Kraft Foods Analysis - Essay Example

Kraft Foods – Introduction The journey of Kraft Foods Inc. began in Chicago when James L. Kraft launched his Kraft cheese business in 1903. The company specialized in pasteurized cheese and was listed in Chicago Stock Exchange in 1924. Following a series of mergers and acquisitions it today stands as the world’s “second largest food and beverage company” with an impressive portfolio of 11 brands. Its products include convenient meals, confectionary, cheese, grocery, snacks and beverages (Siegert, 2013). Question 1 Pestle Analysis of Kraft Foods Inc. Political Political Contributions in US The political environment of North America is quite favourable for Kraft Foods. It actively supports candidates who draft public policies that are related to the brand and its products. The company has its own political action committee Kraftpac which makes valuable contributions to the US Federal and State political parties and candidates; however all corporate contributions are made as permitted by law (Kraft Foods Group, 2014). Condemning Controversial Laws Kraft Foods was also a member of ALEC (American Legislative Exchange Council) but left this corporate front group under consumer pressure after it backed some controversial laws (Terkle, 2012). Acquisition of Cadbury The acquisition of Cadbury’s Chocolate also sparked protest in the US and its biggest shareholder Warren Buffet cut down his shares in Kraft (Clark, 2010). Economic Economic Downturn in US The economic downturn has also affected Kraft Food sales; however it quickly launched strategies which helped it to recover from this difficult situation. For instance, it came up with meal solutions through which consumers got make the most of their grocery dollars and get quality food at reasonable rates (Kraft Foods Inc., n.d. [a]). Penetration in North America Kraft enjoys a 98% penetration rate in US and 99% penetration in Canadian households (The New Kraft Foods Group, 2013). Cadbury Acquisition Although its acquisition of Cadbury Chocolates sparked controversy, Kraft Foods actually experienced an upward increase in sales. Missed Sales Target In 2013, the sales of its refrigerated meals, beverages, snack nuts and enhancers increased while the sale of its cheeses decreased slightly (Zacks Equity Research, 2014); however it did miss its target slightly. Social Health and Wellness On social front, Kraft Food is quite active and gives priority to health, well-being and nutrition issues. It has earned a name for itself in fighting obesity on one hand and malnutrition and hunger on the other (Siegert, 2013). It has emerged as a strong oppose of negative lifestyles and also been vocal about food quality and safety. Health maintenance, water purification and unaffordable nutrition are other factors it has been working on. Advertising to Children During the anti-obesity drive, the company launched a policy not to target children below 6 years with its advertisements (Siegert, 2013). Better-for-you-products are advertised to children aged between 6 to 11 years. In school advertising has been eliminated and in Europe, the nutrition content is also mentioned on the packages to help consumers adopt a healthy lifestyle (Kraft Foods Inc., n.d. [c]). Kraft Foods has also lowered salt content and fat content from some of its products (Kraft Foods Inc., n.d. [c]). Meals for the Poor In conjunction with Feeding America program, Kraft gave 20 million meals to families in need (PR NewsWire, 2011). Technological Use of Smartphone Apps Innovation has always been the hallmark of Kraft Foods. It uses technology to its advantage and has come with novel ideas to reach its consumers. As the use of Smartphones has increased among people, Kraft has launched an iFood Assistant application through consumers will be able to download recipes and the ingredients will be added automatically to the shopping list present on their phones (Kraft Foods Inc., n.d. [b]). Marketing with Technology Kraft in collaboration with Intel Technology has created a vending machine called iSample which gives out free pudding samples to adults (Yirk, 2014). Data Management For quick and efficient data management, Kraft has employed SAP technology which has also helped the food company to improve its logistics considerably. With SAP Services and SAP Design Thinking; it has been able to reach its consumers and has provided them with “real time mobile pricing and ordering tools” (Santelli, 2014). Legal Following FDA Directives Kraft Foods complies with the regulations set by FDA the Food and Drug Administration and FTC the Federal Trade Commission. It discloses the nutrition content of its products on the labels as directed by FDA and as per FTC directives it does not deceive its customers through misleading advertisements (Child, 2010). Intellectual Property Rights It has obtained Intellectual Property Rights to protect the value and image of its products. The company also took action against the workers who mistreated cows as the company is against animal cruelty (Chicago CBS, 2012) Environmental Reducing Waste Saving the environment is also one of the top priorities of Kraft Foods. It has reduced solid waste, and energy and water consumption during manufacturing; recycling is also done at its manufacturing units. It has also made efforts to reduce carbon emission during transportation (RP News Wires, n.d.). Green Teams The employees at Kraft Foods have created their own Green Teams to incorporate sustainability in day to day working (RP News Wires, n.d.). Question 2 Following presents SWOT analysis of Kraft Foods; Strengths Kraft Foods Inc. is the second largest food and beverage company in the world with a strong brand image and a strong consumer base. Impressive Portfolio It has a large global presence and it sells its products to millions of consumers in 170 countries around the world. The portfolio of Kraft Food comprises of big brands like Cadbury Chocolate and has 49 major products to its credit. Its brands are divided into six sectors namely; cheese, confectionary, biscuits, beverages, convenient meals and grocery (Kraft Foods Inc., n.d. [a]). Innovation It believes in innovation and modernization whether in its products or in the marketing methods or improving its operations. It has a strong and efficient distribution network. The food company is able to correctly interpret the changes in preferences of consumers and their demands and respond to them quickly. Corporate Citizen It has also earned a name for itself as corporate citizen through social and charity programs. It has launched several successful campaigns to promote healthy eating in America. Employee Friendly Kraft Foods is also seen as an employee friendly corporation and has introduced various employee benefit programs including early retirement and pension. It is known for creating a positive work life balance by offering its employees flexibility of work hours. The employees can choose work at home, part time, full time and job sharing arrangements (The New Kraft Foods Group, 2013). Weakness Disappointed Shareholders Kraft Foods acquired Cadbury despite opposition from shareholders as a result its main shareholder sold some of its shares. Drift from Original It has expanded too far in snacks and is drifting away from its core business; grocery because of which its sales of groceries dropped. Division of Company Kraft Foods decided to split into two companies in 2012 and according to the market analysts it could be detrimental for the food giant (CGT, 2011). Weak Sales The sales of Kraft Foods products are weaker across the globe as compared to its other competitors. Product Recall It had to recall some of its products (macaroni) when artificial dyes were detected in the product. Decline in Demand The demand of products like refrigerated gelatine and salad dressings has declined and its other packaged products are also lagging behind. Ineffective Marketing The marketing from Kraft Foods is weak and that has allowed its competitors to gain a slight edge; although Kraft Foods has revamped its marketing but so far the response from consumers has been lukewarm. Opportunities Two Sections The decision to split into two distinct companies by Kraft Foods was taken in 2012 and so far it has yielded a positive result. One section will now deal with groceries while the other will deal with snacks, sweets and confectionary; both sections can now concentrate on the products in their respective domain (CGT, 2011). Increasing Snacks Demand As the demand for snacks is increasing the world over, Kraft Foods now has the opportunity to expand its business (CGT, 2011). Emerging Markets Kraft Foods has expanded its business in emerging markets like India, Russia and Brazil which offer tremendous growth opportunities (CGT, 2011). Using Cadbury Its acquisition of Cadbury is turning out to be a good option as Cadbury is an established brand in many countries like India and China and Kraft can increase its business using the brand’s name (CGT, 2011). Health Centred Food It is offering health-centred products and organic salads to reposition itself in North America. As the trend of organic food consumption is growing, Kraft Foods can offer organic salads and use organic ingredients to attract consumers (Kraft Foods Inc., n.d. [a]). Threats Competitive Rivalry Competitive rivalry is the biggest threat faced by Kraft Foods. It is up against strong competitors and therefore should remain alert about the market trends. Changing Preferences Another threat it faces is that consumers can change their preferences and this may adversely affect Kraft Foods (Kraft Foods Inc., n.d. [a]). Changing Lifestyle Changing lifestyle could be a threat to Kraft Foods. Obesity is on the rise in America and other parts of the world. Health conscious people have now reduced or stopped consumption of food and snacks loaded with calories. This can affect sales of snacks, pizza and desserts by Kraft Foods (Kraft Foods Inc., n.d. [a]). Raw Materials The rising prices of raw materials is making it difficult for Kraft Foods to keep its prices under control, it may eventually have to pass on commodity inflation to its consumers (Kraft Foods Inc., n.d. [a]). Lower Buying Power Economic downturn has also resulted in lower buying power of the consumers. Boycott Kraft Foods also faced boycott on a number of occasions such as people vowed never to buy Oreo Cookies one of the bestselling Kraft brands when an image of Rainbow Oreo Cookies (multi-colour cookies) was released on Facebook, people took it as support to Gay/Lesbian (Gilbert, 2012) Declining Dollar Declining value of dollar and rising value of Euro is another worry that Kraft Food faces. Question 3 Competitor Analysis Product Form Kraft Foods Established in 1903 Kraft Foods Inc. the North American food and beverage company has been in business for more than a century. It started off as wholesale grocery business and later ventured into snacks. Its products include grocery, cheese, convenient meals, snacks, confectionary and beverages (Kraft Foods). Nestle SA Established in 1905 Nestle SA is a Swiss food company which is the largest food company of the world on the basis of revenue. Its products include bottled water, beverages, baby food, coffee, tea, breakfast cereals, frozen food, ice cream, dairy products, snacks and pet foods. It also has a large number of shares in L’Oreal a major cosmetics company of the world (Nestle, 2014). Product Substitutes Kraft Foods It has nine coffee brands including Jacob’s and Maxwell House. Nestle has two coffee Brands Nescafe and Nespresso. Nestle is ahead of Kraft Foods in instant coffee (Schneiderova et al, 2010). The food group by Kraft Foods earns a big portion of revenue in North America; however Nestle recently acquired Kraft’s frozen pizza business. Nestle also sold its frozen pasta business to Brynwood Partners (Reuters, 2014). Generic Competitors The biggest competitors of Nestle and Kraft Foods are PepsiCo and Danone (Bodimeade, 2012). Kraft’s Macaroni and Cheese is facing tough competition from Annie’s Organic Macaroni and Cheese (Baertlein, 2014). Potential New Entrants Green Mills and Theo Muller Group are the new entrants both Kraft Foods and Nestle should watch out. Already the different flavoured yogurt from Theo Muller Group is available throughout US and has received a positive response from consumers (Bodimeade, 2012). References Baertlein, L. (2014). Kraft challenged by "healthier" macaroni and cheese brands. [Online]. 30 March, 2014. Reuters. Available at: [Accessed on April 30, 2014]. Bodimeade, M. (2012). US dairy products market led by Kraft Foods, Nestlé and Danone, [Online]. 27 Nov, 2012. Companies and Markets. Available at: [Accessed on April 30, 2014]. CGT. (2011). Kraft Foods to Split into Two Companies. Available at: [Accessed on April 30, 2014]. Chicago CBS. (2012). Kraft Foods Supplier Target Of Animal Abuse Charges. [Online]. 10 Oct, 2012. Chicago CBS. Available at: [Accessed on April 30, 2014]. Childs, C. M. (2010). Federal Regulation of the “Smart Choices Program”: Subjecting Front-Of-Package Nutrition Labeling Schemes to Concurrent Regulation by the FDA and the FTC. Boston University Law Review 90 (2010): 2403-2426. Clark, A. (2010). Warren Buffett Sells Kraft Shares. [Online]. 18 May, 2010. The Guardian. Available at: [Accessed on April 29, 2014]. Gilbert, K. (2012). Kraft defends rainbow-stuffed gay pride Oreo as ‘reflection of our values’. [Online]. 27 June, 2012. Life Site News. Available at: [Accessed on April 29, 2014]. Kraft Foods Group. (2014). Political Contributions and Lobbying Activity. Available at: [Accessed on April 29, 2014]. Kraft Foods Inc. (n.d. [a]). Kraft Foods - First to the Table - Q&A: Shopper Insights. Available at: [Accessed on April 29, 2014]. Kraft Foods Inc. (n.d. [b]). Kraft Foods - First to the Table - Q&A: Tech-Enabled Shopping. Available at: [Accessed on April 29, 2014]. Kraft Foods Inc. (n.d. [c]): Health and Wellness Fact Sheet. Available at: [Accessed on April 29, 2014]. Nestle. (2014). History: Nestle - Good Food Good Life. Available at: [Accessed on April 29, 2014]. PR NewsWire. (2011). Kraft Foods Huddles With Feeding America to Give 20 Million Meals to Families in Need. PR Newswire Association LLC. Available at: [Accessed on April 29, 2014]. Reuters. (2014). Nestle sells U.S. frozen pasta business. [Online]. 06 Jan, 2014. Chicago Tribune. Available at: [Accessed on April 30, 2014]. RP News Wires (n.d.). Kraft Foods green efforts help employees create recipes for change. Reliable Plant. Available at: [Accessed on April 29, 2014]. Santelli, S. (2014). Talking Solutions, Not Technology. [Online]. 08 Apr, 2014. SAP News Center. Available at: [Accessed on April 29, 2014]. Schneiderova, K., Merkel, S., Klötzer, N., Wiese, C., Weimer, S., & Schröder, N. (2010). Strategic Analysis of Nestlé and its Competitor Kraft Foods. Available at: [Accessed on April 29, 2014]. Siegert, L. (2013). Sustainable Development Approaches in the Food & Beverage Industry: A Comparison Between Nestle SA and Kraft Foods Inc. UK: Anchor Academic Publishing. Terkel, A. (2012). Kraft Drops Membership in Conservative Group ALEC. [Online]. 08 May, 2014. Huffington Post. Available at: [Accessed on April 29, 2014]. The New Kraft Foods Group. (2013). Cagny Conference. Available at: [Accessed on April 29, 2014]. Yirka, B. (2011). Kraft uses Intel technology in vending machine to target customers by age. [Online]. 27 Dec, 2011. phys.org. Available at: [Accessed on April 29, 2014]. Zacks Equity Research. (2014). Kraft Misses on Earnings & Revs Again. [Online]. 14 Feb, 2014. Zacks. Available at: [Accessed on April 29, 2014]. Read More