Kraft aims for rapid expansion in China

14 September 2010

BEIJING: Kraft, the food group, is planning to rapidly expand its reach in China by boosting the number of categories and cities in which it has a presence.

The US multinational is also aiming to double the number of cities where it sells products made by Cadbury, the UK-based confectionary firm it purchased for $19bn (€14.8bn; £12.4bn) in January 2010.

Currently, Cadbury's leading brands are available in around 20 urban centres, and its parent's short-term ambition is to increase this total to at least 40.

"China has been doubling every year, and the real challenge is to pick the right opportunities," Lorna Davis, president and chairman of Kraft's operations in China, told Reuters.

"If I had unlimited resources and unlimited people, I would bring in everything Kraft has, but right now the focus is really on integrating Cadbury and growing our line of biscuits."

Another target area for Kraft is breakfast cereals, long a staple in the US and are now gaining ground in China, as consumers move away from established habits.

"There's a hole in the breakfast market now and we're moving to fill it," said Davis.

"The problem is that Chinese supermarkets traditionally haven't had a breakfast section, and you don't want to put it in the cereal section where traffic is low. So there's a bit of trial and error right now."

Kraft's sales have quadrupled in China during the last four years, and the company believes its future is equally bright, as levels of discretionary wealth rise.

In evidence of this, Americans drink 35 times more coffee, and customers in New Zealand buy 13 times more cookies, than their Chinese peers.

"There's a lot of consumer education and research going on right now," Davis added.

"Some older consumers in China are not used to the texture or taste of chocolate because it's not something they're used to, so we've got to design new products to cater to that."

Kraft has previously reformulated the recipe for Oreos to ensure it found favour among Chinese consumers, and also emphasises food safety, a matter assuming central importance in the country.

"We do a lot of work with our suppliers to educate them, and that's something we have to continue doing if we are to keep these safety standards," said Davis.

Data sourced from Reuters; additional content by Warc staff