19 Feb 2009

Kraft’s turnaround plan and new brand identity: Will it win against store brands?

Raj Bhatt

At a CAGNY conference in Florida, Irene Rosenfeld, CEO of Kraft Foods, highlighted the progress made by Kraft against the turnaround plan announced by her in 2007. The turnaround plan is based on organizational changes, category re-framing using the ‘growth diamond’, sales initiatives, retailer collaboration, cost reduction and quality improvements.

Kraft also unveiled a new corporate logo and brand identity (click here for Brandweek article). Their new slogan is “Make today delicious,”.

The new Kraft logo consists of an upward, red smile exploding into an array of seven “flavor bursts,” each of which represents a different division. The new logo was designed by Nitro after interacting with many employees and consumers worldwide on questions as: “What do you look for in a food company?” “How do you engage with food generally?” and “What are the moments of that relationship that are important to you?”. The findings resulted in a corporate logo that is “more contemporary, the colors are more vibrant and it has a life to it,” CMO, Mary Beth West said.

Kraft has seen significant organic growth in H1’08 but most of it was from price increases. In Q4, it had a volume decrease of 5.2%. This was partly due to inventory reductions (especially at Walmart, which accounts for ~15% of sales). Kraft USA is experiencing significant unit volume declines in cheese, coffee, crackers, nuts and salad dressings.

I ask myself: Is Kraft losing its battle against store brands? Will its turnaround strategy and its rebranding bring success ?

I don’t think the Q4 volume declines necessarily indicate loss of ground against store brands. Most of the volume declines experienced by Kraft are more than offset by pricing increases. In terms of dollar share, Kraft has lost less than 3 percentage points in most categories. Kraft continues to be the market leader in sub-categories accounting for around 70% of its sales. So long as Kraft manages its pricing such that it does not lose further significant share, Kraft will likely continue to experience healthy organic growth.

The focus on quality is also paying off for Kraft. 65% of surveyed customers preferring Kraft products to competitor products (as opposed to 44% in 2006).

Outside the US, Kraft is enjoying record sales growth in the Developing Markets (coffee, biscuits, chocolate, Tang) and margin expansion in Europe and the Developing Markets.

Going forward, the new branding appears more colorful and contemporary to me. I hope it allows Kraft Foods to better differentiate its products from store brands (by driving home the taste advantage).

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2 thoughts on “Kraft’s turnaround plan and new brand identity: Will it win against store brands?

  1. By the way, here is the full copy of Irene Rosenfeld’s presentation to CAGNY: http://media.corporate-ir.net/media_files/irol/12/129070/kft_presentation0209.pdf

  2. Raj Bhatt on February 20th, 2009 at 7:06 am
  3. very interesting! when I go to the supermarket, the generics look more and more like the brands they mimic – so difficult for the brand-name to prevent that kind of imitation. then the supermarkets offer the “pseudo-sale” prices – i.e., “$0.75 LESS than brand-name version”

  4. daniel on February 20th, 2009 at 7:33 pm

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