Kraft Foods Inc. is a house hold name in North America. The corporation boasts of diverse brand portfolio comprising among popular North America food brands such as Kraft cheeses, coffee & refreshment beverages, grocery products, dinners, Oscar Mayer meats, dressing etc. In the U.S. Kraft is positioned number one among 11 of top 17 consumer foods and beverages brands by market share. It is contribution from these 11 top brands that Kraft posted a 50% growth in retail net revenues in 2012 on the U.S market. However, in recent times, emergence of generic products as substitutes pose is a big threat to Kraft’s market share (Euromonitor). These products are traded by regional and local wholesalers, retailers and cooperatives. Going forward, the corporation needs to invest more in product improvements through innovation and quality.
Kraft background and Industry
The history of Kraft Foods Inc. dates back to 1980s operating as Delaware Corporation before rebranding to Kraft Foods Global, Inc. In March of 2012, Kraft Foods Global, Inc. was redomesticated to Virginia, rebranded again as “Kraft Foods Group, Inc. Mondelēz International wholly owned the largest retailer and distributor of consumer packaged food and beverages brands worldwide until 1st October, 2012 before Spin-off by Mondelēz International, leaving Kraft Foods Group with grocery business in North America. Despite the shareholding transfers, Kraft Foods Inc. still commands largest share of packaged consumer foods and beverage market with net revenue of $18.3 billion in 2012.
Source: Kraft Foods Group, Inc. – Annual Report
Strategic Situation & Analysis
Kraft competitors are mainly established national and international companies. Kraft management are explores different options to achieve competitive advantage. These include cost leadership and production differentiation. Due to customer pressure and competition, the corporation intends to reallocate more funds to marketing, advertising, and retail trade incentives. Although this will increase costs, in the long run sales volumes will increase to offset the expenses.
Marketing and Advertising
Kraft invests heavily in marketing campaigns and promotions of its brands. The corporation values customer needs and engages third party vendors such as ACNielsen in capturing and analysis consumer behavior, product trends and buying patterns. Understanding customer buying patterns helps the corporation in developing marketing programs and merchandising activities.
Product differentiation coupled with brand loyalty and recognition is the main competitive advantage for Kraft foods. Therefore, Kraft Foods Inc. must invest more in R&D projects that target specific consumer preferences, cost reductions, uncompromising product quality and safety long-term strategies in order to retain its number one position in North America (Jennings). This is in line with the corporation’s policy on outsourcing of creative ideas from technologists and scientists from outside as well as building on partnerships and collaborations with suppliers.
The corporation’s returns from 2012 to 2014 indicate a health financial position as seen from the profit margins bellow.
SWOT Analysis table
|· world’s second largest food company
· iconic brand
· distribution network
· strong R&D capability
· decline in profitability
· market share
· debt requirement
· geographic concentration
· organic products offering
|· many competitors
· Cadbury issues
· customer service is relatively weak
Euromonitor. “Kraft Foods Company Profile – SWOT Analysis.” Global Market Research and Analysis for Industries, Countries, and Consumers. Euromonitor International, 2014. Web. 3 Dec. 2014.
Jennings, O. Teaching strategic management: A case study in the diffusion of innovation in education. In: K. Pittenger and M.J. Vaughan, eds., Developments in business simulation and experiential learning, 2001. Print.
Kraft Foods Inc. “Kraft Foods Group, Inc. – Annual Report.” Kraft Foods Group, Inc. – Investor Relations. United States Securities and Exchange Commission, 2013. Web. 3 Dec. 2014.