China holds promise for Kraft

08 June 2009

BEIJING: Kraft, the world's second-biggest food manufacturer, expects to register a double-digit upturn in sales in China this year, and will also increase its advertising spend in the country by around a fifth in 2009 as it seeks to enhance its overall position.

The company sells its products in 150 countries around the world, and its net organic revenues improved by 12% in the first quarter of 2009 in developing regions including Asia Pacific, Central and Eastern Europe and the Middle East.

It entered the Chinese market in 1984, and its top-performing properties in the country include its Maxwell House coffee range, Tang, a powdered beverage brand, and Oreo cookies, which it redeveloped specifically for national tastes.

Lorna Davis, ceo of Kraft China, argues that the "food business" is currently in a relatively strong position, as "whatever happens in the economy, people still eat. And we have a range of products to serve everybody's needs."

More specifically, she said that the opportunities in China are "just huge," a label she also applied to Russia, Brazil and Southeast Asia as a whole.

To give just one example, Kraft found that the average Chinese consumer eats around one kilogramme of biscuits a year, compared with eight kilogrammes in the US, and 11 kiligrammes in the UK, allowing it considerable room for long-term growth.

While not releasing exact revenue figures for Kraft's Chinese operations, Davis did report that total sales were less than the $1 billion (€717m; £627m) posted in Brazil, but did register a "double-digit" improvement in 2008. 

Advertising will play a key role in boosting the profile of Kraft's various brands in the country, with the company's media spend set to rise by 20% on an annual basis over the course of the year.

Davis argued that "if you want to build your business here [in China] and you don't spend more than 10 percent of your total revenue on advertising, you are not going to grow."

Data sourced from Financial Times; additional content by WARC staff