kraft - history, evolution, present and the future
DESCRIPTION
A comprehensive background of Kraft containing its History and Origins, Early Evolution, Modern Business, Global Expansion, Company Structure, Recent Efforts and Company DNA. As one of the chapters of the book FMCG: The Power of Fast-Moving Consumer Goods by authors Greg Thain and John Bradley. For more details on their success story and that of other leading FMCG companies, check www.fmcgbook.com or Amazon http://amzn.to/1jRyd20.TRANSCRIPT
History & Origin . . . . . . . . . . . . . . . . . . . 3
Early Evolution . . . . . . . . . . . . . . . . . . . . 4
Global Expansion . . . . . . . . . . . . . . . . . 6
Modern Business . . . . . . . . . . . . . . . . . . 7
Company Structure . . . . . . . . . . . . . . . 9
Recent Efforts . . . . . . . . . . . . . . . . . . . .10
Company DNA . . . . . . . . . . . . . . . . . . 17
Summary . . . . . . . . . . . . . . . . . . . . . . . .18
Social Media Accounts . . . . . . . . . . . .19
2
James Lewis Kraft, known as J.L., was an offspring of a Canadian
Mennonite family
He moved to New York State and worked with a cheese company
In 1903, J.L. Kraft rented a horse and wagon, purchased wholesale
cheese and began selling it to small stores in Chicago, Illinois
In 1905, he wrapped the cheeses and branding them ‘Elkhorn’.
The emergence of Kraft’s sterilized cheese became a genuine
paradigm-shifting innovation
JL realized he had one advantage: People liked his cheese.
It then became a big hit when America entered the war in 1917
The army purchased six million cans of Elkhorn to send to troops in
France which created millions of brand advocates
Kraft Cheese was widely advertised in the main magazines of the
day
Kraft was the largest cheese company in the world by 1923 3
The company launched a brand of mayonnaise in 1922 and three
years later acquired a maker of French dressing
Kraft Kitchens was born in 1926.
In 1928, ‘Velveeta’ was the nutritious cheese food that is digestible
as milk itself
Followed by merging with the Phoenix Cheese Company of New
York
In 1901, Phoenix Cheese had been formed with the purpose of
acquiring the world’s first cream cheese
This had been invented accidentally in 1872 by an American
dairyman, William Lawrence: he subsequently called it Philadelphia
In 1943, Kraft was heavily involved in the development of ‘K’
Rations
After the war, Kraft changed its name to Kraft Foods Company
Kraft started embracing the emerging medium of television 4
Kraft Television Theatre became the first commercially sponsored
programme on network television in 1947
Cheez Whiz was created as an all-purpose cheese sauce
Cracker Barrel was launched in 1954
Kraft Fudgies and the first portion-controlled mayonnaise was fist
introduced in 1956
Kraft Catalina French Dressing was introduced in 1957
Kraft Jet-puffed Marshmallows together with whipped cream
cheese were introduced in 1959
In 1960, the compny was the first major player to introduce low-
calorie salad dressings
In 1976, it was renamed as Kraft, Inc.
It has been one of the best acquisitions in packaged goods history
with sales of just under $5 billion
5
Kraft’s first global expansion happened in Canada in 1920
They purchased MacLaren’s Imperial Cheese Co., which had a
factory in downtown Montreal
Canada gave easier access to the British market, which Kraft
exploited four years later by opening a sales office in London
Britain also gave ready access to the other main markets of the
British Empire including Australia
The company operated in 68 countries
Milka was just behind at 91 countries, followed by Maxwell House
at 78 and Ritz Crackers at 49
In 2003, they accounted for 11% of Kraft’s sales despite its 30%
share of global packaged foods
6
In 1970’s, Philip Morris began to diversify along with other tobacco
companies
Kraft acquired Miller Brewing and Seven-Up
R. J. Reynolds acquired Nabisco Brands for $4.9 B
Philip Morris quickly followed by acquiring General Foods for $5.75
B
General Foods was by then a $9 B turnover company that had
acquired along the way many brands
Philip Morris had a food business with combined sales of over $15
B
In 1989, launched Kraft’s Fat Free Miracle Whip and pourable salad
dressings
Oscar Mayer’s award-winning Lunchables was launched in1989
They launched DiGiorno Rising Crust Pizza onto a national market
The company’s sole asset was an 80.1% share in the Nabisco
foods
The next year, Philip acquired Nabisco Holdings for $18.9B
7
Philip Morris sold a 16.1% stake in the newly enlarged Kraft Foods
In 2001, Kraft Foods was a gigantic foods business, the largest in
North America and the second largest in the world
The new business defined its strategy:
Accelerate growth of core brands
Drive global category leadership
Optimize the portfolio
Deliver world-class productivity, quality and service
Build employee and organizational excellence
Four-point strategy:
Build superior brand value
Transform the portfolio
Expand global scale
Reduce costs and asset base
8
Even more than Kraft’s international development, it is instructive
to consider the evolution of Kraft’s management structure before
the merger with General Foods and the incorporation of Nabisco.
Prior to being acquired by Philip Morris, Kraft had nine divisions
reporting to a Chief Operating Officer: Refrigerator Products,
Grocery Products, Frozen Foods, Dairy, Food Ingredients, Food
Service, Sales, Operations and Technology, and International.
In 1990, a mini-restructuring was Kraft General Foods’ first move
to an over-arching marketing function with links to all the business
units
9
2004
New strategy and structure were apparently off to a good start
leading to an increase in sales by 5.5% to over $32 billion and in
volume by 2.8%
However, the company was at the beginning of a strategic
transformation, so what was more important was the progress
being made to reshape Kraft Foods
Here were the promising signs within the now expanded number of
strategic thrusts: Build Superior Customer Brand Value Build Shopper Demand Through Superior Customer
Collaboration Transform the Portfolio Expand Global Scale Drive Out Costs and Under-Performing Assets Strengthen Employee and Organisational Excellence Act Responsibly
10
2005
Sales for new products hit a company high of $1.5 billion
The Crystal Light/Clight brand grew by 12%, reinforcing its position
as the US’ number one non-carbonated diet beverage
Tang, available in 80 countries, grew by 10% worldwide
Philadelphia’s global sales increased by 7%
Thin Crust frozen pizza technology delivered $175 million in sales
across three brands
The final change announced in the year was the addition of 3
guiding principles to the 7 elements of the strategy:
Put Consumers First, Work Simply
Act Quickly
Play to Win
11
2006
An ex-General Foods executive, Irene Rosenfeld, was brought in as
CEO from PepsiCo, where she had been successfully running the
Frito-Lay unit
She was clearly not impressed with what she found, with volume
down by 5% year-on-year (3%, discounting the 2005 53rd
accounting week)
2007
Kraft bought Danone’s entire global biscuit business for
approximately $7.6 billion
Within the year itself, top-line sales increased by an 8.4%
Organic volume growth was lagging at 1.7%
An investment of $100 in Kraft shares in 2002 had so far yielded a
total shareholder return of minus $4.75
12
2008
The structural, operational and cultural remaking of Kraft Foods
continued apace
A breakdown of Kraft’s sales by division:
Division Total
sales (%)
Snacks (biscuits, chocolate, salted snacks)
37.7
Beverages (coffee, packaged juice, powdered) 20.1
Cheese
17.7
Convenience Meals (pizza, dinners, lunches, meats)
14.6
Grocery (dressings, condiments, desserts)
9.9
13
2009
The latest structural changes involved the disappearance of Kraft
International
The business now had three main reporting units: Kraft North
America, Kraft Europe and Kraft Developing Markets
2010
Kraft Foods announced the terms of its final offer for Cadbury
Cadbury held a 10% global confectionery market share
Cadbury topped with over 70% market share and was one of
the country’s top packaged goods companies in India
Kraft became the world’s second largest food and beverage
company with a turnover of $49 billion
DiGiorno, Tombstone and Jack/s brands in the US and Delissio in
Canada were sold to Nestlé in March for $3.7 billion
14
2011
10.5% increase in sales to $54.4 billion
Twelve brands each had sales that topped $1 billion
The performance of Kraft Foods Developing Markets is the highlight
of the year.
It added over $2 billion in sales to jump to 27% of total company
sales
Organic volume was up a very healthy 3.9%
Starbucks offered Kraft $750 million in August 2010 to terminate
the partnership, but Kraft declined
Annual sales had increased ten-fold to about $500 million a year
The company announced in August that it was going to split into
two
Irene piloted the new Global Snacks Business (Mondelēz
International, Inc.) which consist of Kraft Foods Europe, Kraft Foods
Developing Markets and North American snacks and confectionery
businesses.
15
2012
The newly-reconstituted Kraft Foods Group ‘s sales was over $18
billion.
Kraft Foods Group was in the business of managing big customers:
25% of sales went to Wal-Mart, with an other 17% going to its next
four biggest customers.
Mondelēz International had sales of $35 billion.
Over 80% came from outside North America, 45% from developing
markets)
Operating in the much sexier categories of biscuits (27% of sales),
chocolate (another 27%) and gum and candy (15% of sales), and
with no customer anywhere accounting for over 10% of total sales
(the five largest accounting for only 15%)
The company had a new strategy: “Drive Efficiency to Fuel Growth
and Protect the Well-being of our Planet (As everyone does) “ 16
The sequence of colossal mergers, acquisitions and splits since
1988 have created the most modern of companies: one built and
remodeled more by Philip Morris and Wall Street than by a
definable management culture
Mondelēz International is a cohesive organization with a clear
category focus, but it is not yet a company, with a definable DNA
17
No other company has been through such a prolonged period of
major upheaval. It has been progressively combined and re-
combined with other long-established packaged goods giants,
each with their own histories, competencies and operating
cultures.
We believe this uniqueness will fade over time, not because Kraft
will become more like other companies but because other
companies will become more like Kraft. As retailers get ever larger
and more powerful, and in the absence of a laser-accurate niche
focusing, size has become a crucial strategic component for the
large FMCG companies. Be big or be unique.
Kraft Foods/ Mondelēz International experience will provide a
valuable pointer as to whether size can be made a supplier – as
well as a retailer-strength
18
Website: www.kraftfoodsgroup.com LinkedIn: www.linkedin.com/company/kraft-foods-group Facebook: www.facebook.com/KraftFoods
Twitter: www.twitter.com/kraftfoods YouTube: www.youtube.com/user/kraftrecipes
19