QUOTE AND NEWS
Forbes  Oct 22  Comment 
Investors eyeing a purchase of Kraft Foods Group Inc (NASD: KRFT) stock, but cautious about paying the going market price of $56.52/share, might benefit from considering selling puts among the alternative strategies at their disposal. One...
SeekingAlpha  Oct 17  Comment 
By Eli Inkrot: When you think about dividend growth companies, especially those in the consumer sector, it's likely that you immediately conjure images of the Procter & Gambles (NYSE:PG), Johnson & Johnsons (NYSE:JNJ), Kimberly-Clarks (NYSE:KMB)...
Motley Fool  Oct 15  Comment 
Kraft Foods Group has a lot of things going for it, but its cash commitments are holding it back.
SeekingAlpha  Oct 14  Comment 
By Stock Gamer: Share price performance of KRAFT Foods (NASDAQ:KRFT) has been very bumpy since July. The price experienced a large pullback in late July. Despite a partial recovery in August, it slid back to $55 level in September. From a dividend...
Motley Fool  Oct 14  Comment 
There's lots of room for the dividend to grow, but what about the stock?
Motley Fool  Oct 14  Comment 
Kraft Foods recently increased its dividend by 5%. Here's why Kraft could bump up its dividend.
SeekingAlpha  Oct 14  Comment 
By Josh Arnold: Yesterday I took a look at former Kraft (NASDAQ:KRFT) component Mondelez (NASDAQ:MDLZ) and concluded its subpar dividend and earnings growth left investors with little reason to own the stock. Today I'll contrast that article with...
MarketWatch  Oct 7  Comment 
Yum Brands lost ground in extended trading Tuesday after its third-quarter results missed Wall Street’s expectations. Kraft Foods gained in late action after the company hiked its dividend.
TheStreet.com  Oct 7  Comment 
NEW YORK (TheStreet) --aKraft raised its quarterly dividend to 55 cents from 52.5 cents a share on Tuesday. Shares of the food company were gaining 0.2% to $55.70 in after-hours trading. The new quarterly dividend is payable on Oct. 31 to all...
SeekingAlpha  Oct 5  Comment 
By Valuentum: We think an in-depth intrinsic value estimate is a valuable data point in evaluating a company's investment prospects. For one, it allows the investor to see what he or she is getting for shares. In some cases, the price for a...




 

Kraft Foods Inc. (NYSE: KFT) is the largest food and beverage company headquartered in North America and the second-largest in the world after Nestlé SA.[1] With 97,000 employees in over 70 countries, the firm operates in two main segments: Kraft North America Commercial and Kraft International Commercial. In addition to these two geographical divisions, Kraft's products are divided into one of five categories: snacks & cereals, beverages, cheese & dairy, grocery, and convenient meals.

Company Overview

Headquartered in Northfield, Illinois, Kraft Foods Inc. began as a cheese manufacturer. The company is now the largest North America-based food and beverage company and the second largest in the world after Nestlé SA.

Segments

North America

Beverages As a beverage manufacturer, Kraft produces primarily coffee, aseptic juice drinks, flavored water, and powdered beverages. The company's most popular brands of beverages in North America include Maxwell House coffee, Kool-Aid, and Country Time powdered beverages.

Cheese & Food Service

As a cheese & food service manufacturer, Kraft produces primarily natural, processed and cream cheeses. The company's popular brands within North America cheese & food service include Kraft Singles, Philadelphia cream cheese, and Velveeta.

Convenient Meals As a convenient meals manufacturer, Kraft produces primarily frozen pizza, packaged dinners, lunch combinations and processed meats. The company's popular brands within North America Convenient Meals include DiGiorno, Kraft Macaroni & Cheese, and Oscar Mayer hot dogs.


Grocery As a grocery product manufacturer, Kraft produces primarily enhancers and desserts. The company's popular brands within North America Grocery include Jell-O, Grey Poupon, and A1 steak sauce.

Snacks & Cereals As a snacks & cereals product manufacturer, Kraft produces primarily ready-to-eat cereals, cookies, crackers, salted snacks and Chocolate confectionery. The company's popular brands within North America Snacks & Cereals include Oreo, Planters nuts, and Ritz crackers.

With the acquisition of Cadbury, Kraft now owns the second-largest market share for gum - Trident and Dentyne - and the top market share for cough drops - Halls. The new brands also have majority market shares in Canada and Latin America.

International Sales

European Union Salesfddgd Kraft Foods sales products from each of the five major food product categories, featuring brands familiar and unfamiliar to North America. With the acquisition of Cadbury, Kraft now owns the leading gum, chocoldfgdfgate, and candy brands in much of the EU. Its candy and gum brands are sold throughout the continent, but it also has significant presence in the chocolate markets of Poland, Russia, and France.

Developing Markets, Oceania, & North Asia Sales The Developing Markets, Oceania & North Asia segment manufactures and sales many of the popular North American brands across each product category as well as some foreign brands. With the addition of Cadbury's brands, Kraft now has majority market shares in Australia, New Zealand, India, Thailand, and Malaysia for chocolate, gum, and/or candy.

Kraft's developing markets strategy is based around growing ten "power brands" in ten countries. Tang, Oreos, and Jacobs Coffee are some of the brands that have are particularly successful abroad and have allowed developing markets' to account for 21% of Kraft's total revenues.[2]

Middle East and Africa Sales The Middle East and Africa region is a rapidly growing market for Kraft. The company plans to continue growth by increasing investments in the region and producing more of its power brands locally. The purchase of Cadbury has given Kraft the leading share of the African confection market.

Cadbury Acquisition

With the purchase of Cadbury (CBY) for $19 billion, Kraft is expected to have annual revenues of more than $50 billion. The acquisition makes Kraft the world's largest chocolate and sugar confectioner, with a solid second place in the gum category thanks to Cadbury's Trident label.[3] Perhaps more important than Cadbury's brands is the company's geographic reach; Kraft now has inroads into many developing world markets where it formerly had no presence. In India, for example, Cadbury (CBY) has had a presence for the past 60 years, selling chocolate, snacks, dairy, and other candies.[4] The merger is also expected to affect players further down the supply chain, such as cocoa producers. It is possible that the producers may consolidate their operations in response to expected increased pressure for lower raw material prices.[5]

As part of the deal's approval by European regulators, Kraft sold Cadbury's Romanian and Polish divisions. In Romania, Kraft sold Cadbury’s Kandia-Excelent chocolate, soft cake and candy business to Oryxa Capital, an investment fund.[6] In Poland, Kraft sold Cadbury's E. Wedel brand of chocolates and candies to Lotte Group, however Kraft will retain Cadbury's other brands and two factories in the country.[7]

Trends & Forces

Detrimental Supermarket Consolidation

Kraft's five largest customers accounted for approximately a quarter of its net revenues, and the company's ten largest customers accounted for approximately a third of its net revenues. The company's largest customer, Wal-Mart Stores (WMT), accounted for approximately a sixth of revenues. Manufacturers like Kraft Foods are becoming increasingly dependent on a small number of retailers for sales volume, which gives these retailers (i.e. Wal-Mart Stores (WMT)) significant leverage to bargain for lower prices. This can negatively impact any firm whose goods are sold in supermarkets.[8]

Increasing Raw Materials Prices Hurt Earnings

The company uses hedging techniques to minimize the impact of price fluctuations in its principal raw materials; however, such techniques do not completely protect Kraft Foods. Kraft is a major purchaser of milk, cheese, plastic, nuts, green coffee beans, cocoa, corn products, wheat, pork, poultry, beef, vegetable oil, sugar, other sweeteners and numerous other commodities. If the company is unable to increase its prices to offset increased cost of commodities due to consumer sensitivity, Kraft Foods may experience lower profitability. Raw materials prices to watch are:

Rising Demand for Organic Foods Hurts Kraft

Dean Foods Company (DF), Kraft, and other companies that sell dairy products in the U.S. are being harmed by an increase in natural & organic food consumption. Dairy farmers in the U.S. commonly use artificial growth hormones to increase milk production, which is not in keeping with organic practices. Companies such as Whole Foods Market (WFMI) benefit from organic demand.

Competitors

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Kraft Foods Inc., is the largest food, beverage, and candy company headquartered in North America and the second largest in the world after Nestlé SA. The company's principal competitors include Pepsico (PEP), General Mills (GIS) , and Nestlé SA. Kraft produces foods and beverages across a wide variety of product categories, making way for competition with many specified, smaller companies.

References

  1. KFT 2009 10-K, Item 6: Selected Financial Data, p. 17
  2. Kraft's Tang Makeover Led to 30% Sales Jump Abroad Last Year, Business Week, 3/6/10
  3. Kraft Gets Its Sugar Fix, Motley Fool, 1/20/10
  4. Kraft To Have Presence in India, Bloomberg, 2/7/10
  5. Kraft's Cadbury Deal May Force Cocoa Consolidation, Moneynews, 2/12/10
  6. Oryxa Capital Sinks Teeth Into Cadbury's Romanian Division, AltAssets.com, 7/7/10
  7. Kraft to Sell Off Cadbury's E. Wedel Brand, Food & Drink Digital, 7/2/10
  8. KFT 2009 10-K, Item 1: Business, p. 5
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