Kraft Lays Out Global Growth Strategy
Kraft Foods Inc. has unveiled its new global growth strategy by which the company aims to deliver organic revenue growth of 5 percent or more, margins in the mid- to high-teens and earnings per share growth of 9 to 11 percent, making it a top-tier performer in the global food industry.
“Today’s Kraft Foods is a global snacks powerhouse with an unrivaled portfolio of leading regional and local brands,” said Irene Rosenfeld, chairman and CEO. “This unique and complementary combination, together with our significant presence in high-growth developing markets, will deliver consistent growth in the top tier of our peer group.”
Noting that Kraft is has hit its “sweet spot,” Rosenfeld said the company’s “solid foundation for growth” will be further enhanced “by leveraging our scale, making strategic investments in marketing, sales and innovation and …world-class cost structure … [that will] take our performance to the next level.”
With the acquisition of Cadbury earlier this year, Kraft claims to have become the undisputed world leader in snacks, a high-growth, high-margin category that now accounts for more than half of the company's total revenue.
The company has a broad portfolio of global snacks power brands – led by Milka and Cadbury chocolates, Oreo and LU biscuits, and Trident gum – with leading market shares in every major region, a full pipeline of innovation and a clear opportunity to grow its presence in the point-of-purchase “hot zone.”
Kraft now offers dozens of brands of chocolate, gum, candy, and snack-size cookies, crackers and nuts through multiple distribution channels, which are further complemented by the company’s snacks portfolio are iconic regional and local brands in the beverage, grocery, cheese and convenient meals categories. The company says about 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. They also carry high margins and generate strong cash flow.
The Northfield, Ill.-based Kraft plans to 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 says it will cultivate local brands, such as A-1 steak sauce in North America, Dairylea cheese in the United Kingdom and Vegemite spreads in Australia, through flexible business models and nimble marketing.
Kraft officials say their union with 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’s 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.
According to Kraft, 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, are expected to contribute to the expansion of gross margin.
“This combination of factors gives us great confidence that our company will generate organic revenue growth of 5 percent or more, margins in the mid- to high-teens and EPS growth of 9 to 11 percent,” said CFO Tim McLevish. “Delivering on these commitments will make Kraft Foods a sustainable top-tier performer in the global food industry.”
A live audio webcast of the presentations, including slides, is available in the investor center section of company’s website, www.kraftfoodscompany.com, where it will be archived for one year following the webcast.