned the portfolio for faster growth, including the acquisition of Cadbury. “Today, high-growth snacks comprise about half of our portfolio. Nearly 60 percent of our revenues are generated outside of the United States. And we’ve doubled our presence in fast-growing, higher-margin instant consumption channels. As a result, we’re now on a new growth trajectory. I’m confident we’ll deliver top-tier performance as our virtuous cycle accelerates around the globe.”

    Winning in North America

    Tony Vernon, President, Kraft Foods North America, noted that the company’s performance in this region is gaining momentum, bolstered by sequential improvement in organic revenue growth and market share. In fact, KFNA’s growth rate exceeded most of its peers’ last year — despite a sluggish economy, rising input costs and depressed categories.

    Vernon outlined plans to accelerate growth by revitalizing the company’s iconic brands through advertising, innovation and differentiated marketing. In addition, KFNA will increase marketing and sales excellence in grocery and instant consumption channels while delivering significant cost savings.

    Vernon mentioned several exciting new products hitting the market now, including Trident Vitality and Stride Spark vitamin-fortified gums, Oreo Fudge Cremes, Philadelphia Cooking Creme and MiO liquid water enhancers, the company’s largest beverage brand introduction in a decade.

    Fueling the Virtuous Cycle

    David Brearton, Executive Vice President, Operations, provided a progress report on Kraft’s End-to-End Cost Management, including savings from systems, manufacturing, procurement, logistics and overheads. These savings are critical to offset higher costs and fund additional brand-building investments and new product development.

    Brearton reported that strong cost savings and a continuous improvement mindset have helped improve gross margin trends despite volatile input costs. Since 2008, for example, procurement and logistics savings have more than doubled, while Lean Six Sigma is stepping up manufacturing savings. As a result, productivity as a percentage of cost of goods sold rose to about 4 percent in 2010 from less than 3 percent in 2009. Kraft is targeting productivity of more than 4 percent on an ongoing basis. The company has also improved its overhead efficiency, with overheads as a percent of net revenue expected to decline from the mid-teens to 12.5-13 percent on an ongoing basis.

    Delivering Top-Tier Financial Performance

    Chief Financial Officer Tim McLevish summarized Kraft’s 2010 financial performance and outlook for the future. He described how strong growth in Kraft’s Power Brands drove organic revenue growth in the top half of the company’s peer group in three of the last four years. This momentum will be aided by $1 billion of targeted revenue synergies from Cadbury over the next three years as well as the company’s expanding footprint in fast-growing Developing Markets.

    McLevish described how End-to-End Cost Management and $750 million in cost synergies from the Cadbury integration would accelerate margin expansion. These savings also will enable the company to increase spending on advertising and consumer programs to 9-10 percent of net revenue from about 8 percent in 2010. At the same time, further investments in innovation will boost new product development as a percentage of total revenue from about 9 percent last year to 11 percent by 2013.

    McLevish concluded by reiterating the company’s 2011 outlook and long-term targets. Kraft expects to deliver organic net revenue growth in excess of 5 percent – or roughly 4 percent, excluding the year-over-year impact of calendar changes – operating income margins in the mid-teens and operating EPS growth of 11 to 13 percent. Over the long-term, Kraft expects organic net revenue growth of more than 5 percent, operating income margins in the mid- to high-teens and operating EPS growth of 9 to 11 percent.

    Kraft Foods presentation was accompanied by slides. Access to a replay of the webcast with accompanying slides is available at kraftfoodscompany.com.

    About Kraft Foods

    Northfield, Ill.-based Kraft Foods Inc. (NYSE: KFT) is a global snacks powerhouse with an unrivaled portfolio of brands people love. Proudly marketing delicious biscuits, confectionery, beverages, cheese, grocery products and convenient meals in approximately 170 countries, Kraft Foods had 2010 revenue of $49.2 billion, more than half of which was earned outside North America. Eleven of the company’s iconic brands — including Cadbury, Jacobs, Kraft, LU, Maxwell House, Milka, Nabisco, Oreo, Oscar Mayer, Philadelphia and Trident — generate revenue of more than $1 billion annually, and 40 have been loved for more than a century. A leader in innovation, marketing, health & wellness and sustainability, Kraft Foods is a member of the Dow Jones Industrial Average, Standard & Poor’s 500, Dow Jones Sustainability Index and Ethibel Sustainability Index. For more information, visit kraftfoodscompany.com and facebook.com/kraftfoodscorporate.

    Forward-Looking Statements

    This press release contains a number of forward-looking statements. Words, and variations of words such as “expect,” “goals,” “plans,” “believe,” continue,” “may,” “will,” and similar expressions are intended to identify our forward-looking statements, including but not limited to, statements regarding the virtuous cycle; top-tier revenue growth; margins; savings and investments; our portfolio; our new growth trajectory; delivering top-tier performance; Kraft Foods North America performance momentum, plans to accelerate growth and cost savings; productivity targets; overhead efficiency and targets; Cadbury synergies; and the 2011 outlook and long-term targets, in particular, organic net revenue growth, EPS growth.

    These forward-looking statements involve risks and uncertainties, many of which are beyond our control, and important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, continued volatility and increase in commodities’ costs, increased competition, pricing actions, our failure to successfully execute in developing markets, risks from operating globally; our failure to integrate successfully and recognize the synergies from our combination with Cadbury and tax law changes.

    For additional information on these and other factors that could affect our forward-looking statements, see our risk factors, as they may be amended from time to time, set forth in our filings with the SEC, including our registration statement on Form S-4, as amended from time to time, filed in connection with our Cadbury offer, our most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this press release, except as required by applicable law or regulation.

    – make today delicious –

    SOURCE: Kraft Foods
    via: http://phx.corporate-ir.net/phoenix.zhtml?c=129070&p=irol-newsArticle&ID=1531329

    which, if you go to:
    http://phx.corporate-ir.net/

    you’ll see is:
    http://thomsonreuters.com/products_services/financial/financial_products/corporate_services/investor_relations/

    great!

    • http://www.facebook.com/profile.php?id=519548543 Elaine Hazelrigs Manross

      Notice how the article said ” Proudly marketing delicious biscuits, confectionery, beverages, cheese, grocery products and convenient meals in approximately 170 countries, Kraft Foods had 2010 revenue of $49.2 billion, more than half of which was earned outside North America.” The last 4 words should mean more than ‘healthy foods’, earned outside North American means the jobs once occupied by American workers is now being outsourced. Outsourcing is part of what is wrong with the American Economy. And, don’t even try to blame it on the unions…..I was proudly a member of CWA Local 3204 for over 30 years. The unions didn’t MAKE companies outsource, the CFOs, CEOs, etc., are way too money hungry! Outsourcing to me is turning your back on your own country just for profit. Nasty!

  • Charlotte

    The Philadelphia cooking creme (note, does not say cream) is already on the US market. I tried to look up the ingredients on their website, but came up empty handed a few weeks back.

    This is the ingredients in the Aussie one:
    Ingredients: Milk, water, cream, maltodextrin (tapioca), thickener (1450, from maize), salt, vegetable gums (410, 415, 466), gelatine, emulsifier (472e), acidity regulator (339), preservative (200), starter culture, enzymes, 30% milk solids.

    I decided to forego the deal on the cooking creme, and opt for cream and fresh herbs instead. That being said, d’know how hard it is to use coupons and get healthy food? Buying healthy food on a budget can be a killer at times.