Kraft Foods

Jessica Bargman Bryanna Geisbush

Caitlin Casey
Wu-Tang Clan Pat Jewell
Shane Fitzgerald
Strategic Analysis Jerry Wroten
 Organizational
Chart

Market in almost 160 countries

Owns 70+ brands that earn
$100 million annually
Core Business:
Beverage, cheese & dairy,
snack foods, confectionary,
convenience foods & cereal.
 Marketed in more than 26 Countries
Mexico Uruguay
Brazil Venezuela
France Belgium
Ireland Canada
Russia Germany
Ukraine Italy
Middle East
Argentina
Netherlands
Brazil
United Kingdom
Colombia
United States
Dominican Republic
Denmark
Ecuador Finland
Paraguay Sweden
Peru
 Kraft TOWS Analysis
Weaknesses Opportunities Threats
(W) (O) (T)
1. Hard to grow-slow 1. Expand more internationally 1. Competitors
2. Poor monopolistic image 2. New food categories 2. DEAN-more dairy
3. Reaction time is very slow a. Organic/Health 3. GM-food conglomerate
4. Current and slope with revenue 3. Acquiring competitors 4. Health Trends-non organic
a. Low stock prices last few 4. Online marketing company
quarters 5. Vertical integration 5. Economy
5. Cadbury’s poor financial situation 6. US $ vs. other currencies
6. Cadbury States that Kraft has
internal management weaknesses

Strengths Strengths to Weaknesses Strategies (S/W) Strengths to Opportunities Strategies Strengths to Threats Strategies (S/T)
(S) (S/O)
1. Diverse Product Portfolio 1. Brand Power vs. Hard to Grow 1. Using marketing and brand power 1. Wide variety of product helps
2. Acquisitions of other 2. International Influence vs. Bad to acquire competitors for with new healthy trends
companies image with Cadbury company success 2. Competitors (Dean& GM)
3. Brand Power 3. Social responsibility 2. Using brand power and diverse a. Merger with companies
4. International Influence market segments to develop new b. Brand power
5. Marketing Power E-Marketing for a competitive c. Social responsibility
6. Social Responsibility advantage 3. International influence w/ US
7. Financial Freedom currency
8. Diverse Market Segments
 Strategic Actions
Strength Strategy
Diverse Product Portfolio, Purchase a farm in order to
awareness of social expand vertically and create
responsibility, room for
financial spending and Brand
a more sustainable
Power. company
Success in past merged Buying out Folgers coffee
companies and room for company
financial spending.
Increase and improve
Marketing Power, room for
current E-Marketing
financial spending,
international relations and
brand recognition.
 Financial Information
Kraft is in the process of
acquiring Cadbury
$19 billion deal
Information based off of
2008/2009 yearly financial
statements
All the strategic actions are
based off this information
 DuPont
Kraft Foods Inc.
Income Statement        
Sales        
$42,201,000 Net Profit After Taxes Net Profit Margin    
Cost of Goods Sold $1,817,000 4.31%   
$28,186,000    Return on Total Assets  
Operating Expenses     2.88% 
$10,198,000       
Interest Expense   Total Asset Turn Over    
$1,272,000   0.67  Return on Equity
Taxes       8.18%
$728,000       
         
Balance Sheet        
Current Assets        
$11,366,000       
Net Fixed Assets Total Assets      
$51,712,000 $63,078,000     
Current Liabilities     Financial Leverage Multiplier  
$11,044,000 Total Liabilities   2.84 
Long Term Debt        
$18,589,000 $29,633,000     
Total Stockholder Equity        
$22,200,000      *$ numbers in 1000's*
 DuPont
  Kraft Foods Inc.
  General Mills Inc.
Net Profit Margin     Net Profit Margin    
4.31%    8.25%   
  Return on Total Assets  
  2.88%    Return on Total Assets  
        6.78% 
Total Asset Turn Over    
Total Asset Turn Over    
0.67  Return on Equity
0.82  Return on Equity
    8.18%
    23.43%
Financial Leverage Multiplier
      Financial Leverage Multiplier
  2.84    3.45 

  Dean Foods Co.

Net Profit Margin    
General Mills has high Return
1.49%    on Total Assets
  Return on Total Assets  
  2.64% 
Dean Foods has high Financial
      Leverage Multiplier
Total Asset Turn Over     Kraft is a lot higher is sales
1.77  Return on Equity
    33.28% than both companies
  Financial Leverage Multiplier  
  12.61 
 Kraft Pro Forma Analysis
DATA 2008   Next Year
Sales $ 42,201,000   $ 40,511,183
Net profit
 
Balance sheet
Pro Forma Analysis 1,817,000
 
 
 
 
% of sales
1,744,243
 
 
Assets:      
Current assets 11,366,000 27% 10,910,881
Net fixed assets      
Equipment 9,917,000   9,917,000
Goodwill 27,581,000 65% 26,476,599
Intangible Assets 12,926,000 31% 12,408,416
Other Assets 1,288,000 3% 1,236,426
Total Assets 63,078,000   60,949,321
       
Liabilities:      
Total Current Liabilities 11,044,000 26% 10,601,775
Total Long Term Liabilities 29,834,000   29,834,000
Total liabilities 40,878,000   40,435,775
       
Owner's Equity:      
Treasury Stock (8,714,000)   (8,714,000)
Capital Surplus 23,563,000   23,563,000
Retained Earnings 13,345,000 4% 15,089,243
Other Stockholder Equity (5,994,000)   (5,994,000)
Total Owner's Equity 22,200,000   23,944,243
Total L & OE 63,078,000   64,380,018
       
Financing Needs =     (3,430,697)
       
      *numbers in 1000's
 Sustainability Perceptions
Perceived Actual
Brand Perceived Actual Brand Perceived Actual
1 General Mills 82 49 8 Stonyfield Farm 44 81
2 Kellogg 81 42 12 Unilever 32 79
3 Kraft Foods 79 58 5 The Coca-Cola Co. 64 66
4 Nestle 71 63 11 Group Danone 33 64
5 The Coca-Cola Co. 64 66 4 Nestle 71 63
6 Sara Lee 59 33 7 PepsiCo 55 62
7 PepsiCo 55 62 3 Kraft Foods 79 58
8 Stonyfield Farm 44 81 9 Anheuser-Busch InBev 37 54
9 Anheuser-Busch InBev 37 54 1 General Mills 82 49
10 ConAgra Foods 36 31 13 Molson Coors Brewing 24 44
11 Group Danone 33 64 14 SABMiller 14 44
12 Unilever 32 79 2 Kellogg 81 42
13 Molson Coors Brewing 24 44 6 Sara Lee 59 33
14 SABMiller 14 44 10 ConAgra Foods 36 31
 Strategy 1: Vertical Integration
Strength: Diverse Product Portfolio,
awareness of social responsibility, room
for financial spending and Brand Power.
Opportunity: Sustainable agriculture,
real-estate
Spending plan: approximately $5
Billion
Purchase dairy farms in United States
Preferably in Wisconsin, but any
available farms to be purchased
Idaho, California
 Purchasing Dairies
2007 Kraft purchased $3.5 Billion
worth of raw milk
Purchase of dairies would allow Kraft
to control entire product supply from
creation to distribution
Organic/Natural, control of milk quality
Milk market is very fluctuating
Dairy farm prices change with milk
price
 USDA Averages
Average Farm Size 418 acres
Average Farm Price approx $2050
Approx Farm cost: $856,900
Will be more miscellaneous expense depending
on barns, parlors, equipment
2008 Wisconsin Cattle production cow/per year
19,546lbs
1.25 Million Cows
 Threats

Availability of dairy farms

Staff
Requires high amount of
experience
Fluctuating Market
 Return
Money spent on one year of raw milk could purchase
enough farms and cattle to supply their demand.
Min. 1000+ Cow Farm
Provide alternative power sources
Methane
Dairies would be self-sustaining
Strategy 2: Acquisition of Folgers
Strength: brand power
and marketing power
Threat: outside
competitors
Kraft currently owns 8
coffee brands
Ex. Maxwell House
U.S. main competitor
Folgers is currently
owned by Smuckers
 Folgers Background
Similar brand qualities
as Maxwell House
Purchased by Smuckers
in 2008 for $2.65 billion
Current success with
Smuckers
Our bid would have to
more then the worth
 Location of Coffee Sales
Sales
Home brewed coffee
sales increasing
Recession creates 7% 1%
4% Home
potential sales numbers Work
18% Eating Place
Traveling
Other
70%
 Competitive U.S. Companies
Sales
Folgers leading the way
Potential for market Folgers Maxwell
House
majority Eight O' Gevalia
Clock Coffee
Trend of sales 6% Kona Chock Full O'
Ex. Pepsi and Coke 6% 4%
7% 19% Nuts
30% Green
8% 11%
Jamaican
Mountain Bule
9% Mountain
Other
 Can we afford it?
$3.4 billion spending plan
Would Smuckers sell?
Overpayment possibility
Possible failure
Kraft past acquisition success
Ex. Nabisco: oreo
Strategy 3: Increase E-Marketing
Strengths: Brand Power Pull Marketing
and diverse market Initiative rests with the online
shoppers who request
segments information
Opportunities: Newer Ex: advertising and e-coupons
online marketing Push Marketing
available, and new Promotes product/service
competitive advantages information to online
shoppers or web browsers
being developed that do not ask for
information
 Online Coupons
Create manufacturer coupons
directly posted on Kraft website all
the time
Kraftfoods.com alone achieves 1.3 M
unique visitors per month
Online searches for coupons and
offers have increased by 58% over
the past year
Properly executed e-mail
campaigns can be an effective way
of disbursing coupons to the right
people
Creating an account, joining a
mailing list, etc
 Online Commercials
Companies sell commercial
space for ads to accompany
the airing of a TV show or
Movie
With online commercials
typically there are only 1-2
commercials so viewers
don’t feel the need to click
away
It is easy to target markets
specifically by the genres of
the online videos
 Social Media Sites
• Time spent online by
people ages 18-25
– ~30% entertainment
– ~30% Social Media
• Create ads/banners on
social media sites
• Develop promotional
contests directed
towards our
demographic (18-25)
 Recap
Main strengths focus
Our strategies
Vertical Expansion
Acquisition of Folgers
Increase E-Marketing
EFN
Financial situation in
correlation with
strategies
 Qualitative Data
Compare and contrast
Feasibility of each
Post potential negative
analysis results
Rating
Increase E-Marketing
Vertical Integration
Acquisition of Folgers
 Strategic Actions
Strength Strategy
Diverse Product Portfolio, Purchase a farm in order to
awareness of social expand vertically and create
responsibility, room for
financial spending and Brand
a more sustainable
Power. company
Success in past merged Buying out Folgers coffee
companies and room for company
financial spending.
Increase and improve
Marketing Power, room for
current E-Marketing
financial spending,
international relations and
brand recognition.
Questions?