Kraft Foods chairman and CEO Irene Rosenfeld has said she feels “very good” about the US food giant’s performance in Europe, a challenging market for consumer goods companies.
On a reported basis, Kraft reported lower sales and operating income from its European business for the second quarter.
However it posted an increase in sales on an organic basis and a rise in adjusted operating income.
Rosenfeld acknowledged Europe has been a “challenging” economic environment, but added Kraft was “pleased” with its performance.
“A lot of the elements that have driven that performance so far will be in place as we look to the balance of the year,” she told analysts on the firm’s earnings call yesterday (2 August).
“We’ve got a very strong innovation pipeline in each of our core franchises. We’ve got the chocolate Philadelphia in the cream cheese business, we’ve got Milano coffee and as well as Crispello … and the opportunity to expand our core biscuit innovation into new territories. So all of that will continue to be in place as we look to the back half of the year.”
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Pricing and productivity had helped Kraft’s second-quarter profits but Rosenfeld said the company expects the contribution from pricing in the back half of the year to “moderate a little” as it starts to lap some of the moves it made a year ago.
However, she added: “We feel very good about the performance of our European business and we believe that the elements that have driven it are stable and we will continue to outperform. We saw our share grow in 14 of 17 countries so we’re feeling quite good about our performance across the Continent, including the UK. We’ve got a terrific innovation pipeline, all of which together are helping to fuel our strong performance and I expect that to continue as we exit the year, despite the challenging economic conditions.”
CFO David Brearton was equally as optimistic about Kraft’s operations in the developing markets despite Sanford Bernstein analyst Alexia Howard suggesting a weaker margin expansion in the second quarter compared to the first.
“Our developing market margins actually increased again this quarter. I wouldn’t get hugely uptight about one quarter … in second quarter we were up 40 basis points, so we feel pretty good about the margin trends in our developing markets,” he told analysts.
Rosenfeld pointed to Brazil and Russia as markets of “some concern” but added the company’s developing markets are likely to continue to be “strong contributors” to the overall group.
“As we look in our overall developing markets mix, the reality is, we’ve got a pretty diverse footprint among our developing markets, so although we have seen a slowdown in markets like Brazil and Russia, we’ve been been able to offset that with markets like China and India, as well as the result we’ve got in the Middle East and Africa.
“We feel quite good that we’ve got a nice virtuous cycle growing, we’re continuing to support our key franchises and we’re quite confident that it will continue that that group of countries will continue to be strong contributors. We may see some weakening in one country or another over time.”