You’ll need to drink a lot of Maxwell House coffee to keep up with Tony Vernon as he sets about recasting Kraft Food Group as a domestic brand powerhouse.
Reporting its first-ever Q1 financials with Vernon as CEO, the home of Kool-Aid, Maxwell House, Oscar Mayer and its namesake Macaroni & Cheese grew 2% to $4.5 billion, with income rising 9% to $809 million.
“We’re off to a solid start,” Vernon told analysts during May’s quarterly conference call.
Kraft Food Group is the result of the October 2012 corporate split that placed Vernon in the driver’s seat to bolster North American sales. And the narrowing focus isn’t done. On July 1, the company created two new, stand-alone business units: Meals and Desserts, and Enhancers and Snack Nuts. In a statement, Vernon (who was not available for an interview) said the new divisions are further evidence of Kraft’s drive to wring new sales out of mature brands.
“We’ve focused heavily on turbocharging our iconic brands,” he said. “And we’ve made a lot of progress thanks to great marketing and innovation.”
Much of the coming year is devoted to moving those beloved brands back into consumers’ kitchens. The company’s first-ever chief marketing officer was appointed in January. The strategy also includes more media spending and outright advertising.
“Since I began talking to you just three years ago, we’ve significantly increased our advertising to net revenue ratio,” Vernon told analysts at a conference in February. “It’s now 3.5% and moving closer to industry averages.”
Some 15 of the company’s brands are advertising at share of market standards, while the rest, about 45 brands, lag. Vernon is promising to lower that number in a cost-effective manner that generates “an attractive return on investment.”
Some products are already out of the R&D pipeline. Innovation has brought about Kool-Aid liquid water enhancers, new bacon- and jalapeno-flavored Oscar Mayer bologna, and Miracle Whip dipping sauces. Each new product is based on an iconic name yet meets the needs of today’s consumer. It’s a sweet spot that Kraft had been missing out on with reduced ad spending.
“While we’re making progress on many fronts, there is more progress to be made,” Vernon told analysts during May’s Q1 call. “In the months ahead, you will see us spend back a greater portion of our cost savings on brand-building than was the case in the first quarter.”
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