12-06-2014, 02:43 PM
INTEGRATED COMPANY ANALYSIS
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EXECUTIVE SUMMARY
With its well-publicized acquisition of Cadbury in February 2010, Kraft gained access to the British confectioners‟ extensive network of distribution channels in developing markets in Africa and Asia. Declining domestic sales and the maturity of North American markets makes success abroad of critical importance to the company‟s future. In addition, Kraft is targeting high margin categories such as snacks, confectionary and quick meals for growth. The company‟s long-term growth strategy is to position itself as a “global snacks powerhouse.”1
In order to accomplish this strategy successfully and sustainably, Kraft should:
employ a locally-focused marketing strategy in launching Oreo in India, and be conscious of Indian consumers‟ tastes, buying preferences, and price sensitivity.
use successes and failures from the Oreo launch to develop best practices for other large-scale product introductions in developing markets
manage its significant long-term debt through further restructuring, and avoid investing activities that would increase its long-term debt
COMPANY OVERVIEW
Kraft Foods, Inc. is the world‟s second largest food company. 2009 revenues from its three operating segments – Kraft Foods North America, Kraft Foods Europe, and Kraft Foods Developing Markets - exceeded $40.4 billion. With respect to percentage of total revenues, Kraft is experiencing significant growth in international markets (see Appendix A). The company currently has approximately 97,000 employees worldwide and sells its products to consumers in over 160 countries. Domestically, Kraft products are present in more than 99% of American households.
Kraft‟s brands span six consumer sectors: Snacks, Beverages, Confectionary, Cheese, Grocery and Convenient Meals. In February 2010, Kraft finalized its $19.5 billion acquisition of Cadbury, the world‟s largest confectionary company (see Appendix B). While in 2006 Snacks and Beverages were Kraft‟s two largest sectors, today Confectionary and Snacks are, and generate 51% of its revenues (see Appendix C).
COMPETITOR OVERVIEW
Given Kraft‟s large portfolio of brands (see Appendix E) and range of products, it faces competition from domestic and international companies, smaller regional companies, and generic brands. Some of Kraft‟s key competitors are Nestle, Pepsi-co, Coca-Cola, Danone, and Heinz. As Kraft moves forward with its plan to capture market share in developing markets, it must be aware that several of its competitors have similar growth strategies. For example, Coca-Cola has named Mumbai one of the cities most important to its growth and Nestle touts its commitment to Middle East operations after opening a $136 million manufacturing plant in Dubai (see Appendix F).
KRAFT IN INDIA: FUTURE MARKETING STRATEGIES
NEW PRODUCTS
Given the demands of Indian consumers, Kraft should consider new product development that reflects local tastes and uses distinctive local ingredients. For example, Kraft‟s competitor PepsiCo has found success in tailoring products to local tastes. Its Frito Lay division launched a product called Kurkure to bridge the gap between its core product, potato chips, and a traditional Indian food called „namkeens‟. This product was designed specifically for Indian consumers‟ tastes and is now one of the most popular food products in India.
CONCLUSION
Kraft, in 2010, is well on its way to becoming “a global snacks powerhouse” that takes full advantage of its “unrivaled portfolio of brands people love.” With newly acquired distribution channels that allow it to permeate international markets, Kraft can leverage its scale and brand equity to grow into the future. To accomplish this global strategy successfully and sustainably, Kraft should localize marketing efforts as well as create and utilize best practices in tailoring its products and promotions to developing markets. Though it is in a strong financial position, the company must continue to manage its long-term debt through smart restructuring and avoid investing activities that would increase its existent debt. In doing all of this, Kraft will fully realize the potential of its investment in Cadbury.