Kraft Food's Case Study

Group Case Analysis 1: Kraft Foods Inc.

BUSI 400 - B01

Leanne Shelton, Adam Stauffer, Pamela Stokley,

Michael Sullivan, Angela Sweetenberg and Tawana Washington

June 24, 2011

TABLE OF CONTENTS

Executive Summary 2

Existing Mission, Objectives, Strategies 6

New Mission Statement 8

SWOT Analysis 9

Competitive Profile Matrix 10

External Factor Evaluation (EFE) Matrix 11

Internal Factor Evaluation (IFE) Matrix 12

Alternative Strategies 13

Recommendations 15

References 17

EXECUTIVE SUMMARY

We endeavor to achieve a consistent financial performance that places us in the top tier of our peer group and provides our shareholders with top-tier returns on their investment. To understand how we will achieve these goals let's review the market conditions in front of us. Consider that the latest Consumer Expenditure Survey results indicate food at home in the United States accounts for 7.6% of average annual expenditures (U.S. Department of Labor, 2011). Citing Euromonitor International and U.S.D.A. Economic Research Service statistics, Hannah Fairfield (2010) reports that in 2009 there were 4,885 pounds per capita of pre-packaged food consumed worldwide. The U.S. Packaged Foods Industry is a mature, highly saturated industry with limited domestic growth expectations, which requires food manufacturers to begin looking for growth internationally (Graves & Kwon, 2011).

As a leading manufacturer in the processed food industry, the Kraft Foods Inc. 2010 Report disclosed revenues totaling 49.2 billion dollars (United States Securities and Exchange Commission 10k, 2010). Current subsidiaries encompass the following six consumer sectors:

* Biscuits - primarily cookies, crackers and salted snacks,

* Confectionery - primarily chocolate, gum and candy,

* Beverages - primarily coffee, packaged juice drinks and powdered beverages,

* Cheese - primarily natural, processed and cream cheeses,

* Grocery - primarily spoonable and pourable dressings, condiments and desserts,

* Convenient Meals - primarily processed meats, packaged dinners and lunch combinations;

and each sector contains product lines that include iconic brands such as Miracle Whip salad dressing, Chips Ahoy cookies, Oscar Mayer Lunchables convenience snack, Cheez Whiz spreadable cheese product, Cool Whip non-dairy topping, Stove Top stuffing, Crystal Light powdered drink mix, as well as the recent addition of Cadbury (United States Security & Exchange Commission, 2010).

Kraft Foods, Inc. also has an international presence divided into eight reporting segments: U.S. Beverages, U.S. Cheese, U.S. Convenient Meals, U.S. Snacks, U.S. Grocery, Canada & N.A. Food Service, Kraft Foods Europe, Kraft Foods Developing Markets; these segments represent Kraft product presence in 170 countries (United States SEC, 2010). 57% of 2010 net revenues were generated outside the U.S. In addition, Kraft has ongoing food operations in 75 countries, with 223 manufacturing and processing facilities (United States SEC, 2010, p. 8).

As consumers tastes have changed, Kraft has changed. In response to consumer desires for a healthier lifestyle, Kraft Foods Inc. has created or reformulated over 5,000 products. Efforts have been made to reduce fat, sodium, sugar; while whole grains, fiber, and micronutrients have been increased. The Kraft Foods Inc. 2010 Report states, "It's good for the consumer and it's good for business" (www.Kraft.com ).

Recognizing a need for environmental responsibility, Kraft Foods Inc. continues to increase support for sustainable farming while reducing plant energy usage, carbon dioxide emissions, and water consumption. Sustainability goals are further achieved through community development, and industry and governmental partnership initiatives (Delicious World, 2010 Report).

The largest food manufacturer and key competitor of Kraft Foods Inc is Nestlé, boasting a global presence in 189 countries and 2010 sales of 109.7 million CHF (www.nestle.com ). Products include Gerber baby foods, Pure Life and Perrier bottled water, Butterfinger candy bar, Nescafé coffee, Lean Cuisine meals, Carnation milk, Juicy Juice fruit drink, and Häagen-Dazas ice cream (Our Brands).

In 2008, nearly 2 billion CHF in Nestlé Research™ was invested to realize nutritional research and development of baby formulas and food, as well as developments in the Jenny Craig weight management programs. Nestlé further displays a commitment to consumer well being with access to www.nestlenutrition-institute.org, an interactive website targeting scientists and health professionals (Nestlé Nutrition).

A responsibility towards present and future society, a desire to delight customers, and a dependence on a sustainable environment are the three principles outlined in Nestlé's Policy on Environmental Sustainability. To this end, a product life cycle has been adopted which uses natural resources efficiently, uses sustainably-managed renewable resources and strives for zero waste (Corporate Governance: Business Principles).

Providing the Healthy Choice, Hebrew National, Hunt's, Reddi-Wip, Slim Jim, Chef Boyardee, and Wesson brands (Foods You Love) and reporting 2010 net sales at 12,079 million dollars (Investors, Annual Reports), ConAgra Foods is another major competitor in the processed food industry.

Citing accountability as an operating principle, ConAgra Foods reduced excess inventory, and subsequently, warehouse space by working with customers and suppliers; improved company/customer communication, as evidenced by earning the David Ogilvy Award for excellence in advertising research; and created or improved products to meet consumer behavioral trends towards maintaining a healthier lifestyle (Investors, Annual Reports).

EXISTING MISSION, OBJECTIVES, AND STRATEGIES