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February 21, 2012

CAGNY: Kraft upbeat about brands in developed markets

Kraft Foods has insisted it will be able to drive continued strong growth in its "power brands" and grow its market share in developed markets like the US.

Kraft Foods has insisted it will be able to drive continued strong growth in its “power brands” and grow its market share in developed markets like the US.

Speaking at the Consumer Analyst Group of New York (CAGNY) conference today (21 February), Tony Vernon, EVP and president of Kraft Foods’ North American unit, told analysts that the group is confident that it can generate market-leading growth in its “mature brands”.

Kraft is set to divide into a North American grocery company and a global snacks manufacturer last this year. Vernon has been lined up as CEO of the North American firm.

“There is no such thing as a mature brand because great marketing is back at Kraft,” Vernon said. “We were one of the few in our industry to increase investments in innovation and marketing last year… and there is still significant room to increase our ad support and drive our brands even harder.”

Earlier today, Kraft reported its financial results for 2011, which included a 5.1% rise sales in North America last year and Vernon said the group expects to take advantage of this momentum.

He said Kraft is increasingly focusing a higher proportion of its advertising investment in North America on the company’s power brands as it prepares for the split.

“Our brands can bloom and grow despite record input commodity costs,” he insisted, citing an 11% increase in sales of Philadelphia cream cheese and a 9% rise in the sales of Kraft dinners in its domestic market.

Another factor driving higher revenues at the company’s power brands in the US is the “transformational change” the company has made in its product pipeline, Vernon suggested. New products added US$100m to North American revenues last year, he revealed.

The investments that Kraft is making in marketing and innovation in North America are being funded through a “virtuous cycle” of increased efficiency, with productivity savings being reinvested to drive growth.

During 2011, productivity as a percent of cost of goods sold rose to 4.4% and Vernon said that he expects these savings to accelerate into 2012.

“We are creating a lean end-to-end cost management culture. One where employees spend shareholder money like its their own. We believe that we are at a very encouraging early point in our cost management curve,” Vernon said.

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