The spike in global dairy prices over the last 12 months has hit full-year earnings at US giant Kraft Foods.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The company behind Philadelphia cheese today (30 January) posted a 6.6% fall in underlying operating income to US$4.9bn for 2007.
Net sales jumped 5.1%, on an organic basis, to $35.7bn last year but Kraft said rising dairy costs – as well as investment in developing new products – had offset the gains in revenue.
“The benefits of strong revenue growth and cost savings were more than offset by significantly higher input costs, primarily dairy, as well as investments in product quality and new products,” Kraft said.
The company, whose brands also include Cote d’Or chocolate and Oscar Meyer bacon, is in the middle of a “three-year plan” to revitalise its business. Chairman and CEO Irene Rosenfeld insisted the 2007 results had proved “an excellent start” to that programme.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“We’ve shown that our investments in product quality, marketing and innovation lead to accelerated volume growth, better product mix and improved market share trends,” Rosenfeld said.
She added that, while Kraft faced an “unprecedented input cost environment”, the company has entered 2008 with “good momentum”.
As a sign of its confidence, Kraft raised its guidance for sales this year from 3-4% to over 4%. The company said underlying operating income would grow faster than revenue.
The company’s fourth-quarter sales rose 6.2%; operating income fell 10.9%, thanks largely to a slump in earnings from its cheese business as dairy costs started to bite.
