Kraft Foods has unveiled plans to drive profit growth through its “virtuous cycle” – a programme that focuses on developing its brands by cutting overheads and investing the money into marketing and innovation.
Speaking at the CAGNY analyst conference in Florida today (22 February), the company revealed plans to either cut or maintain overhead costs in each of its divisions as part of this plan.
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Chairman and CEO Irene Rosenfeld said that Kraft’s businesses in Europe and developing markets were already seeing the benefits of these plans but revealed the company is just beginning to implement the scheme in North America.
Rosenfeld confirmed that Kraft would be putting most of its weight behind its “power brands” and snacks in the coming year. She said the lines they account for some 75% of the group’s portfolio and provide around 90% of its revenue growth.
Describing the virtuous cycle, Rosenfeld said Kraft would focus on developing its power brands, categories and markets, to drive sales. She claimed this then reduces costs, enabling the company to leverage overheads and then reinvest some of the savings in growth, through either innovation or marketing.
Earlier this month, Kraft recorded a 5.8% drop in operating income from its North American division in 2010. Tony Vernon, president of Kraft Foods North America, outlined plans to accelerate its growth in the region and “win” in the region.
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By GlobalDataHe said that the division’s sales growth exceeded most of its peers last year, despite a sluggish economy, rising input costs and depressed categories.
During 2011, Vernon said Kraft is looking to grow faster than its categories in North America through investing heavily in the marketing of its power brands, as well as through delivering “record savings” from its end-to-end cost management, which include savings from the supply chain and overheads.
Turning to Cadbury, Rosenfeld said that Kraft is extracting synergies from the integration of the UK confectioner than planned, and that following consolidation of the chocolate manufacturer’s management in 2010, the group will be looking to drive growth in 2011.
She added that Cadbury would be accretive to earnings in 2011, which will be its first full accretive year within the company since its acquisition in early 2010.
