Marketing key for Kraft

24 February 2011

NORTHFIELD, Illinois: Kraft, the food giant, believes enhancing the quality and performance of its marketing is the "single biggest" factor that can fuel future growth.

Speaking at the Consumer Analyst Group of New York conference, Irene Rosenfeld, Kraft's chief executive, summarised the corporation's objectives.

"Our focus today is squarely on driving growth from our position as a global snacks powerhouse, combined with our unrivalled portfolio of regional power brands," she said.

Collectively, these products contributed 75% of value sales and 90% of revenue expansion, last year, and while snacks boast the greatest potential, heritage brands yield scale and margin benefits.

"[We're] focusing on the power brands, categories and markets that will drive top-tier growth in each region," Rosenfeld added.

"Although the portfolio differs by region, we have the same growth formula around the world."

More specifically, the US multinational is attempting to reduce costs across its operations, redirecting the savings to marketing and innovation.

In developing markets, it has emphasised ten "power brands", like Oreo, Lacta and Tang, and an equal number of countries, such as Brazil, Russia, China, South Africa and Indonesia.

Having boosted advertising and consumer spending by 26% in emerging nations last year, to over 10% of sales, Kraft's priority products saw 16% sales increase, and now account for 40% of returns.

Advertising and promotional expenditure also reached 8.5% of revenues in Europe, where its power brands registered a 6% uptick, but the US and Canada remain somewhat behind at present.

"North America is still is the early stages of getting our virtuous cycle spinning," said Tony Vernon, president, Kraft Foods North America.

He added that the organisation plans to lure shoppers back to key categories using strategies which propelled a 1.1% organic sales improvement last year, and a 4% surge for power brands.

"We'll revitalise our iconic brands through advertising, innovation and differentiated marketing," said Vernon.

"We'll increase marketing and sales excellence in both grocery and immediate consumption channels. And to fund our growth, we'll deliver record cost savings."

The company's leading offerings stand to attract most resources, while smaller ranges rely on an "entrepreneurial" approach, encompassing digital media, customer relationship management and other such tools.

"Our 20 power brands will receive the bulk of our marketing and innovation support, and we expect them to drive the majority of our region's revenue growth," said Vernon.

"The average size of our 20 power brands is $600m. That means each is large enough to afford, and greatly benefit from, mass marketing programmes such as TV advertising."

Kraft intends to raise North American advertising and consumer spending by 10% this year, and to raise its ad-sales ratio to at least 8% long term, measured against 6.5% in 2010.

"Base marketing excellence is the single biggest thing we can do to step up our growth," said Vernon. "Great marketing is back at Kraft."

He added: "It is a simple formula. Great brands with strong messaging supported by competitive advertising will grow at benchmark, and we're seeing that result on many of our brands, with more to come."

Further initiatives include heightening its overall "excellence", improving the marketing mix, securing efficient trade spending, augmenting customer planning models and rewarding loyal buyers.

"As the recession challenges certain discretionary categories, we can drive more resilient categories like beverages, meats and convenience meals to continue to grow overall," said Vernon.

"This demonstrates how the breadth of our portfolio is an advantage, not a weakness," he added.

Data sourced from Kraft; additional content by Warc staff