Key development: Shifting children-aimed advertising to emphasize healthful products.
What's next: Expanding internationally, particularly to China, Brazil, Mexico and Russia.
Most food and beverage companies these days are addressing growing demand for more healthful products. Kraft Foods is going a step further.
This year, the packaged-goods giant stopped advertising some snacks to children under 12, and introduced ads for healthful products. "We firmly believe in self-regulation and feel it is important to take meaningful steps to address public concerns in this area," Roger Deromedi said during a 2004 earnings call.
The healthful items featured in these ads display Kraft's Sensible Solutions flag, indicating the items provide nutrients or functional benefits or meet certain health specifications. Products featuring the flag began appearing on store shelves in the United States in April and range from cereals and rice to cheese and ready-to-drink beverages. By year's end, products accounting for about a quarter of sales in North America are expected to qualify for the flag, Deromedi told shareholders at Kraft's annual meeting in April.
Kraft also is marketing to specific demographics. Because Hispanic children are disproportionately affected by obesity, the company partnered with the National Latino Children's Institute to develop Salsa, Sabor y Salud (Food, Fun and Fitness), a program designed to encourage healthful lifestyles among Latino families.
For adults, Kraft teamed up this year with South Beach Diet creator Dr. Arthur Agatston to highlight existing Kraft products that meet the diet's guidelines and launched a line of 27 South Beach Diet products. These items, among them frozen entrees, meal-replacement bars and cereal, also serve a convenience function.
Continuing on the track of health and wellness, in 2004 the company eliminated trans fats in 70% of its U.S. cookie and cracker product volume, or 49 production lines. Kraft's purchase of Back to Nature, maker of cereal, granola, crackers, cookies, meals and organic cheeses, gave it a foothold in the fast-growing natural and organic food niche.
Beyond the United States, Kraft is targeting four large markets for growth: China, Brazil, Mexico and Russia. It continues to invest in marketing and infrastructure and delivered compound revenue growth of 9% annually since 2001 in these countries, Deromedi said at the shareholders' meeting. In this year's first quarter, these markets produced revenue growth of about 20%, he added.
Like many packaged-goods makers, Kraft also continues to streamline its offerings. Last year, the company reduced its stockkeeping units by 11% nationally and 12% internationally, and the effort is ongoing. "This program helps drive simplicity throughout our organization and has benefits for our retail partners as well," Deromedi said at the meeting.