Kraft outlines global growth strategy
September 15, 2010
by Eric Schroeder
NEW YORK — Kraft Foods Inc. on Sept. 15 detailed a global growth strategy under which the Northfield, Ill.-based company expects to deliver organic revenue growth of 5% or more, margins in the mid- to high-teens and earnings-per-share growth of 9% to 11%. Kraft also said it expects developing markets will become a larger part of its business.
“Today’s Kraft Foods is a global snacks powerhouse with an unrivaled portfolio of leading regional and local brands,” said Irene Rosenfeld, chairman and chief executive officer. “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.
“At Kraft Foods, we’re hitting our sweet spot. 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.”
Kraft, which received a boost following the February acquisition of Cadbury P.L.C. for $19.5 billion, said it will continue to invest in marketing and innovation for its larger regional “power brands,” including Oscar Mayer meats, Jacobs coffee and Tang powdered beverages. At the same time, the company said it plans to use flexible business models and nimble marketing to grow local brands, such as A-1 steak sauce in North America, Dairylea cheese in the United Kingdom and Vegemite spreads in Australia.
Key to the growth strategy has been the addition of Cadbury, Kraft said. The London-based company has given Kraft 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. By 2013, the proportion of business in developing markets will increase from a quarter of total revenue to roughly one-third, Kraft said.
Kraft also indicated it plans to realize additional savings over the next three years from procurement, manufacturing and logistics efforts that will drive productivity gains in excess of 4% of cost of goods sold. The productivity gains, combined with flat overhead growth and pricing to offset input costs, will contribute to the expansion of gross margin, the company said.
“This combination of factors gives us great confidence that our company will generate organic revenue growth of 5% or more, margins in the mid- to high-teens and e.p.s. growth of 9% to 11%,” said Tim McLevish, chief financial officer. “Delivering on these commitments will make Kraft Foods a sustainable top-tier performer in the global food industry.”