Kraft Lays Out New Global Growth Strategy

Kraft Foods Inc. presented its new global growth strategy at a meeting of analysts and investors in New York this week. A comprehensive review of the company's power brands, global categories and regional business units detailed the plan by which Kraft Foods will deliver organic revenue growth of 5 percent or more, margins in the mid- to high-teens and earnings per share (EPS) growth of 9 percent to 11 percent, making it a top-tier performer in the global food industry.

 

"At Kraft Foods, we're hitting our sweet spot," says Irene Rosenfeld, chairman and CEO. "We've built a solid foundation for growth. By leveraging our scale, making strategic investments in marketing, sales and innovation and establishing a world-class cost structure, we will take our performance to the next level."

 

Here are some highlights from that meeting:

 

Unique Combination of Snacks and Heritage Brands: With the acquisition of Cadbury earlier this year, Kraft Foods solidified its position as a world leader in snacks, a high-growth, high-margin category that now accounts for more than half of the company's total revenue.

 

The companyâs portfolio of global Snacks power brands -- led by Milka and Cadbury chocolates, Oreo and LU biscuits and Trident gum -- tout leading market shares in every major region, a full pipeline of innovation and a clear opportunity to grow presence at the point-of-purchase.

 

Complementing the company's Snacks portfolio are iconic regional and local brands in the beverage, grocery, cheese and convenient meals categories. Roughly 80 percent of these "heritage" brands hold No. 1 or No. 2 positions in their respective categories and are household names among consumers who tend to be extremely brand-loyal.

 

Going forward, Rosenfeld reports that Kraft Foods will continue to invest in marketing and innovation for the larger regional "power brands," including Oscar Mayer meats, Jacobs coffee and Tang powdered beverages. At the same time, the company will cultivate local brands, such as A-1 steak sauce in North America, Dairylea cheese in the U.K. and Vegemite spreads in Australia, through flexible business models and nimble marketing.

 

This combination of global powerhouse snacks brands and iconic heritage brands is expected to provide Kraft Foods with a unique capability to invest profit from stable cash-generating businesses into high-margin categories and fast-growing developing markets.

 

Financial Transformation: The combination of Kraft Foods and Cadbury provides the scale necessary to grow sales and distribution in new and existing markets, delivering $1 billion in incremental revenue synergies -- in addition to $750 million in cost synergies -- by 2013.

 

More than half of Kraft Foods' revenue now comes from markets outside of North America, such as Brazil, China, India and Mexico, where GDP and demand growth are strongest. Accordingly, by 2013, the proportion of business in developing markets will increase from a quarter of total revenue to roughly one-third.

 

Additional savings over the next three years from procurement, manufacturing and logistics will drive productivity gains in excess of 4 percent of cost of goods sold. These productivity gains, combined with flat overhead growth and pricing to offset input costs, will contribute to the expansion of gross margin.

 

A live audio webcast of the presentations, including slides, is available in the Investor Center section Kraft Foodsâ Web site, www.kraftfoodscompany.com.