CONSUMER

The Top 10 Global Leaders In Food

Increasing market share, revenues and NPD success By Mark O’Bornick

Mark O’Bornick
Mark O’Bornick is a consultant, specialising in strategic research and consulting projects across the food, drink and packaging industries. Mark spent over eight years at Datamonitor in a variety of research, consulting and management roles before leaving in 2001. His experience at Datamonitor primarily focused on strategic analysis of the European and global packaging, retail and FMCG industries. This included a strategic focus on change and innovation, particularly within the context of Datamonitor’s published range of reports and client-defined consultancy projects. Mark now works successfully on a freelance basis for a number of manufacturers, retailers and specialist research and consulting companies. He has a degree in economics from the London School of Economics. He can be contacted by email at: mark@obornick.freeserve.co.uk

Copyright © 2004 Business Insights Ltd This Management Report is published by Business Insights Ltd. All rights reserved. Reproduction or redistribution of this Management Report in any form for any purpose is expressly prohibited without the prior consent of Business Insights Ltd. The views expressed in this Management Report are those of the publisher, not of Business Insights. Business Insights Ltd accepts no liability for the accuracy or completeness of the information, advice or comment contained in this Management Report nor for any actions taken in reliance thereon. While information, advice or comment is believed to be correct at the time of publication, no responsibility can be accepted by Business Insights Ltd for its completeness or accuracy. Printed and bound in Great Britain by MBA Group Limited, MBA House, Garman Road, London N17 0HW. www.mba-group.com

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Table of Contents
The Top 10 Global Leaders in Food
Increasing market share, revenues and NPD success

Executive Summary
Introduction Market Dynamics Cadbury-Schweppes Danone General Mills Heinz Hershey Kellogg Kraft Masterfoods Nestlé Unilever Bestfoods Industry opinion survey Conclusions

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16 16 16 17 17 18 18 18 19 19 20 20 21 21

Chapter 1

Introduction

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The aim of this report Chapter structure Selecting the ‘Global Food Leaders’

Chapter 2
Summary

Market Dynamics and Emerging Market Analysis

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Introduction Methodology behind the analysis of global food markets Trends in global food markets Consumer lifestyle drivers Industry drivers blur category definitions Company positioning: global food leaders Disposing of non-core assets to provide greater focus Growth through acquisition A case by case approach Market positioning: chilled food Market share versus growth in global chilled food markets Market positioning: confectionery Market share versus growth in global confectionery markets Market positioning: dairy products Market share versus growth in global dairy markets Market positioning: savoury snacks Market share versus growth in global savoury snacks markets

30 31 32 32 33 33 35 36 37 38 40 40 42 42 44 44 46

Chapter 3
Summary

Cadbury Schweppes

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48 49 49 50 50 52 55 55 55 55 57 57 58 59 59 60 61 62 63 63 63 65 65

About Cadbury Schweppes History Recent performance Performance in 2003 Financial performance in 2003 Market positioning Expanding the portfolio in 2003 The Americas Asia-Pacific Eastern Europe The Middle East and Africa Western Europe Global confectionery brands Product examples Strategies for growth Acquisitions and disposals play a key role NPD and brand repositioning SWOT analysis A trusted brand that has diversified its portfolio Action to remedy production and organisational inefficiency Access to higher growth categories Threat to indulgence from healthier alternatives

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Chapter 4
Summary About Danone History

Danone

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68 69 69 70 71 71 73 73 74 74 75 76 77 79 79 80 80 81 82 82 82 84 84 85

Recent performance Performance in 2003 Financial performance 2003 Market positioning Dominant positions in every region The Americas Asia-Pacific Eastern Europe Middle East and Africa Western Europe Leading brands at Danone Product examples Strategies for growth A focus on high growth segments that match consumer needs Success in NPD Online purchasing accounts for one-quarter of purchases SWOT analysis Leadership brings competitive advantages Over reliance on regions, brands and categories Expanding into emerging markets Growth of private labels and legal action in Spain

Chapter 5
Summary About General Mills History

General Mills

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87 88 88 89 89 91 91 94 94 94 96 96 97 98

Recent performance A good performance in 2003 despite problems in bakery Market positioning A portfolio of international brands Strategies for growth Innovation and international expansion will drive sales NPD targets consumer megatrends in 2003 SWOT analysis Strong brands across several categories Weaker markets and higher commodity costs Joint ventures and international expansion

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Threats 98 Chapter 6 Summary About Heinz History Heinz 101 101 102 102 103 104 104 107 107 107 109 109 110 111 111 Recent performance Greater focus boosts performance in 2003 Financial performance Foodservice Market positioning Global brand reach Strategies for growth A focused portfolio NPD targets changing consumer requirements SWOT analysis Strong brands and a focused approach Chapter 7 Summary About Hershey History Hershey 115 115 116 116 117 117 117 119 119 120 120 122 122 123 123 123 124 125 126 127 127 Recent performance Performance in 2003 Financial performance Market positioning Higher margins in confectionery The Americas Outside the Americas Product examples Strategies for growth Hershey’s customers and competitors Private label – no concern NPD tracks consumer megatrends in 2003 SWOT analysis Strengths Weaknesses Opportunities Threats vi .

Chapter 8 Summary About Kellogg History Kellogg 131 131 132 132 133 134 136 137 137 138 139 139 141 142 142 143 143 144 Recent performance Performance in 2003 Financial performance Market positioning Meeting consumer needs in cereals. snacks and health foods Natural appeal Strategies for growth Three fundamental targets NPD focuses on helping modern. busy consumers SWOT analysis Strengths Weaknesses Opportunities Threats Chapter 9 Summary About Kraft History Kraft 147 147 148 148 150 150 151 153 154 154 154 155 157 157 158 160 161 162 162 163 163 163 163 vii Recent performance Performance in 2003 Financial performance Acquisitions and sales Market positioning Coverage across five global product sectors The Americas Asia-Pacific Eastern Europe Middle East and Africa Western Europe Product examples Foodservice Strategies for growth New structure for 2004 Brand strategies drive performance Fast-growing sectors Health Distribution channels .

Advantages of global category leadership Initiatives respond to health concerns SWOT analysis Scale and leadership brings advantages Difficulty launching new brands Opportunities Threats 164 164 165 166 167 168 168 Chapter 10 Summary About Masterfoods History Recent performance Performance in 2003 Masterfoods 171 171 172 172 173 173 174 174 174 175 175 177 178 179 180 180 180 181 181 182 183 183 Market positioning Household names in confectionery. rice and vending The Americas Asia-Pacific Eastern Europe Middle East and Africa Western Europe Product examples Foodservice Strategies for growth NPD plays a vital role in growth SWOT analysis Brand names carry cross-category High dependency on chocolate Further potential for brand extensions Mature markets and health-wise consumers Chapter 11 Summary About Nestlé History Nestlé 186 186 187 187 189 190 190 193 193 Recent performance Performance in 2003 Financial performance Market positioning “Factories or operations in almost every country in the world” viii . snacks. pet food.

fats and spreads Frozen foods Knorr – the ‘number one brand’ Hellmann’s Foodservice Strategies for growth Leading brands account for over 90% of total business Looking beyond the Path to Growth SWOT analysis Strength demonstrated by core brands Underperforming businesses remain Brand extensions and emerging markets Low-carb diet threat to Slim Fast ix .The Americas Asia-Pacific Eastern Europe Middle East and Africa Western Europe Product examples Foodservice Strategies for growth Driving growth and improving margins The three major projects SWOT analysis A global perspective Successful brand extensions Health implications for indulgent products 194 195 197 197 198 201 202 203 203 204 204 205 206 206 Chapter 12 Summary Unilever Bestfoods 209 209 210 210 211 212 212 213 215 215 216 216 217 218 219 219 219 220 220 221 222 222 222 224 224 224 225 226 226 About Unilever Bestfoods History Sales and acquisitions Recent performance Leading brand growth revised downwards in 2003 Financial performance Total shareholder return positioning Board changes announced in February 2004 Market positioning From soups and dressings. to frozen food and ice cream Product examples Greater brand focus on brands with strong potential Brands can be local and also spread across categories NPD plays a key role Oils.

Chapter 13 Summary Introduction Industry Opinion Survey 229 229 230 231 231 232 232 234 235 235 236 237 238 239 240 240 241 Food leaders: 2003 performance Product innovation drives growth in market share Food leaders: competitive positioning Convenience shapes strategy ahead of brand recognition and pleasure Danone and Unilever react more quickly to customer trends Unilever perceived as the leading innovator Cadbury and Hershey could do better at spotting cross-category opportunities Hershey is perceived to be relatively weak at moving into new markets Nestlé leads the way in terms of marketing strength Food leaders: geographical strategies Asia-Pacific offers the greatest growth potential Food leaders: the future NPD and innovation is the best way to deliver growth Danone is the company most likely to deliver growth Chapter 14 Summary Introduction Conclusions 245 245 246 246 246 247 248 248 248 249 250 The global food industry Convenience remains most important Asia-Pacific and Eastern Europe are top targets for expansion Strategies for success Focus on core brands and strengths Growth through acquisition Expansion and cross-category NPD will be the main driver of growth Chapter 15 Appendix 253 253 253 256 258 Primary research methodology Terms and abbreviations used in this report Food segmentation table Index x .

turnover and operating profit 136 A selection of products from Kellogg 139 Kellogg SWOT analysis 143 Kraft financial performance 2000—2003.38: Figure 13.11: Figure 4.14: Figure 5. turnover and operating income 151 A selection of brands from Kraft 161 Kraft SWOT analysis 167 A selection of brands from Masterfoods 179 Masterfoods SWOT analysis 182 Nestlé financial performance 2000—2003.33: Figure 11.6: Figure 2.44: xi .39: Figure 13.8: Selecting the global food leaders 26 Selecting the global food leaders 27 Global food leaders positioning 35 Market share versus growth in global chilled food markets 40 Market share versus growth in global confectionery markets 42 Market share versus growth in global dairy markets 44 Market share versus growth in global savoury snacks markets 46 Cadbury Schweppes financial performance 2000—2003.43: Figure 13. turnover and operating profit 213 A selection of brands from Unilever 218 Unilever Bestfoods’ SWOT analysis 225 Global food leaders: performance in 2003 231 How important have the three food and drinks megatrends been in shaping the marketing.40: Figure 13. product.32: Figure 11.23: Figure 8.17: Figure 6.10: Figure 3.1: Figure 1. turnover and operating profit 72 A selection of brands from Danone 79 Danone SWOT analysis 83 General Mills financial performance 2001—2004.27: Figure 9.21: Figure 7. turnover and operating profit 53 Cadbury Schweppes confectionery performance 2000—2003.28: Figure 9. turnover and operating profit comparison 105 A selection of brands from Heinz 109 Heinz SWOT analysis 112 Hershey financial performance 2000—2003.31: Figure 11.19: Figure 6.24: Figure 8.34: Figure 11. turnover and net earnings 90 A selection of brands from General Mills 93 General Mills SWOT analysis 97 Heinz financial performance 2001—2004.List of Figures Figure 1.7: Figure 3.13: Figure 4.26: Figure 9. Americas and Europe turnover and operating profit comparison 54 A selection of brands from Cadbury Schweppes 60 Cadbury Schweppes SWOT analysis 64 Danone financial performance 2000—2003.29: Figure 10.4: Figure 2.37: Figure 12.3: Figure 2. NPD and branding strategies of the global food leaders? 233 Rating the global food leaders: reacting to customer trends 234 Rating the global food leaders: innovation 235 Rating the global food leaders: identifying cross-category expansion opportunities 236 Rating the global food leaders: country coverage/moving into new countries 237 Figure 3.30: Figure 10.41: Figure 13.9: Figure 3. turnover and operating income 191 A selection of brands from Nestlé 202 Self-service snacking facility from Nestlé FoodServices 203 Nestlé SWOT analysis 205 Unilever financial performance 2000—2003.36: Figure 12.15: Figure 5.16: Figure 5.25: Figure 8.42: Figure 13.5: Figure 2.18: Figure 6.12: Figure 4.22: Figure 7. turnover and net income 118 A selection of brands from Hershey 122 Hershey SWOT analysis 126 Kellogg’s financial performance 2000—2003.35: Figure 12.20: Figure 7.2: Figure 2.

8: Table 2. 2002 Danone market shares in Western Europe.17: Table 4.10: Table 3. 2002 Cadbury Schweppes’ market shares in Eastern Europe.34: Table 8.36: Table 8.20: Table 4.7: Table 2.11: Table 3. 2002 Cadbury Schweppes’ market shares in the Middle East and Africa. 2003 Top five ranking by growth of global dairy markets.48: Rating the global food leaders: marketing and communications activity (website. 2002 continued General Mills financial performance 2001—2004 General Mills performance by division 2002—2004 General Mills market shares. 2002 Hershey market shares outside the Americas.6: Table 2.18: Table 4. 2003 Top 10 ranking by size of global dairy markets.22: Table 4.3: Table 2.27: Table 5. advertising. 2003 Cadbury Schweppes financial performance 2000—2003 Cadbury Schweppes confectionery performance 2000—2003 Cadbury Schweppes’ market shares in the Americas. 2002 Heinz financial performance 2001—2004 Heinz divisional performance 2001—2004 Heinz market shares.37: Country coverage of global food markets Ranking of global food leaders by food sales. 2003 Top 10 ranking by size of global confectionery markets. 2003 Top five ranking by growth of global savoury snacks markets. 2002 Danone market shares in Western Europe.29: Table 6.47: Figure 13. 2002 Danone financial performance 2000—2003 Danone food business performance 2000—2003 Danone market shares in the Americas.15: Table 3.45: Figure 13.4: Table 2. 2002 Danone market shares in the Middle East and Africa. 2003 Top five ranking by growth of global chilled food markets.9: Table 2.26: Table 5. 2002 Cadbury Schweppes’ market shares in Asia-Pacific.23: Table 4.46: Figure 13.1: Table 2. 2002 Cadbury Schweppes’ Market Shares in Western Europe.Figure 13.24: Table 4.35: Table 8.14: Table 3.33: Table 7.13: Table 3. 2003 Top 10 ranking by size of global chilled food markets. 2002 Kellogg’s financial performance 2000—2003 Kellogg’s divisional performance 2000—2003 Kellogg market shares. 2002 Danone market shares in Eastern Europe.32: Table 7.25: Table 5. 2003 Top 10 ranking by size of global savoury snacks markets. 2002 xii 31 34 38 39 41 41 43 43 45 45 52 54 55 56 57 57 59 71 72 74 75 76 77 78 79 90 91 92 104 106 108 117 120 121 136 137 138 .5: Table 2. 2002 Danone market shares in Asia-Pacific.30: Table 6.31: Table 7.19: Table 4. 2003 Top five ranking by growth of global confectionery markets.28: Table 6. 2002 Hershey financial performance 2000—2003 Hershey market shares in the Americas.16: Table 3. promotions etc) 238 Which of the following geographic regions will offer the highest growth potential for your chose global food leaders over the next three years? 239 Which of the following companies are best placed to compete most effectively over the next three years? 240 Which strategies will help the global food leaders grow most aggressively over the next three years? 241 List of Tables Table 2.12: Table 3.2: Table 2.21: Table 4.

2002 Nestlé market shares in Western Europe.64: Table 12. 2002 continued Nestlé market shares in Asia-Pacific. 2002 Kraft market shares in Eastern Europe.39: Table 9.68: Kraft financial performance 2000—2003 Kraft divisional performance 2000—2003 Kraft divisional performance 2000—2003 continued Kraft market shares in the Americas. 2002 Masterfoods market shares in Western Europe. 2002 Nestlé market shares in the Americas. 2002 Masterfoods market shares in the Americas.45: Table 9.65: Table 15.38: Table 9. 2002 Nestlé market shares in the Middle East and Africa. 2002 Kraft market shares in Western Europe.46: Table 10.66: Table 15.53: Table 11.60: Table 11.62: Table 12.61: Table 11. 2002 continued Nestlé financial performance 2000—2003 Nestlé Divisional Performance 2000—2003 Nestlé market shares in the Americas. 2002 Nestlé market shares in Western Europe.52: Table 11.58: Table 11.41: Table 9. 2002 Kraft market shares in Asia-Pacific.51: Table 10.44: Table 9.63: Table 12.48: Table 10. 2002 Masterfoods market shares in Western Europe.43: Table 9.49: Table 10.67: Table 15.42: Table 9.50: Table 10. 2002 Masterfoods market shares in the Middle East and Africa. 2002 continued Nestlé market shares in Eastern Europe. 2002 Kraft market shares in the Middle East and Africa. 2002 Kraft market shares in Western Europe. 2002 Nestlé market shares in Asia-Pacific.47: Table 10.56: Table 11.54: Table 11.59: Table 11. 2002 Terms and abbreviations used in this report Definitions of food segments used in this report Definitions of food segments used in this report continued 151 152 153 155 156 157 158 159 160 175 175 177 178 178 179 190 192 194 195 195 196 197 198 199 201 213 214 217 254 256 257 xiii .55: Table 11. 2002 Unilever financial performance 2000—2003 Unilever food divisional performance 2000—2003 Unilever market shares.Table 9.57: Table 11. 2002 Masterfoods market shares in Eastern Europe.40: Table 9. 2002 Masterfoods market shares in Asia-Pacific.

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Executive Summary 15 .

Executive Summary
Introduction
This chapter presents a summary of some of the core findings of this report. Each section refers to a chapter of the report, in which greater explanation and analysis of the issues is available.

Market Dynamics
Increasingly, leading food manufacturers are aligning their product portfolios to those that fit closely with the needs of the modern consumer. Categorising the market by consumer trend enables manufacturers to create new strategies for increasing its market share. Whilst a number of the large food manufacturers have been disposing of assets in their portfolios to concentrate on core operations, others have made significant acquisitions.

Cadbury-Schweppes
In the last 20 years, the company has strengthened its portfolio through almost 50 acquisitions. In March 2003, the company completed the acquisition of Adams from Pfizer for $4.2 billion. In confectionery, the company has reduced its reliance on chocolate to build a portfolio of confectionery products encompassing chocolate, sugar, medicated confectionery and chewing gum.

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In October 2003, the company set out its four-year strategic and operational agenda at the heart of which lie the ‘Fuel for Growth’ cost reduction and ‘Smart Variety’ growth initiatives.

Danone
Danone operates a portfolio of major international brands yet around 70% of its sales come from brands that are local market leaders and four brands represent almost 60% of the company’s sales. In addition to a greater focus on its three core business segments, the Group’s strategy extends to geographical targets. Although around 31% of sales are in emerging markets, the Group aims to increase this share to 40%. Growth strategies in emerging markets link high-profile brands with wide-ranging distribution for sales close to consumers.

General Mills
In the year to May 2003, General Mills’ net sales grew 32% to $10.5 billion. Over 30 of the company’s U.S. consumer brands generate annual retail sales in excess of $100 million. General Mills is looking to capture a growing share of away-from home food sales, whilst international expansion is also an important target for the company. The acquisition of Pillsbury has enhanced the company’s strategies. Its mix of retail categories offers further opportunities for product and marketing innovation, especially with the expansion of distribution networks.

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Heinz
According to Heinz, its brands hold number one and number two market positions in more than 50 countries. The Heinz brand is worth $2.5 billion and Heinz’s top-15 brands account for two-thirds of the company’s annual sales. Heinz’s Brand Growth Strategy is based on four imperatives designed to drive profitable growth: remove the clutter, squeeze out costs, measure and recognise performance. Heinz admits that its biggest growth opportunity is its biggest brand - Heinz Ketchup. The company believes that it has a 30% share of the world’s ketchup market, and has set a target of a global market share of 50%.

Hershey
Hershey has announced a number of initiatives in its value enhancing strategy, including the introduction of new products and various initiatives to streamline its supply chain. Wal-Mart Stores, Inc. and subsidiaries is the corporation’s largest customer and represented about 17% of sales in 2002. Hershey is looking to leverage its core competencies in the broader snack market. It believes that targeted adjacent segments offer growth opportunities, as consumers are likely to select well-known brands in a broader array of snacks.

Kellogg
The acquisition of Keebler in 2001 has helped Kellogg to achieve greater scale in the United States, including a stronger presence in traditional supermarkets and in nontraditional channels.

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Kellogg has announced plans to expand its reach beyond the cereal and snack food aisles with extensive licensing initiatives in the toy, clothing, entertainment, publishing, and food categories. A key operating principle for Kellogg is to achieve greater value for the consumer, rather than promoting greater volume sales through discounting.

Kraft
Kraft is the largest branded food and beverage company in North America and the second largest in the world. Kraft’s brand strategy focuses on fast-growing sectors such as snacks, beverages and convenient meals. These offer the best growth potential and account for the majority of the company’s revenues (around 66% in 2002). Kraft is seeking to exploit faster growing distribution channels such as convenience stores, mass merchandisers, drug stores, and vending machines, all of which it believes are growing faster than the traditional grocery channel.

Masterfoods
Mars operates in over 100 countries. The company operates its three core businesses - snackfood, petcare and main meal food - under the Masterfoods name in most parts of the world. As a privately owned corporation, Masterfood believes it enjoys greater flexibility and autonomy. Serving convenience and impulse markets, the company’s first bite-sized line was introduced in 2003. In the UK, the company also announced that Mars and Snickers bars have had their recipe changed amid health fears over a fatty ingredient.

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Nestlé
Nestlé believes it is the undisputed leader in the food industry, with more than 470 factories around the world and sales of more than CHF 81 billion/€51 billion. Nestlé’s four-pillar strategy is based on operational performance, product innovation and renovation, product availability and consumer communication. One of Nestlé’s key strategies is to grow its existing products through innovation and renovation while maintaining a balance in geographic activities and product lines.

Unilever Bestfoods
In 2002, the company generated foods sales of €27 billion and owned eight food brands with sales in excess of €1 billion. The foods business spans several categories including savoury and dressings, spreads and cooking products, health and wellness, ice cream and frozen foods. The company is seeking to extend brands across product categories, particularly those that feature high levels of consumer trust. An example of this is the Bertolli’s food brand that has grown beyond olive oil into pasta sauces. The company’s Path to Growth strategy was designed to accelerate growth with a series of initiatives to focus on fewer, stronger brands. Since February 2000, the company has sold a total of 87 companies with sale proceeds of €6.3 billion. The company has reduced the number of brands it manages from 1,600 to some 400 leading brands and just under 250 tail brands.

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NPD .innovating and launching new products into developed markets is the strategy most likely to deliver growth in the short-term future.Industry opinion survey Convenience issues had a strong influence on the strategies of the global food leaders in 2003. This was seen as the most important issue shaping the strategies of the leading companies. 21 . there is little evidence that convenience will become less important for consumers in the near future. mass merchandisers. Danone and Unilever stand out as being the two companies most responsive to new customer trends. and vending machines. drug stores. all of which maybe growing faster than the traditional grocery channel. It seems unlikely that the level and size of acquisitions seen in the last five years will continue although many companies remain open to selective. Conclusions Although it has been a well-documented trend for several years now. ‘bolt-on’ acquisitions. Organic growth can exploit faster growing distribution channels such as convenience stores.

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Chapter 1 Introduction 23 .

performance and market positioning of each of the 10 global food leaders. their strengths and weaknesses and to put these into context of the global food markets in which they operate. the chapter goes on to analyse the company’s recent financial performance. 24 . from an analysis of corporate performance to the growth and development of both mature and emerging food markets. trends and developments that influence the world’s leading food manufacturers. Chapter structure Market Dynamics . the aim of the report is to get behind the company’s strategies.Chapter 2 analyses the latest trends in global food markets. The chapter concludes with analysis of the company’s key growth strategies and a SWOT analysis provides a concise summary. The chapter addresses key issues within five main areas: About the company. Company Analysis . From new product development to merger and acquisition policies. Each chapter analyses the strategies. In addition to a brief introduction to the company. As many players are disposing of assets to provide a greater focus on their core operations. recent performance. providing a breakdown of results by food division where these are available.Chapter 1 Introduction The aim of this report This report identifies the key issues. Key market share information on a country-bycountry basis is provided. the report will assess market dynamics. highlight changing consumer trends and analyse recent important developments together with the performance of the market leaders.Chapter 3 to Chapter 12. supported by recent news about key merger and acquisition activity.

where possible.Chapter 15 provides a glossary of terms used throughout this report and an index of key terms. SWOT analysis. Asia-Pacific. Industry Opinion Survey . strategies for growth. country and regional coverage and perceived strength of brands.Chapter 13 provides detailed analysis of over 50 industry survey responses. Eastern Europe.Chapter 14 provides a concise summary of the key conclusions of the report and identifies the major developments that will shape the future performance of the global food leaders. The information is not intended to be used as a definitive list of all of the countries that the company operates in. Appendix . 25 . The following ratings of each company that was ultimately selected for inclusion in the report are based on a mixture of author research and the opinions and choices of those industry executives that were gathered in the Global Food Industry Survey undertaken by Business Insights in December 2003. it highlights that market share information research and collected for this report. recent financial performance. selecting a series of companies deemed to be the leaders of the global food industry is a matter of opinion. the Middle East and Africa and Western Europe. market and category coverage. Rather. Selecting the ‘Global Food Leaders’ Ultimately. These include financial size. Conclusions . been segmented by geography and split into five main markets: the Americas. The company market share information has. though a number of selection criteria can be used to filter down a list of potential candidates.market positioning.

Figure 1.1: Selecting the global food leaders Key to Selection Ratings Very Weak Average Very Strong Cadbury-Schweppes Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Danone Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio General Mills Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Heinz Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Source: Author research/Global Food Industry Survey Business Insights 26 .

2: Selecting the global food leaders Hershey Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Kellogg Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Kraft Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Masterfoods Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Nestlé Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Unilever Bestfoods Financial Size 2003 Performance Category Coverage Country Coverage Brand Portfolio Source: Author research/Global Food Industry Survey Business Insights 27 .Figure 1.

Cadbury-Schweppes scores relatively low in terms of financial size (food sales only) but higher in terms of its brand portfolio. Heinz’s strong brand portfolio (it maintains to be number one or two in over 50 countries) rated highly. together with its country coverage. whilst Nestlé rated highly in all areas. international sales account for less than 5% of total sales. giving the company an ‘average’ rating under this criteria. its expertise is limited to a relatively few number of categories. though its sales put it behind Danone and General Mills. 28 . Though it exports to over 80 countries. Kellogg has strong country coverage. but was held back by disappointing sales growth in 2003. Strong category coverage is limited to confectionery.From the previous figures. Hershey is perceived as a relatively ‘smaller’ global food leader. Finally. Unilever also scored highly. Kraft rated highly across several of the categories. but in much the same way as CadburySchweppes. as was General Mills. Masterfoods has a selection of strong brands. though its 2003 performance (in terms of sales growth) rated as ‘average’ for the companies selected. apart from its 2003 performance. Danone was perceived to have rated consistently high across all of the criteria. limited to relatively few categories.

Chapter 2 Market Dynamics and Emerging Market Analysis 29 .

the prevalence of medical conditions such as obesity in many Western markets will boost consumer demand for healthier food products. Japan has been of the slowest growing markets over the last six years. It begins by looking at the methodologies used in the research. accounting for nine of the top 10 fastest growth markets. others have made significant acquisitions. Introduction This chapter places the global leaders in the manufacture of food products in context.Chapter 2 Market Dynamics and Emerging Market Analysis Summary Increasingly. Though starting from a particularly small base. Within the larger confectionery markets. Whilst a number of the large food manufacturers have been disposing of assets in their portfolios to concentrate on core operations. Though it is the largest market for chilled food. Eastern Europe and Latin America dominate rankings of the fastest growing dairy markets. 30 . before going on to highlight the latest consumer trends in a selection of global food markets that are together valued at almost $500 billion. the Ukraine and Romania being the three fastest growing markets. in terms of market growth. with Russia. In particular. Asia-Pacific. leading food manufacturers are aligning their product portfolios to those that fit closely with the needs of the modern consumer. the greatest market opportunities for growth appear to be in China and Mexico. Categorising the market by consumer trend enables manufacturers to create new strategies for increasing its market share. analysis indicates that Eastern Europe will provide the best growth opportunities for savoury snack markets.

representing growth of 20. the total value of the combined markets covered within this analysis was $405.96 million in 2003. Mexico and Morocco are not covered in this report.54 million in 1998. In each of these markets. the top 10 global countries in terms of markets size were identified. which rose to $487.544. These were chilled food. Despite this.787.The chapter then goes on to quantify the positioning of both the leading food manufacturers analysed in this report and also several food markets in which they operate. but the speed with which they are demonstrating growth. The following table illustrates the breadth of 52 countries covered within this report. 31 . the chilled food markets in India.1%. Food markets are not placed in the context of their size. Table 2. dairy and savoury snacks. along with the 10 fastest growing markets. together with the market for cheese in China (one segment from the Chinese dairy market). due to a lack of available data.1: Country coverage of global food markets Argentina Australia Austria Belgium Brazil Bulgaria Canada Chile China Colombia Czech Republic Denmark Egypt Source: Datamonitor Finland France Germany Greece Hong Kong Hungary India Indonesia Ireland Israel Italy Japan Malaysia Mexico Morocco Netherlands New Zealand Norway Philippines Poland Portugal Romania Russia Saudi Arabia Singapore Slovakia South Africa South Korea Spain Sweden Switzerland Taiwan Thailand Turkey UK Ukraine USA Venezuela Vietnam Business Insights Unfortunately. Methodology behind the analysis of global food markets To assist in establishing the companies considered to be global food leaders. four key markets were analysed. confectionery.

the latest developments see a concerted effort on behalf of the manufacturers (perhaps with the threat of litigation at the back of their minds) to promote the health and nutritional benefits of their portfolios. Though it has been a well-documented trend for several years now. With premium and convenient products grabbing the attention of manufacturers in recent years. Increasing prevalence of medical conditions such as obesity and an ageing population in many markets will fuel consumer demand for healthier food products. Detailed analysis of the three consumer megatrends enables food manufacturers to develop product variations that will better suit the needs of consumers. resulting in both changes in the type of food and drinks products that consumers now purchase and changes in the way that food manufacturers meet these needs. Recent decades have seen the development of a convenience-oriented society.Trends in global food markets Consumer lifestyles have changed significantly over the last 20 years. these developments will engender consumer loyalty. longer working hours. As consumers have become gradually more aware of the ingredients and content of the foods they eat. there is little evidence that convenience will become less important for consumers in the near future. more working mothers. In turn. driven by changes in family structure. differentiate consumers towards high margin opportunities. and increased labour mobility.convenience. health and pleasure. Consumer lifestyle drivers Increasingly. and help them gain greater market share in their core markets. leading food manufacturers are aligning their product portfolios to those that fit closely with the needs of the modern consumer and which continue to meet the demands set by three major consumer trends . so manufacturers have become aware of a possible threat of litigation as consumers seek to hold food manufacturers responsible for a failure to disclose product ingredients 32 .

which. whilst others have made 33 . Despite the prevalence of high pressure lifestyles and the increasing popularity of healthy foods. offer genuine longer-term health benefits. Industry drivers blur category definitions The consumer megatrends that have been highlighted above represent an important opportunity for the food industry to create closely targeted. Categorising the food market by product type or category may not reveal many new sales opportunities for manufacturers. Additionally. a number of high profile food scares have resulted in a greater popularity of ‘natural’ and organic products in many Western markets. in much the same way that tobacco companies have been subject to legal action. categorising the market by consumer trend enables the manufacturer to create new strategies for increasing its market share without cannibalising the market for existing products. In attempt to portray themselves as ‘nutritionally friendly’ the leading manufacturers are launching a number of initiatives to raise the profile of healthy eating. the development of products. and ethnic and exotic meal solutions. provides a key opportunity for engendering consumer loyalty.(which may result in future health problems). the demand for exciting and enjoyable food has not decreased. However. Company positioning: global food leaders In recent years a number of the large food manufacturers highlighted in the following table have been disposing of non-core assets in their portfolios. in particular. indulgent and premium. from a manufacturer’s perspective. with continuing and more widespread appeal of novel and fun. higher margin products that fulfil the needs of modern consumers. However.

Separate data not available for other regions.2% -4. Biscuits and Cereal and Other food sales only.207 7.987 4. (1) American and European confectionery sales only in 2001 and 2002. Spreads and Cooking.812 n/a 5. (4) Net sales.056 31.515 29. Desserts and Cereals division. Table 2.1% n/a 32. the company sold its dry soup and sauces businesses in Europe (with sales of €435 million).3% 0.0% 8. In February 2001. In January 2001.548 7. Source: Author analysis Business Insights General Mills’ results were boosted by the acquisition of Pillsbury in 2001. net sales growth was 4%. the company sold the Bestfoods Baking Company and later in the year it also disposed of a number of North American brands and related assets. In 2002. 2003 data defined as Americas confectionery and total EMEA region.723 14. (7) Includes some beverages sales in the following divisions: Savoury & Dressings.2% -7. Where relevant all currencies converted to $ with ex.506 10.578 4.803 Growth ‘01-’02 1. (3) Classified as 2002 and 2003 and interim 2004 data in company accounts.000 10.200 n/a 5. rate at 30/12/02.3% -0. 2003 Sales $m Nestlé (6) Unilever Bestfoods (7) Kraft (8) Masterfoods (5) General Mills (3) Danone (2) Kellogg Heinz (3) Cadbury-Schweppes (1) Hershey (4) 2001 35.2% 2.010 n/a n/a 11.significant acquisitions. Unilever Bestfood’s decrease in sales was attributable to a series of disposals.6% 10. Health.986 n/a 1.137 2002 36. (5) Estimate.236 3. On a comparable basis. Wellness & Beverages and Ice Cream & Frozen Foods.238 29.173 Notes: Latest two year financial analysis.053 28. nutrition & ice cream . The companies with the largest growth rates in sales have seen their results enhanced by acquisitions. 34 .120 Interim ‘03 16.304 8.603 n/a 15. confectionery & biscuits sales only.956 8.395 3. (2) Fresh Dairy Products. (6) Milk products. whilst Kellogg’s net sales increased with the acquisition of Keebler Foods.360 8. including its seafood businesses.2: Ranking of global food leaders by food sales. (8) Includes some beverage sales in the Beverages.Prepared dishes & cooking aids and Chocolate.4% 2003 n/a 33.301 4.614 3. EMEA sales were over £200 million greater than just European confectionery sales.234 n/a 7.615 29.949 11.190 4.117 4. adjusting for the Keebler acquisition and a small disposal.

resulted in a decline in sales of 6%.00% 30. changes to the structure of Danone combined with negative exchange rate effects.00% 20.3: Global food leaders positioning $ Change in Food Sales '01-'02 $ Sales Change 2. which was completed in October 2000).800 Growth in Food Sales '01-'02 (% ) Business Insights Source: Author analysis of company accounts In 2002. the company has sold a total of 87 companies with sale proceeds of €6. Since the announcement of the ‘Path to Growth’ strategy in February 2000.00% 40.Figure 2. Disposing of non-core assets to provide greater focus Perhaps the best example of a company disposing of assets to focus on its core operations is Unilever. 35 .200 Kraft Nestlé Kellogg 200 -10. This has reduced the number of brands that the company manages from 1. However. if considered on a like-for-like basis. organic sales growth of 6% was achieved. particularly following the 2000 acquisition of Bestfoods.3 billion (some of which were also being divested as a result of undertakings given to the European Commission in connection with the acquisition of Bestfoods for around €26 billion.00% Hershey Heinz Cadbury 0.00% -800 Danone Unilever Bestfoods -1.200 Food Sales Greater growth General Mills 1.00% -Schweppes 10.600 to around 400 leading brands and just under 250 tail brands.

U. Nestlé is another food manufacturer that has consolidated growth through acquisition. Since 1996.S. which together generated approximately $1. The company believes that it now manufactures products that rank first or second in U. Heinz disposed of a number of North American businesses and merged them with Del Monte Foods Company in a move designed to make Heinz a faster-growing company.S.S. More recently. Rather than boosting growth rates with further acquisitions. sales across seven major food categories.8 billion in annual sales (or 20% of annual revenues). this has been demonstrated by the purchase of the Italian mineral water concern San Pellegrino (1997).S. In the same year. with the integration of the Adams business well underway. Cadbury’s has been going through something of a transition phase. The businesses. the company made two major acquisitions in North America.S. General Mills is seeking greater organic growth. The new. the acquisition of Spillers Petfoods of the UK (1998).Heinz is a prime example of a large multi-national food manufacturer that has disposed of certain businesses in recent years in order to concentrate more fully on realising the full potential of its core brands. more diversified product portfolio will undoubtedly boost the company’s growth. The March 2001 acquisition of Keebler Foods Company was by far the largest acquisition in Kellogg’s history. Growth through acquisition A good example of a company that has grown rapidly through acquisitions is CadburySchweppes. included North American pet food and pet snacks. tuna. the company is seeking to utilise product innovation. In June 2002. channel expansion and international expansion to build the company’s brands and increase revenues. U. Nestlé announced that its U. and Ralston Purina (2002). A further example of a company willing to grow significantly through acquisition is Kellogg. ice cream business was to be merged 36 . baby foods. Following the acquisition of Pillsbury in 2001. private label soups and U.

for almost $15 billion. Kraft announced plans to sell its Invernizzi branded cheese business in Italy to Groupe Lactalis. However. Kraft acquired a leading producer of biscuits and snack cakes in Egypt and in September 2003. Kraft announced the acquisition of the Back to Nature brand cereal and granola business from Organic Milling. The sale of Galbani’s cheese business at the beginning of 2002 continued the Group’s strategy towards a more focused business. whilst continuing to divest itself of non-core activities (in June 2003. Danone announced that had acquired Nestlé’s dairy business in Turkey in a move that will double its sales in Turkey.S. Perhaps the best example of growth through acquisition is that of Kraft (though the company itself was acquired by Philip Morris – now named Altria – in 1988). with the decision to divest the Findus brand in 1999. A case by case approach Falling somewhere between the two strategies are companies such as Danone. Kraft sold its retail rice business in Germany. and it also acquired Chef America. beverages. 2003.-based hand-held frozen food product business. a glass packaging company) it is also seeking to make strategic acquisitions. was a busy year for the company as it both acquired and disposed of a number of assets. crackers and snacks.into Dreyer’s. a U. however. in order to concentrate on higher added-value frozen food products and the sale of its dairy business in Turkey to Danone. For example.fresh dairy. Danone agreed to sell its remaining 44% stake in BSN Glasspack. In April. However. Austria and Denmark to Ebro Puleva and in September. a leader in cookies. and biscuits and cereal. In March 2003. By far the biggest of these was the 2000 acquisition of Nabisco Holdings. the company has also shown that it will dispose of non-core assets. and meant that nearly all Group sales were in the three core businesses . 37 . in December 2003.

Spain is the world’s third fastest growing chilled food market and also the 14th largest market in terms of size by value. Table 2.Market positioning: chilled food The following table provides a ranking of the 10 largest countries in the global chilled foods market. however. 38 . that whilst being the largest market for chilled food. In terms of markets size. the chilled food market in Japan actually decreased in value by 4. as described in the earlier research methodology section. in terms of market growth. taken from the selection of 52 countries whose data is covered in this report. Japan has been of the slowest growing markets over the last six years.3: Top 10 ranking by size of global chilled food markets.8% over the 1998—2003 period. the greatest market opportunities for growth appear to be in the Ukraine and France. 2003 Country Japan US Russia UK Italy France Ukraine Netherlands Germany Denmark Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 47 17 15 14 37 10 9 26 42 40 Rank Value Size ‘03 1 2 3 4 5 6 7 8 9 10 Business Insights Whilst six-year growth rates in markets such as France and the Ukraine have approached 50% (in value terms). It is interesting to note. Japan leads the market followed by the United States and Russia. Within the larger chilled food markets.

64 million. Though it dominates chilled food markets the market in Japan is declining in size.Table 2. to reach a value of $1. with the size of each bubble referring to the size of the market. 2003 Country Romania Vietnam Spain Hungary Brazil Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 1 2 3 4 5 Rank Value Size ‘03 29 49 14 18 27 Business Insights Romanian and Vietnam markets have both grown from small bases in recent years.792. 39 . The following figure plots market share of selected countries in the global chilled food market against market growth (in value terms).3% over the 1998—2003. whilst the Spanish market increased in value by 87.4: Top five ranking by growth of global chilled food markets.

0% 5. It is interesting to note. in terms of market growth.4: Market share versus growth in global chilled food markets 250. the UK.0% 40.0% U kraine N etherlands Japan 0. however.0% B razil Spain H ungary France R ussia U S U K D ark enm Italy 50.0% -50.0% 35.0% 10.0% 25.0% 20. Within the larger confectionery markets.0% Market Growth 1998-2003 R ania om Faster grow ing m arkets M arket share G reater m arket size 200. the greatest market opportunities for growth appear to be in China and Mexico. Japan and Russia have been amongst the 10 slowest growing markets over the last six years.0% Vietnam 5.Market share versus growth in global chilled food markets Figure 2.0% 30. that whilst being amongst the five largest markets for confectionery. the United States leads the market from the Germany and the UK. 40 .0% G any erm 0.0% 150.0% 15.0% M arket Share 2003 Business Insights Source: Author analysis of Datamonitor research Market positioning: confectionery In terms of markets size.9 100.

0% and 50. In size terms. From significantly larger bases. the Mexican and Chinese confectionery markets grew at rates of 59. they are ranked as the 23rd and 26th largest markets respectively. The Ukraine and Indonesia are the world’s fastest growing confectionery markets.0% respectively.Table 2. the United States. Table 2. both China and Mexico recorded growth in excess of 50%. grew by 12. 2003 Country Ukraine Indonesia Romania Vietnam Venezuela Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 1 2 3 4 5 Rank Value Size ‘03 23 26 50 37 46 Business Insights Growth rates in excess of 100% over the 1998—2003 period were recorded by both the Ukraine and Indonesia. 2003 Country US Germany UK Japan Russia China France Italy Brazil Mexico Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 38 34 50 43 41 9 33 44 21 7 Rank Value Size ‘03 1 2 3 4 5 6 7 8 9 10 Business Insights Over the 1998—2003 period.8% over the same period.5: Top 10 ranking by size of global confectionery markets. The largest market.6: Top five ranking by growth of global confectionery markets. 41 .

Whilst China is the world’s 10th largest dairy market.6% of the market.0% Market Growth 1998-2003 140. Mexico and Brazil feature prominently. these four markets account for 49.0% M arket Share 2003 25. Among the world’s larger dairy markets that are also fast growing.The United States dominates global confectionery markets. Market share versus growth in global confectionery markets Figure 2. with Germany.9% Faster growing markets Market share Greater market size 100. Japan and the UK forming a cluster of markets of a similar size behind it. 42 .0% 0.0% 20.0% Indonesia 0.0% 60. it is also the fourth fastest growing.0% 30.0% Source: Author analysis of Datamonitor research Business Insights Market positioning: dairy products Global dairy markets are dominated by the United States.0% 80.5: Market share versus growth in global confectionery markets 160.0% 120.0% Brazil China France Russia US G ermany Japan UK 20.0% Italy 0.0% -20.0% 15.0% 5. China.0% Mexico Romania Vietnam Venezuela 40.0% 10. Together. Japan and leading Western European countries.

Table 2.8: Top five ranking by growth of global dairy markets. 43 . Eastern Europe and Latin America dominate rankings of the fastest growing dairy markets. Table 2.1% over the 1998—2003 period as the market reached a value of $17.7: Top 10 ranking by size of global dairy markets. is the 14th largest market overall. The exception in the top 10 is the Egyptian market.4% over the 1998— 2003 period. 2003 Country Romania Indonesia Colombia China Philippines Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 1 2 3 4 5 Rank Value Size ‘03 47 36 14 10 43 Business Insights Asia-Pacific. growth has been achieved from a relatively small base. growth in Japan reached just 3. 2003 Country US Japan Italy France Germany UK Mexico Brazil Spain China Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 28 50 41 33 38 44 9 10 23 4 Rank Value Size ‘03 1 2 3 4 5 6 7 8 9 10 Business Insights Although it is the world’s second largest dairy market. Colombia. which grew by 61.70 million. accounting for nine of the top 10 fastest growth markets. the third fastest growing market.427. Whilst Romania and Indonesia are the fastest growing dairy markets.

0% 100.0% -50. 44 . Market share versus growth in global dairy markets Figure 2.6: Market share versus growth in global dairy markets 250. accounting for a 23. Together. in eighth place.0% Indonesia Philippines Colombia Mexico China Spain Brazil France Italy UK Japan US 50.0% 0. Russia.The United States dominates the global dairy industry.0% 150. Germany and the UK accounted for 54.7% share of the market.0% Market Share 2003 20.0% 0. the United States.2% of the market in 2003.0% Germany 10.0% Market Growth 1998-2003 Faster growing markets Romania Market share Greater market size 200.0% 25. France.0% 5.0% 15. the fourth largest market is also the fifth fastest growing market. Japan.0% Source: Author analysis of Datamonitor research Business Insights Market positioning: savoury snacks Amongst the 10 largest savoury snack markets.0% 30. is also the world’s fastest growing market whilst Mexico. Italy.

analysis indicates that Eastern Europe will provide the best growth opportunities for savoury snack markets.5% from 1998.52 million in 2003. Both the Japanese and the UK markets decreased in value over the 1998—2003 period.9: Top 10 ranking by size of global savoury snacks markets. 2003 Country Russia Ukraine Romania Vietnam Mexico Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 1 2 3 4 5 Rank Value Size ‘03 8 28 51 45 4 Business Insights 45 . up by 31.10: Top five ranking by growth of global savoury snacks markets. 2003 Country US Japan UK Mexico Germany China Canada Russia Australia France Source: Author analysis of Datamonitor research Rank Growth ‘98-’03 14 48 44 5 41 19 21 1 24 37 Rank Value Size ‘03 1 2 3 4 5 6 7 8 9 10 Business Insights The market for savoury snacks in the United States reached $23. though the UK market saw some growth return in 2002. While starting from a particularly small base. the Ukraine and Romania being the three fastest growing markets over the 1998—2003 period. with Russia. Table 2.Table 2.425.

Japan.7: Market share versus growth in global savoury snacks markets 400.0% France -100.The savoury snacks market in Mexico grew by 80.0% 50.0% 250.0% G any erm 0.86 million.3% over the 1998—2003 period. to reach $3.0% Australia C anada C hina K U Japan M exico Faster grow ing m arkets M arket share G reater m arket U S 0.0% 200.597. The United States dominates the savoury snacks industry.0% -50. Together.0% 100.0% Romania 150.0% 30.0% 20. accounting for a 42.0% Ukraine Market Growth 1998-2003 350.7% of the market in 2003.0% M arket Share2003 Source: Author analysis of Datamonitor research Business Insights 46 .0% 40. Market share versus growth in global savoury snacks markets Figure 2.0% 10. UK and Mexico accounted for 70.0% Vietnam 50. the United States.0% 300.7% share of the market.

Chapter 3

Cadbury Schweppes

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Chapter 3
Summary

Cadbury Schweppes

With a history stretching back over 200 years, Cadbury Schweppes employs over 55,000 people and sells products in over 200 countries. In the last 20 years, the company has strengthened its portfolio through almost 50 acquisitions. In March 2003, the company completed the acquisition of Adams from Pfizer for $4.2 billion. As a result of the acquisition, the company believes it has leadership positions in sugar and functional confectionery and the number two position in gum while gaining access to major new markets. As a result of the acquisition, the company believes it is the only company to span the three major confectionery categories - chocolate, sweets and gum. In confectionery, the company has reduced its reliance on chocolate to build a portfolio of confectionery products encompassing chocolate, sugar, medicated confectionery and chewing gum. The company’s confectionery brands are sold across the world. Its key brands include: Cadbury Dairy Milk, Trebor Bassett, Maynards, Hollywood, STIMOROL, Halls, Dentyne and Trident. 2003 was a year of transition for Cadbury Schweppes as the company sought to consolidate Adams, manage changes to distribution arrangements and put in place organisational changes. A reduction in operating profit in Asia-Pacific in the first half of 2003 was due to shortfalls in the businesses in Australia and China. The performance of the confectionery business in Russia improved in 2003 under the guidance of a new management team. In October 2003, the company set out its four-year strategic and operational agenda at the heart of which lie the ‘Fuel for Growth’ cost reduction and ‘Smart Variety’ growth initiatives.

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About Cadbury Schweppes
Cadbury Schweppes is one of the biggest international beverage and confectionery companies in the world. With a history stretching back over 200 years, Cadbury Schweppes employs over 55,000 people and sells products in over 200 countries.

Since the start of the 1980s, the company has strengthened its beverage and confectionery portfolio through almost 50 acquisitions. The company believes that the recent purchase of Adams makes it the leader in the global confectionery market and the only company to span all three categories - chocolate, sweets and gum.

History The company’s heritage starts back in 1783 when Jacob Schweppe perfected his process for manufacturing carbonated mineral water in Geneva, Switzerland. And in 1823 John Cadbury opened in Birmingham selling cocoa and chocolate. The two household names merged in 1969 to form Cadbury Schweppes plc. Since then, the company has grown throughout the world by a programme of organic and acquisition led growth.

In 1824, John Cadbury, the son of Richard Cadbury, opened a shop at 93 Bull Street, then a fashionable part of Birmingham. Apart from selling tea and coffee, John Cadbury sold hops, mustard and a new sideline - cocoa and drinking chocolate, which he prepared himself using a mortar and pestle. By 1842, John Cadbury was selling 16 sorts of drinking chocolate and eleven cocoas and in 1847, John Cadbury encouraged his brother Benjamin into partnership and the family business becomes Cadbury Brothers of Birmingham.

In 1854, the Cadbury Brothers received their first Royal Warrant as ‘manufacturers of cocoa and chocolate to Queen Victoria’. In 1879, the Cadbury Brothers moved their manufacturing operations to establish the ground-breaking Bournville factory and village, about four miles south of Birmingham. In 1897, Cadbury manufactured its first

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milk chocolate and in 1899 Cadbury Brothers was incorporated as a limited company. At that stage, the Bournville factory had 2,600 employees.

In the mid-1980s the company took the strategic decision to concentrate on its core international brands of beverages and confectionery and exit the general foods and hygiene sector with the sale of non-core brands such as Typhoo Tea, Kenco Coffee and Jeyes. Since that time, the company has strengthened its portfolio of key brands through the purchase of Mott’s (1982), Canada Dry (1986), Trebor (1989), Bassett’ (1989), Dr Pepper and Seven Up (1995) and Hawaiian Punch (1999). In 1988, the manufacture of Cadbury confectionery brands was licensed in the US to Hershey.

In 2002 Cadbury Schweppes acquired Dandy, the Danish chewing gum company and, at the end of the year, announced the proposed $4.2 billion acquisition of Adams, which was completed in March 2003.

Recent performance
2003 was designed to be a year of transition for Cadbury Schweppes as the company sought to consolidate Adams, manage changes to 7 UP’s distribution arrangements (in a depressed US beverage market) and put in place the organisational changes announced in February.

Performance in 2003 At the release of preliminary full-year 2003 results, in February 2004, the company announced a “resilient” performance set “against the backdrop of difficult trading conditions in a number of key markets.” The company’s performance improved as the year progressed. Despite the hot summer, Cadbury Trebor Bassett delivered record sales, profit and market share following a good Christmas and confectionery and beverage operations in Australia recovered strongly in the second half of the year.

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The company reported 2003 sales at £6.4 billion, up by 22% from 2002. Acquisitions, net of disposals, contributed 20% to revenue growth. The most significant contributors to growth from acquisitions were Adams (mainly in the Americas), Dandy and Kent in the EMEA region and Apollinaris & Schweppes in Europe Beverages. Like-for-like base business sales grew 2%. Underlying operating profit excluding associates (operating profit before goodwill/intangibles amortisation and exceptional items) increased by 7%, with the base business declining by 1% and the full-year impact of acquisitions contributing 11%. Overall profits before tax fell by 32% to reach £564 million.

The transition of Adams into Cadbury Schweppes and delivery of the integration benefits were in line with the acquisition plan. In the second half of 2003, the company saw gum share trends improve in a number of key markets, notably the United States and Canada. However, an underlying operating profit decline in Americas Confectionery (before acquisitions) reflected a difficult first half of 2003 for Canadian operations. Second half profits improved significantly as the business focused on the more profitable elements of its portfolio. The Americas Confectionery businesses overall performed in line with expectations, driven by new product development and brand relaunches, notably Dentyne Fire in the United States and Trident White in Canada. Adams Mexico maintained strong sales and profit momentum throughout the year and Halls delivered strong results in nearly all markets.

In Europe, margins, particularly during the second half of the year, were negatively impacted by higher costs relating to the major relaunch of Cadbury Dairy Milk in the UK and raw material inflation. Cadbury Trebor Bassett maintained strong momentum and generated record sales, underlying operating profits and market share. The successful re-launch of the Cadbury Dairy Milk chocolate range in the UK increased its sales by 13%, whilst Maynards and Trebor performed strongly and the Adams' business produced better than expected results driven by the Halls brand. In France, Cadbury has stated that it regained leadership in chewing gum, reflecting the focus on the Hollywood brand and a range of successful sugar-free launches.

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298 979 2003 6. businesses in Africa delivered strong profit performances led by South Africa and Egypt. Greece. In Australian confectionery. whilst the Russian business was restructured in the first half with the integration of Dandy. a modest reduction on the losses incurred in 2002.441 1. Adams products are being sold into new outlets and markets via convenience store distribution networks in the UK. These included trade de-stocking. Ireland. Portugal. reflecting strong performances from core chocolate brands and new product development. In the second half of 2003.The Adams businesses in the region were integrated rapidly with full business consolidation taking place in the UK. business in Asia recovered somewhat. the business had a strong year until the fourth quarter when it was hit by the escalation of a minor instore infestation problem. Poland. A fall in underlying operating profits in Asia reflected a number of adverse factors. Financial performance in 2003 Table 3. (2) Underlying Group Operating Profit presented in preliminary results release on 18th February 2004. Source: Company accounts Business Insights 52 . Denmark and Nigeria. Lebanon and South Africa. Russia.118 612 2001 4. The business in China had another difficult year recording losses of £6 million. Elsewhere. the company extended its market leadership position with record second half sales.052 (2) Note: (1) From continuing operations. Ireland.960 758 2002 5. The Spanish business integration is expected to be fully complete by the end of the first quarter.11: Cadbury Schweppes financial performance 2000—2003 £m Turnover Operating Profit (1) 2000 4. the impact of raw material price increases on the Australian confectionery business and disruption following a difficult IT implementation at the end of 2002. In India.

000 0 2000 Source: Company accounts Turnover Operating Profit 2001 2002 2003 Business Insights In September 2003.000 2. raising $2.Figure 3. turnover and operating profit £m 7.0 billion. the company announced that it expects to deliver a 2004 financial performance within its target range of 3-5% net base sales value growth. Cadbury Schweppes announced that it had completed its first bond issue in the U. In February 2004.2 billion acquisition of Adams confectionery business. which is designed to reduce supply chain. market. The company expects restructuring charges of around £200 million and capital spend of around £300 million for 2003.000 1.8: Cadbury Schweppes financial performance 2000—2003. The following table illustrates the performance of the Americas and European confectionery divisions of Cadbury Schweppes over a three-year period.000 6.S.000 4.000 3. commercial and administrative costs. The proceeds are to be used to replace some of the financing arrangements put in place in December 2002 to fund the $4. 53 .000 5. These include the impact of the ‘Fuel for Growth’ initiative.

546 247 n/a n/a Note: (1) From continuing operations Source: Company accounts Business Insights Figure 3. Americas and Europe turnover and operating profit comparison £m 1800 1600 1400 1200 1000 800 600 400 200 0 2000 Source: Company accounts Turnover Americas Operating Profit Americas Turnover Europe Operating Profit Europe 2001 2002 Business Insights 54 .362 200 1.9: Cadbury Schweppes confectionery performance 2000—2003.445 212 1.Table 3.12: Cadbury Schweppes confectionery performance 2000—2003 £m Americas Confectionery Turnover Operating Profit (1) European Confectionery Turnover Operating Profit (1) 2000 2001 2002 Interim 2003 305 44 312 44 252 20 275 16 1.

49 51. São Paulo and Cumbica.10 12. the Canadian confectionery business is being reorganised both to focus on a smaller range of more profitable branded products and to reduce direct and indirect costs.Market positioning Expanding the portfolio in 2003 The Americas After several difficult years.13 6.97 14.13: Cadbury Schweppes’ market shares in the Americas.32 0.68 12. In October 2003.15 45. logistics and distribution for the business and will also support plans to focus on innovation and aggressive growth. A combination of lower branded volumes and stock reduction led to a reduction in profits at these operations. which are uncompetitive. was to consolidate its chewing gum production and packaging in Brazil. from manufacturing plants in Avenida do Estado. Guarulhos to its manufacturing plant in Bauru. Cadbury Adams.49 11. 2002 Country Argentina Argentina Argentina Argentina Argentina Canada Canada Canada Canada Chile Venezuela Market Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Category Chocolate Gum Gum Sugar Sugar Chocolate Gum Sugar Sugar Chocolate Chocolate Company Value% Cadbury Stani SAIC Cadbury Stani SAIC Adams SA Cadbury Stani SAIC Adams SA Cadbury Trebor Allan Inc Adams Brands Ltd Cadbury Trebor Allan Inc Adams Brands Ltd Cadbury Stani SAIC Cadbury Stani SAIC 1. Table 3. The transition will be completed by July 2004 and should result in a higher level of efficiency in production.87 Source: Author analysis of Datamonitor research Business Insights Asia-Pacific A reduction in underlying operating profit in Asia-Pacific in the first half of 2003 was due to shortfalls in the Food & Beverage and Confectionery businesses in Australia and 55 . the company announced that its Brazilian subsidiary.84 15.59 0.

12 9.70 0.05 26.27 4.10 5.10 0.80 2.89 16.80 2.32 1.10 13. Table 3. Confectionery sales in China and neighbouring markets were also affected by the impact of SARS on consumer demand.63 16.10 64.94 1. The confectionery business was affected by the combination of reduced consumer demand following significant price increases early in the year and de-stocking by the trade.07 0. 2002 Country Australia Australia Australia Australia China China Hong Kong Hong Kong Hong Kong India India India India Indonesia Indonesia Malaysia Malaysia Malaysia New Zealand New Zealand New Zealand New Zealand New Zealand Philippines Singapore Singapore Singapore Taiwan Thailand Thailand Thailand Thailand Vietnam Vietnam Market Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Category Company Value% 51.00 65.32 7.10 1.08 0.79 1.55 44.70 20.77 8.49 0.30 0.14: Cadbury Schweppes’ market shares in Asia-Pacific.to a lesser extent the confectionery business in China.46 1.60 35.50 14.95 22.20 0.44 2.02 Chocolate Cadbury Schweppes Australia Ltd Sugar Cadbury Schweppes Australia Ltd Milk Cadbury Schweppes Australia Ltd Overall Cadbury Schweppes Australia Ltd Chocolate Cadbury Food Co Beijing Sugar Cadbury Food Co Beijing Chocolate Cadbury Four Seas HK Ltd Milk Cadbury Four Seas HK Ltd Overall Cadbury Four Seas HK Ltd Chocolate Cadbury India Ltd Sugar Cadbury India Ltd Milk Cadbury India Ltd Overall Cadbury India Ltd Chocolate Cadbury Indonesia PT Sugar Cadbury Indonesia PT Chocolate Cadbury Confectionery (M) Sdn Bhd Gum Cadbury Confectionery (M) Sdn Bhd Sugar Cadbury Confectionery (M) Sdn Bhd Chocolate Cadbury Confectionery Ltd Gum Cadbury Confectionery Ltd Sugar Cadbury Confectionery Ltd Milk Cadbury Confectionery Ltd Overall Cadbury Confectionery Ltd Chocolate Cadbury Schweppes Plc Chocolate Cadbury Singapore Pte Ltd Milk Cadbury Singapore Pte Ltd Overall Cadbury Singapore Pte Ltd Chocolate Cadbury Confectionery Tasmania Chocolate Cadbury Schweppes Plc Gum Adams (Thailand) Ltd Sugar Adams (Thailand) Ltd Sugar Cadbury Schweppes Plc Chocolate Cadbury Schweppes Plc Sugar Cadbury Schweppes Plc Source: Author analysis of Datamonitor research Business Insights 56 .45 24.62 3.

41 3.00 0. Table 3. 2002 Country Egypt Egypt Egypt Egypt Egypt Morocco Saudi Arabia Saudi Arabia Saudi Arabia South Africa South Africa South Africa Market Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Dairy Confectionery Confectionery Confectionery Category Company Value% 36.10 2.62 0.65 22.66 36.15: Cadbury Schweppes’ market shares in Eastern Europe.30 Source: Author analysis of Datamonitor research Business Insights The Middle East and Africa The company holds a dominant share of the Egyptian confectionery market and also accounts for over one-third of both the South African chocolate confectionery and gum markets.26 1. Africa (Pty) Ltd Gum Cadbury Schweppes S.45 Chocolate Cadbury Schweppes Plc Gum Cadbury Schweppes Plc Sugar Cadbury Schweppes Plc Milk Cadbury Egypt Overall Cadbury Egypt Sugar Cadbury Schweppes Plc Chocolate Cadbury Schweppes Plc Sugar Cadbury Schweppes Plc Milk Cadbury’s Ltd Chocolate Cadbury Schweppes S.38 31.20 2.16: Cadbury Schweppes’ market shares in the Middle East and Africa.50 1.91 0.Eastern Europe The performance of the company’s confectionery business in Russia improved in 2003 under the guidance of a new management team.10 39.07 9.45 4. Table 3.01 22.07 0. Africa (Pty) Ltd 57 . Africa (Pty) Ltd Sugar Cadbury Schweppes S.22 4.12 0.40 0.10 1. 2002 Country Bulgaria Czech Republic Czech Republic Hungary Hungary Poland Poland Poland Russia Slovakia Ukraine Ukraine Market Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Category Chocolate Chocolate Gum Chocolate Sugar Chocolate Gum Sugar Chocolate Gum Chocolate Chocolate Company Value% Cadbury Schweppes Plc Cadbury Schweppes Plc Cadbury Schweppes Plc Cadbury Hungary Cadbury Hungary Cadbury Wedel Sp zoo Cadbury Wedel Sp zoo Cadbury Wedel Sp zoo Cadbury OOO Cadbury Schweppes Plc Cadbury Schweppes Plc Cadbury OOO 0.15 0.70 3.

58 . in the UK.Source: Author analysis of Datamonitor research Business Insights Western Europe In France. Greater Manchester and the Trebor plant at Brimmington Road. with both sites closing in March 2005. In addition to the shares listed below. Cadbury Trebor Bassett announced proposals in October 2003. Cadbury Schweppes’ main UK operating business. Cadbury also takes 14th place in the UK Savoury snacks market. mainly to that region.the former Adams plant in Radcliffe. Production will transfer from the Radcliffe plant. Production will cease by the end of 2004. which makes Halls Mentholyptus and Soothers. including Sheffield. Chesterfield. to the Americas as more than 80% of the current plant’s output is exported. Production from the Chesterfield plant will be switched to other factories. the company’s gum market share benefited from new product launches toward the end of 2002 and early 2003. where the confectionery market has been weak. to close two factories .

70 5.27 2.30 5.42 15.Prd. de Conf Cadbury Schweppes .10 56. de Conf Adams SA Cadbury Schweppes .20 0.35 18. Dream. TimeOut.97 1.20 5.17 0.05 48.30 42.50 0.70 Source: Author analysis of Datamonitor research Business Insights Global confectionery brands Product examples The company’s confectionery brands are sold across the world. 2002 Country Belgium Denmark Finland France France France France France Greece Greece Greece Ireland Ireland Ireland Ireland Ireland Netherlands Netherlands Portugal Portugal Portugal Portugal Portugal Portugal Spain Spain Spain Spain Sweden Switzerland Turkey UK UK UK UK UK Market Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Savoury Snacks Category Gum Sugar Sugar Chocolate Gum Sugar Milk Overall Chocolate Gum Milk Chocolate Gum Sugar Milk Overall Chocolate Sugar Chocolate Gum Gum Sugar Milk Overall Chocolate Gum Sugar Sugar Sugar Gum Chocolate Chocolate Gum Sugar Sugar Overall Company Value% Cadbury Schweppes Plc Cadbury Nederland BV Cadbury Schweppes Plc Cadbury France SA Cadbury France SA Cadbury France SA Cadbury France SA Cadbury France SA Cadbury Schweppes Plc Cadbury Schweppes Plc Cadbury Schweppes Plc Cadbury Schweppes Ireland Ltd Adams Confectionery Adams Confectionery Cadbury Schweppes Ireland Ltd Cadbury Schweppes Ireland Ltd Cadbury Nederland BV Cadbury Nederland BV Cadbury Schweppes – Prd.22 28.34 4.17 0. de Conf Cadbury Dulciora SA Adams Spain SA Adams Spain SA Cadbury Dulciora SA Cadbury Schweppes Plc Cadbury Schweppes Plc Cadbury Schweppes Plc Cadbury Trebor Bassett Ltd Adams Confectionery Cadbury Trebor Bassett Ltd Adams Confectionery Cadbury Trebor Bassett Ltd 2. Twirl.62 2.20 0. Creme Egg.Prd.80 0.53 0.00 24.60 0. Roses.Table 3.06 3.37 34. Caramel.97 0.21 4.Prd.55 0. Flake.52 1.27 6. de Conf Cadbury Schweppes .65 0.52 3. Wedel and Poulain.Prd. Its key chocolate confectionery brands include: Cadbury Dairy Milk.17: Cadbury Schweppes’ Market Shares in Western Europe.12 0. 59 .60 0. Miniature Heroes. de Conf Cadbury Schweppes . Crunchie.30 1.97 0.

Jelibon under the Kent umbrella. V6.10: A selection of brands from Cadbury Schweppes Source: http://www. Middle East and Africa Confectionery and Asia-Pacific). Swedish Fish. Beldent. and Kent’s Relax. and Miss. Dentyne and Trident chewing gum. Trebor. La Pie Qui Chante. Europe. 60 .cadburyschweppes. Elegan. and the “Bubbas” range of bubblegum. Bassett’s. European Beverages. the world’s leading sugar confectionery brand. Figure 3. Mantecol.Sugar confectionery brands include Choclairs. Maynards. the company introduced a new organisational structure to clarify accountability and enable swifter decision-making. Sour Patch Kids and Allan. Sportlife. Dirol. Bazooka. Pascall. STIMOROL. Todd Stitzer. Americas Confectionery. A new international leadership team of 10 key executives now report directly to the CEO. Gum brands include Hollywood. As a result.com/EN/Brands/About/Confectionery Business Insights Strategies for growth In February 2003. the company has five geographical regions supported by five business functions (Americas Beverages. The Adams acquisition brought four key confectionery brands to the company: Halls.

Turkey’s leading sugar confectionery 61 . these are expected to be more than offset by sales growth and margin increases. taking its holding to 94%. The company also acquired Wuxi-Leaf Confectionery. the company acquired 43% of Cadbury India. Kraft Foods’ chewing gum and confectionery business was purchased in France including the brands Hollywood.4 billion from disposals. sugar. a manufacturer of sugar free and low sugar gum in China. Kiss Cool. employee benefits and depreciation. the company set out its four-year strategic and operational agenda at the heart of which lie the ‘Fuel for Growth’ cost reduction and ‘Smart Variety’ growth initiatives.Over the last seven years. The acquisition of Adams has taken the company into higher growth categories with greater potential to cross-sell different products in a variety of markets. In October 2003. medicated confectionery and chewing gum. the difference largely funded from cash flow.3 billion on acquisitions (not all in confectionery markets) and realised £1. Krema and Malabar. The company stated that it expects gross cost benefits of £75 million from the Fuel for Growth cost reduction initiative in 2004. In 2000. including Adams cost synergies. In confectionery. insurance. Although these will bring cost increases. most notably in raw materials. In February 2004. In 2002. The year also saw the acquisition of a 51% interest (which has since increased to 65%) in Kent. Cadbury Schweppes’ strategy has been to build a series of regionally robust and sustainable businesses in its core categories of confectionery and beverages. the company has spent a total of £3. the company added to its Argentinean confectionery business with the acquisition of the Mantecol brand. Acquisitions and disposals play a key role Since 1997. the company has reduced its reliance on chocolate to build a portfolio of confectionery products encompassing chocolate. the company announced that commercial and back office savings arising from the integration of Adams and confectionery supply chain optimisation in Europe had kick-started ‘Fuel for Growth’ activities. In 2001.

Dentyne Ice chewing gum. Shotgum. have been launched. Elsewhere.7 billion).2 billion (£2. Halls’ first gum product was launched in the UK and Ireland. Halls Fruit Breezers was launched as the first non-mentholated product. Also in 2003. aiming to keep the company at the forefront of confectionery developments. Also in 2002. Trident sugarfree gum. Trident White launched 3Sku (spearmint). V6 and Dirol brands. Dandy’s branded chewing gum business in Denmark. NPD and brand repositioning Over the last two years a number of new products. Following the acquisition. As a result of the acquisition. with the brand getting a new look. the company completed the acquisition of Adams from Pfizer for $4. particularly Latin America. with the STIMOROL. Cadbury Schweppes and Adams’ confectionery businesses in the Americas were integrated into a new unit. Also in 2002. In 2002. Americas Confectionery. 62 . Four power brands represent over 70% of Adams sales: Halls medicated confectionery. Sour Patch Kids was repositioned in the United States. the company believes it has leadership positions in sugar and functional confectionery and the number two position in gum while gaining access to major new markets. was acquired. Bubbas bubblegum range.manufacturer. In 2003. Adams operations report into Cadbury Schweppes’ Europe. Middle East & Africa and Asia Pacific regions. new packaging and new flavour names. In March 2003.

The acquisition of Adams. a number of production and organisational inefficiencies manifested themselves. medicated confectionery and chewing gum segments. In Canada. A diversified and well-balanced portfolio now includes leading brands across the chocolate. earns the company and its brands a significant amount of trust and loyalty from consumers. The company has also introduced a new organisational structure to clarify accountability and enable swifter decision-making. gives the company a more global presence and better prospects for growth. A trusted brand that has diversified its portfolio Cadbury Schweppes is one of the biggest international beverage and confectionery companies in the world that together with a history stretching back over 200 years.SWOT analysis The following section provides a brief appraisal of the performance and strategy of Cadbury Schweppes’ food businesses in the form of a SWOT analysis. A series of acquisitions over the last 20 years has repositioned the company’s confectionery portfolio so that it is no longer reliant on chocolate products. weaknesses. sugar. In fairness to the company. Action to remedy production and organisational inefficiency Perhaps as a consequence of the large number of acquisitions that the company made in recent years. with recently announced changes in changes in Brazil and the UK in particular. which are uncompetitive. these are now being addressed. the confectionery business is being reorganised both to focus on a smaller range of more profitable branded products and to reduce direct and indirect costs. highlighting the relative strengths. 63 . opportunities and threats faced by the company. in particular.

markets. particularly in Australia and China. As the company strives to deliver the benefits of the Fuel for Growth initiative.Industry analysts have also questioned the company’s long-term benefits from operating a drinks business. medicated confectionery and chewing gum segments Company Opportunities • Integration of Adams brings greater potential to cross-sell different products in a variety of markets • Distribution channels in confectionery markets offer margin growth Company Weaknesses • Production and organisational inefficiencies must be addressed • Weaker performance in Asian markets in 2003 • Analysts question whether a drinks business fits well with global confectionery operations? Company Threats • Will changing consumer tastes. sugar-free alternatives. destocking by the trade and the impact of SARS. 64 . insurance. Figure 3. it anticipates cost increases during 2004. particularly in fiercely competitive U. most notably in raw materials. markets in Asia have also suffered decreasing operating profits. Unfortunately for the company this is inevitable in the short-term if it is to ensure more profitable longer-term growth. as a combination of reduced consumer demand following significant price increases. employee benefits and depreciation.S. sugar.11: Cadbury Schweppes SWOT analysis Company Strengths • Strong brands earn a significant amount of trust and loyalty from consumers • A well balanced portfolio now includes leading brands across the chocolate. along side a global confectionery business. limit growth in traditional markets? • Must continue to innovate and support brands with high quality marketing to maintain awareness and consumer loyalty Source: Author research and analysis Business Insights Though further outside the immediate control of the company. which favour healthy.

it cannot rest easy. it is only recently that chocolate manufacturers have introduced such alternatives and the company cannot afford to be left behind by such initiatives. an increase in sales via the impulse market. 65 . particularly as chocolate confectionery markets become increasingly mature. will see value growth in the market. While the acquisition of Adams in the gum sector.Access to higher growth categories The greatest source of future growth for the company is likely to be from the full integration and growth potential of the Adams business. Consumers. where such products have long been accepted. The expansion of distribution channels in confectionery also offers Cadbury Schweppes an opportunity to boost sales. aiming to keep the company at the forefront of confectionery developments. reduces Cadbury’s reliance on chocolate markets. Whilst supermarkets are increasing their share of the confectionery market. In addition to innovation. the company must support its products with high quality marketing if it is to maintain brand awareness and loyalty amongst consumers that are becoming increasingly fickle. As a result of the acquisition. Threat to indulgence from healthier alternatives Whilst the company has introduced a number of new products over the last two years. increasingly aware of the health implications of indulging themselves on confectionery. value growth has not accompanied volume growth as prices have lowered. The acquisition of Adams has taken the company into higher growth categories with greater potential to cross-sell different products in a variety of markets. at convenience stores where overall margins are greater. However. the company now believes it has leadership positions in sugar and functional confectionery and the number two position in gum while gaining access to major new markets. will start to look to products they see as being healthier or a sugar-free alternative.

66 .

Chapter 4 Danone 67 .

One of the most successful NPD launches of recent years was the Actimel brand. In December 2003. Leading positions in local markets enables the Group to build long-term relationships with major retailers. largely driven by the fresh dairy products and beverages sectors. developed to meet the latest trends in snacking. Although around 31% of sales are in emerging markets. including an increase in like-for-like sales of between 5% and 7%. In addition to a greater focus on its three core business segments. In January 2004. beverages. At the interim stage. Four brands represent almost 60% of the company’s sales. the company set out its targets for the year. cereal biscuits and snacks).2% rise in sales. The sale of Galbani’s cheese business at the beginning of 2002 continued the Group’s strategy towards a more focused business. Danone increased its shareholding in Stonyfield Farm from 40% to 80%. Danone announced that it had acquired Nestlé’s dairy business in Turkey. LU (cereal biscuits and crackers) and Evian and Volvic (in the bottled water market). At the start of 2003. These are Danone (in fresh dairy products). 68 . and meant that nearly all Group sales were in the three core businesses.Chapter 4 Summary Danone Danone operates with three core businesses (fresh dairy products. in a move that will double its sales in Turkey and strengthen its leading position in fresh dairy products. a drinkable yoghurt. Stonyfield Farm is the largest organic yoghurt producer in the United States. Growth strategies in emerging markets link high-profile brands with wide-ranging distribution for sales close to consumers. Danone announced a 7. the Group’s strategy extends to geographical targets. the Group aims to increase this share to 40%. The company operates a portfolio of major international brands yet around 70% of its sales come from brands that are local market leaders.

BSN and Gervais Danone merged to create the biggest food group in France. In 1989 BSN Gervais Danone added to its portfolio of biscuit brands. History Danone has its origins in glass packaging. ready meals. The company operates a portfolio of major international brands yet around 70% of its sales come from brands that are local market leaders. BSN Gervais Danone decided at the start of the 1980s to expand and particularly because of the low concentration of supermarket and hypermarket chains. a group with a network of companies in Germany. cereal biscuits and snacks). in addition to Badoit. merged in 1966. In 1981. mineral waters and baby food. Belgium. sauces and condiments). BSN Gervais Danone acquired a large number of local companies in its traditional areas of business as well as new ones (confectionery. the Souchon-Neuvesel glassworks and Glaces de Boussois. had an annual turnover of one billion francs. beverages.About Danone Danone operates with three core businesses (fresh dairy products. In 1973. France. owned the brand names Jacquemaire and Fali). Boussois-Souchon-Neuvesel. The company claims to be the global leader in the fresh dairy products and bottled water markets and number two in cereal biscuits and snack crackers. which later became BSN. selling off Boussois. acquiring Nabisco’s 69 . the Netherlands and Italy.5 billion francs. By 1979. In 1969. Since then. Through a series of takeovers. BSN wanted to start making the contents for its containers and the acquisitions meant that BSN became the leading French manufacturer of beer. the Group has focused predominantly on food. Italy and Spain were identified as key areas of growth. Two glass companies. its estimated turnover was 16. the Group exited the plate glass sector. partnerships and joint ventures. Kronenbourg and the European Breweries Company in 1970. fresh packaged foods and drinks became the Group’s main product lines. Pasta. The takeover marked its entry into the biscuit industry. BSN Gervais Danone acquired General Biscuit. In 1986. BSN took control of Evian (which.

following expansion into Eastern Europe. the Group dropped BSN from its name and adopted Danone. cereal biscuits & snacks and beverages. combined with negative exchange rate effects. acquisitions during the year. resulted in a decline in sales of 6%. In 2003. By 1996. derived from a 3.European subsidiaries: Belin in France.2% rise in value. changes at the bottled U. In 1993.S. the Group sold its Container business and withdrew from brewing activities. of which the main two were Frucor and Shape.8% rise in volume and a 2. Jacob’s in the UK and Saiwa in Italy. the Group’s turnover had risen to 48. In 1999. which was produced in 30 countries and accounted for about one-quarter of its turnover. In June 1994. the Group employed over 100. changes to the structure of the company. In May 1997. the company announced a new strategy to focus on three main market sectors: fresh dairy products. Within less than 20 years. followed by the sale of Galbani (a leader of the Italian cheese market and a major player in the cured meat market) in 2002. organic sales growth of 6% was recorded in 2002.7 billion francs. 70 . the name of its leading brand. Recent performance In 2002. spring water business as a result of a partnership agreement with The Coca Cola Company. Additionally. BSN Gervais Danone created a specialised export division. Group turnover had reached 83. The new strategy led to the sell-off of the Group’s grocery and confectionery brands. On a like-for-like basis.9 billion francs. The strategy was to determine which brands had international potential.000 people in more than 120 countries. Structural changes principally concerned the sale of Galbani and to a lesser extent. offset the disposals to only a very limited extent.

in the second quarter. Announcing its preliminary full-year 2003 results.1%. in February 2004. Operating margin increases reflected growth in sales volumes plus the recent disposal of business with profitability below the Group average.Performance in 2003 At the start of 2003.18: Danone financial performance 2000—2003 €m Turnover Operating Profit Source: Company accounts 2000 14.2%. However. net sales increased by 7.470 1. although Danone has raised its expectations of the potential cost savings through this programme.590 2003 13.131 million.604 Business Insights 71 .609 2002 13. At the interim stage.555 1. Financial performance 2003 Table 4. Themis.287 1. Danone announced a 7. while business in Asia remained firm despite the SARS epidemic. The overall 2003 performance was also impacted by delays and cost rises to the company’s efficiency programme. the company set out its targets for the year. The company reported that European sales rose steadily.2% rise in sales. Danone announced overall consolidated net sales of €13.131 1. at constant exchange rates and on a like-for-like basis.550 2001 14. largely driven by the fresh dairy products and beverages sectors. Among them was an increase in like-for-like sales of between 5% and 7% and an increase in the operating margin by 20 to 40 basis points. decreasing by 3. Poor performances in the company’s biscuit division led to speculation that the company may seek a buyer for this part of the business.

071 280 378 49 375 60 356 61 318 57 Business Insights 72 .255 282 3.000 0 Turnover Operating Profit 2000 Source: Company accounts 2001 2002 2003 Business Insights Table 4.000 10.530 712 6. turnover and operating profit Euro m 16.000 14.19 illustrates the performance of the fresh dairy products.232 317 3.945 790 6.000 8.185 845 3.Figure 4.12: Danone financial performance 2000—2003.19: Danone food business performance 2000—2003 €m Fresh Dairy Products Turnover Operating Profit Biscuits and Cereal Turnover Operating Profit Other Food Turnover Operating Profit Source: Company accounts 2000 2001 2002 2003 6.371 316 3.000 6.000 12.276 802 6. biscuits and cereals and other food segments. Table 4.000 4. as sales in the division fell by almost 5%.000 2. Operating profit in the biscuits and cereals division dropped by over 11% in 2003.

Danone agreed to sell its remaining 44% stake in BSN Glasspack (a glass packaging company) to Glasspack Participations.S. over 20% on the last decade. With sales around $140 million in 2003. In addition. it was announced that Danone has assumed control of its Turkish operations through the acquisition of the 50% shareholding held up to now by the Turkish group Sabanci. Danone believes that Stonyfield Farm is the largest organic yoghurt producer in the United States. It believes that Stonyfield Farm belongs in the top four brands in the U. Danone and Sabanci had been partners in this joint venture since 1997. from 40% to 80%. In January 2004. The deal also includes the UHT milk business of Nestlé. Danone announced that it had increased its shareholding in Stonyfield Farm. developing leading positions in the fresh dairy products and water markets (bottles under Hayat and Akmina brands and jugs under Flora brand). the Group claims to be the market leader in the Canadian bottled-water market. In December 2003. growing annually. in a move that will double its sales in Turkey and strengthen its leading position in fresh dairy products. a holding company financed by investment funds advised by CVC Capital Partners. Danone will own the local Mis trademark and Nestlé branded products will be gradually integrated in Danone’s brand portfolio including Danone. 73 . Market positioning Dominant positions in every region In the United States. At the same time.In June 2003. and rank second in bottled water in North America. yoghurt market. Danone claims to be a leading producer of fresh dairy foods. Tikvesli and Birtat. on average. The company claims that Evian is the premier brand of still bottled water in the United States. Danone announced that it had acquired Nestlé’s dairy business in Turkey (subject to the approval of the Turkish antitrust authorities). acquired in October 2001.

57 6.00 6. Table 4. Danone entered the fresh dairy market in Brazil in 1970 and in Mexico in 1973.90 0. The Group has also become a leading producer of cereal biscuits and snack foods in South America (leading the Argentine and Brazilian markets).40 57.20 3.20: Danone market shares in the Americas.10 Source: Author analysis of Datamonitor research Business Insights Asia-Pacific Danone’s development in Asia-Pacific began in 1980.The Americas In Latin America.30 2. 2002 Country Argentina Argentina Argentina Brazil Brazil Brazil Brazil Canada Canada Mexico Mexico US US Market Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Category Milk Overall Yoghurt Cheese Milk Overall Yoghurt Overall Yoghurt Overall Yoghurt Overall Yoghurt Company Value% Danone Argentina Danone Argentina Danone Argentina Danone Ltda Danone Ltda Danone Ltda Danone Ltda Danone Inc Danone Inc Danone de México SA de CV Danone de México SA de CV Stonyfield Farm Stonyfield Farm 1. with the Bagley’s and Danone brands.60 3. This position is based on penetration in a limited number of key countries and strong local brands.20 23.70 1. 74 . The company now claims to be the leading producer of bottled water and biscuits in the region.50 3. with a joint venture to manufacture and market fresh dairy products in Japan.30 30.70 34. The Group claims to have leadership positions in these markets and also in Argentina.

75 .90 11.50 7. Danone has been present in the biscuits market in Russia since 1994. under the Tornado brand.21: Danone market shares in Asia-Pacific.20 2. and in cereal biscuits and snack foods under the Opavia and Bolshevik labels.30 Source: Author analysis of Datamonitor research Business Insights Eastern Europe Danone did not expand into Central and Eastern Europe until the 1990s. where.70 3.10 20. it is to acquire Chupa Chups’ soft cake business in Russia (Chok and Rolls company). Bolshevik. with the Danone brand. Groupe Danone Marketing (S) Pte Ltd 0. Groupe Danone. the Chok and Rolls company is the joint leader of the swiss rolls segment in Russia. with sales over $60 million in 2003. Groupe Calpis Ajinomoto Danone Co Ltd Calpis Ajinomoto Danone Co Ltd Danone. Danone believes that with sales around $20 million in 2003. through the acquisition of Bolshevik.60 0.Table 4. Danone announced that via its Russian subsidiary.80 0. Groupe Danone. In January 2004. according to the company. it quickly reached the rank of leader in fresh dairy products. 2002 Country China China Hong Kong Hong Kong Japan Japan Singapore Singapore Singapore Market Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Savoury Snacks Category Overall Yoghurt Overall Yoghurt Overall Yoghurt Overall Yoghurt Overall Company Value% Shanghai Danone Yoghurt Co Ltd Shanghai Danone Yoghurt Co Ltd Danone.30 1.

30 3. Algeria and Israel. 76 .70 0.20 7.60 19.00 3.50 9.20 5.30 4.22: Danone market shares in Eastern Europe.20 Bulgaria Dairy Bulgaria Dairy Bulgaria Dairy Czech Republic Dairy Czech Republic Dairy Czech Republic Dairy Czech Republic Dairy Hungary Dairy Hungary Dairy Poland Dairy Poland Dairy Romania Dairy Romania Dairy Russia Dairy Russia Dairy Slovakia Dairy Slovakia Dairy Slovakia Savoury Snacks Ukraine Dairy Ukraine Dairy Source: Author analysis of Datamonitor research Business Insights Middle East and Africa Recent acquisitions in Morocco and Tunisia have extended the company’s previously limited presence on the African continent. Groupe Danone.20 33.Table 4.90 0. Tunisia. 2002 Country Market Category Milk Overall Yoghurt Cheese Milk Overall Yoghurt Overall Yoghurt Overall Yoghurt Overall Yoghurt Overall Yoghurt Overall Yoghurt Overall Overall Yoghurt Company Value% Danone Serdika AD Danone Serdika AD Danone Serdika AD Danone as Danone as Danone as Danone as Danone Kft Danone Kft Danone Polska Sp zoo Danone Polska Sp zoo Danone Romania SRL Danone Romania SRL Danone Volga ZAO Danone Volga ZAO Danone as Danone as Danone as Danone.60 13.70 36. Morocco. Despite this.70 2. Groupe 5.00 8.80 37.90 6.00 34. the company claims to be the market leader in the fresh dairy products segment in South Africa and holds strong positions in Saudi Arabia.10 10.20 1.

23: Danone market shares in the Middle East and Africa.Table 4. its is ranked number one in fresh dairy products. The company’s main brands in Western Europe are Danone.40 54.20 27. Groupe Al Safi Danone Al Safi Danone Al Safi Danone Danone.70 16.80 29. Evian and Chateau d’eau. number one in cereal biscuits and snack foods and number two in bottled water. According to company literature.00 0. 2002 Country Morocco Morocco Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia South Africa South Africa South Africa South Africa Market Dairy Dairy Dairy Dairy Dairy Savoury Snacks Dairy Dairy Dairy Dairy Category Overall Yoghurt Milk Overall Yoghurt Overall Cheese Milk Overall Yoghurt Company Value% Danone. Jacob’s. Blédina.70 34. Groupe Danone Clover (Pty) Ltd Danone Clover (Pty) Ltd Danone Clover (Pty) Ltd Danone Clover (Pty) Ltd 5. Lu.70 15.90 74.50 Source: Author analysis of Datamonitor research Business Insights Western Europe Western Europe represents about 70% of the Group’s sales. Groupe Danone. 77 .10 10.

80 22. 2002 Country Austria Austria Austria Belgium Belgium Belgium Belgium Belgium Denmark Denmark Finland Finland France France France France Germany Germany Germany Ireland Ireland Ireland Italy Italy Italy Italy Italy Netherlands Netherlands Netherlands Portugal Portugal Portugal Spain Spain Market Dairy Dairy Dairy Dairy Dairy Dairy Confectionery Savoury Snacks Dairy Dairy Dairy Dairy Dairy Dairy Dairy Savoury Snacks Dairy Dairy Dairy Dairy Dairy Dairy Confectionery Dairy Dairy Dairy Savoury Snacks Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Category Company Value% 8.10 8.00 27.70 6.20 20.24: Danone market shares in Western Europe.20 10.80 7.50 0.80 2.90 0.Table 4.70 0.30 5.20 0.80 1.50 1.70 0.90 13.30 7.40 6.00 3.80 8.00 5.60 1.22 1.90 0.10 1.20 38.80 1.30 3.50 9.80 Milk Danone GesmbH Austria Overall Danone GesmbH Austria Yoghurt Danone GesmbH Austria Milk Danone NV/SA Overall Danone NV/SA Yoghurt Danone NV/SA ChocolateLU Benelux/General Biscuits België SA OverallLU Benelux/General Biscuits België SA Overall Danone A/S Yoghurt Danone A/S Overall Danone Finland Oy Yoghurt Danone Finland Oy Milk Danone France SA Overall Danone France SA Yoghurt Danone France SA Overall LU SA Milk Danone GmbH Overall Danone GmbH Yoghurt Danone GmbH Milk Danone Ireland Ltd Overall Danone Ireland Ltd Yoghurt Danone Ireland Ltd Chocolate Saiwa SpA Milk Danone SpA Overall Danone SpA Yoghurt Danone SpA Overall Saiwa SpA Milk Danone Nederland BV Overall Danone Nederland BV Yoghurt Danone Nederland BV Milk Danone Portugal SA Overall Danone Portugal SA Yoghurt Danone Portugal SA Cheese Danone SA Milk Danone SA Source: Author analysis of Datamonitor research Business Insights 78 .50 3.80 3.00 2.20 2.

60 Source: Author analysis of Datamonitor research Business Insights Leading brands at Danone Four brands represent more than 50% of the company’s sales.Table 4.10 0.20 1.danonegroup. LU: the world’s second largest cereal biscuit and snack crackers brand.00 0.13: A selection of brands from Danone Source: http://www. 2002 continued Country Spain Spain Sweden Sweden Switzerland Turkey Turkey Turkey Turkey UK UK UK Market Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Category Overall Yoghurt Overall Yoghurt Overall Overall Overall Yoghurt Yoghurt Milk Overall Yoghurt Company Value% Danone SA Danone SA Danone.50 56.60 2.com/brands/index_brands.50 0. Evian and Volvic .50 11. These are: Danone: the leading brand worldwide for fresh dairy products.80 0. which the company have dominant positions in worldwide markets.20 5.two of the four biggest bottled water brands worldwide.00 0. Product examples Figure 4. Groupe Danone SA Danonesa Gida San ve Ticaret AS Danone SA Danonesa Gida San ve Ticaret AS Danone Ltd Danone Ltd Danone Ltd 19.html Business Insights 79 .90 1.25: Danone market shares in Western Europe. Groupe Danone. Groupe Danone.

and biscuits and cereal. 80 . beverages.Strategies for growth A focus on high growth segments that match consumer needs Danone follows a strategy of profitable growth. The sale of Galbani’s cheese business at the beginning of 2002 continued the Group’s strategy towards a more focused business. industrial efficiency. wellbeing and convenience. and meant that nearly all Group sales were in the three core businesses . Leading positions in local markets has enabled the company to build long-term agreements with major retailers. the Group aims to increase this share to 40%. on innovation and. The international expansion strategy has focused on a limited number of countries.fresh dairy. The Group believes that growth rates in these segments are among the highest in the food industry and that the momentum reflects a close match with trends in consumer tastes. selected for their growth potential. In addition to a greater focus on its three core business segments. However. close ties to consumers. when it acquired Chupa Chups’ soft cake business in Russia. wideranging distribution for sales close to consumers. Growth strategies in emerging markets link high-profile brands with efficient. providing added competitive advantage in addition to that achieved in terms of its marketing expertise. Although around 31% of sales are in emerging markets. particularly with products associated with health. Poor performances in the biscuit division in 2003 led to speculation in early 2004 that a buyer may be sought for the division. breadth of product ranges and targeted R&D. which will enable it to benefit from the growth potential of developing economies and also the steady demand of more mature markets. this followed increased investment in the division by Danone in January 2004. the Group’s strategy extends to geographical targets. despite its global nature. which is centred.

Success in NPD A focus for Danone in recent months has been the introduction of premium products into their portfolios. Danone Vitapole undertakes work on research. including 600 researchers and engineers to develop the Groups’ products and processes. private label alternatives. a product present in 15 countries. Danone Vitapole.With almost 60% of Group sales recorded from four brands (Danone. 81 . Exchanges of research between divisions have generated insights with the potential for short and medium-term development. with applications in each business line for deployment in multiple markets. grew at an annual rate of more than 40% in 2000. France. development. This is being consolidated with the extension and promotion of tag brands such as Taillefine/Vitalinea for low-fat products and Prince for children’s snacks. Recent successes have included Actimel. The sales of Actimel. Poland and Argentina. serves all three of the Group’s core businesses. the Group is able to optimise its marketing expenditure which. Similar drinkable yoghurts have become a key element in the growth of the Group’s fresh dairy products business: Drinkable Bio in Spain. Operational since September 2002. Powered by strong growth in traditional European markets. Danone’s worldwide R&D centre. Based in Palaiseau. quality control and food safety. Danimals Drinkable in the United States. Evian. in turn. The company sees this as a means of differentiating its products from less expensive. Actimel was launched in Mexico. Danonino in Mexico and Drinkable Petit Gervais in a number of other countries. developed to meet the latest trends in snacking. LU and Wahaha) and 97% sourced to the Group’s three main segments. a drinkable yoghurt. provides a key advantage in the strategy of profitable growth centred on innovation and close links to consumers.000 staff. the company employs an R&D community of over 1.

packaging and services. from sales to production.com. some 30 companies around the world will have completed implementation. weaknesses. THEMIS simplifies and harmonises operating processes across all business functions.Online purchasing accounts for one-quarter of purchases Danone is an active user of CPGmarket.000 projects covering raw materials. a programme promoting dissemination of best practices throughout the Group. Improved sales forecasts and planning is optimising the flow of finished products and raw materials. Also in 2001.com and overall. 82 . industrial efficiency. thus reducing inventories and the risk of building up stocks of products that have passed their expiry date. an online marketplace for consumer packaged goods that the company co-founded in 2001. Internet transactions accounted for over 25% of volumes purchased by Danone worldwide and 35% of the total for Western Europe. highlighting the relative strengths. Danone launched THEMIS. in more than 160 markets. By 2004. opportunities and threats faced by the company. In 2002. buyers have used it to negotiate contracts totalling over €1. With size and leadership comes the ability to negotiate strong distribution agreements with supermarket chains. Group-wide deployment of THEMIS began in mid-2002. This provides added competitive advantage in addition to that achieved in terms of its marketing expertise. Leadership brings competitive advantages Danone claims to be the global leader in the fresh dairy products and bottled water markets and number two in cereal biscuits and snack crackers. Over 40 Danone subsidiaries in 20 countries use CPGmarket. After successful testing at four pilot sites. Although the costs of the programme increased in 2003. Danone has used the site for over 1. the level of potential cost-savings was also upgraded. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Danone in the form of a SWOT analysis.5 billion. breadth of product ranges and targeted R&D.

and biscuits and cereal. Despite the fact that the company is a global leader. Western European markets account for about 70% of the Group's sales • Similarly. fresh dairy. Evian. Figure 4. Danone is able to optimise its marketing expenditure which.14: Danone SWOT analysis Company Strengths • Leadership allows the company to negotiate strong agreements with retailers • The sale of non-core businesses means that Danone is now a more focused business • Danone is able to optimise its marketing expenditure which. Danone is heavily reliant on the sales of its four major brands and the performance of three core categories Company Opportunities • The acquisition of Nestlé’s dairy business in Turkey will double its sales in Turkey and strengthen its leading position in fresh dairy products • Danone believes that growth rates in its three core segments are among the highest in the food industry • The company has ambitious targets for sales growth in emerging markets Company Threats • A focus for Danone in recent months has been the introduction of premium products to counter threats from less expensive. it remains ‘close to the ground’ and tailors its expertise to meet the needs of local markets. With almost 60% of Group sales recorded from four brands (Danone. where it has most expertise.The sale of non-core businesses means that Danone is a more focused business and nearly all Group sales are in three core businesses. Danone faced the threat of legal action for alleged abuse of its market dominance Source: Author research Business Insights 83 . Around 70% of sales come from brands that are local market leaders. private label alternatives • In Spain. beverages. provides a key advantage Company Weaknesses • Despite the fact that the company realises the majority of its sales from local market leaders. in turn. LU and Wahaha) and 97% sourced to the Group’s three main segments. provides a key advantage in the strategy of profitable growth centred on innovation and close links to consumers.

beverages. following regional and product concentration. Whilst it is as susceptible as other companies to regional factors that influence a market.Over reliance on regions. these may have a greater impact upon Danone due to its reliance in the region. leaving the company heavily reliant upon the performance of these categories. Expanding into emerging markets In December 2003. brands and categories Despite the fact that the company realises the majority of its sales from local market leaders. This was seen to some extent with the poor performances in 2003 of the company’s biscuit and cereals division. could have far-reaching consequences on the company’s performance. be it product. the company believes that growth rates in these segments are among the highest in the food industry and that the momentum reflects a close match with trends in consumer tastes. and biscuits and cereal. Though nearly all Group sales are in the three core businesses. Western European markets account for about 70% of the Group’s sales. Danone announced that it had acquired Nestlé’s dairy business in Turkey in a move that will double its Turkish sales and strengthen its leading position in fresh dairy products. any disruption to one of these. which together represent almost 60% of the company’s sales. Continuing the theme. Similarly. particularly with products associated with health. wellbeing and convenience. The deal also includes the UHT milk business of Nestlé. the sale of Galbani’s cheese business at the beginning of 2002 meant that nearly all Group sales were in the three core businesses.or category-related. 84 . This is a particularly high proportion for a global company. whilst its four major brands is a strength of the company. fresh dairy.

especially in chains that are already heavily dependent on Danone’s existing range of dairy products. suggesting that it may have prevented the introduction of Müller’s own products into the retail network. the Group aims to increase this share to 40%. Danone has denied any sort of misconduct.In addition to a greater focus on its three core business segments. Although around 31% of sales are in emerging markets. In March. Capa and Duo. the Danone’s strategy extends to geographical targets. the company faced the threat of legal action from Müller in the premium yoghurt market. Müller reacted by accusing Danone of abusing its dominance of the market in launching the products. 85 . Danone launched two new yoghurt lines. taking a similar position to Müller’s own premium line of yoghurts. Growth of private labels and legal action in Spain In Spain. Maxifruit and Duetto.

Chapter 5 General Mills 86 .

consumer brands. Trix yoghurt. especially with the expansion of distribution networks of the leading brands into fast-growing retail channels. In 2004 General Mills has set out to focus on four strategies that have already proved successful in the past. General Mills’ net sales grew 32% to $10. over 30 of which generate annual retail sales in excess of $100 million.5 billion from Diageo of the UK. the portfolio of brands includes Häagen-Dazs. Cereal Partners Worldwide is a joint venture with Nestlé that builds cereal brands in international markets. and Go-GURT. convenient dinner options including the Betty Crocker. In 2001. reflecting an incremental five months of Pillsbury results. In the year to May 2003. a range of snack brands and Yoplait. Within General Mills’ International Division. with consumer brands such as Cheerios.5 billion. General Mills acquired Pillsbury. Old El Paso Mexican and Green Giant vegetables brands. Betty Crocker. Wheaties and Lucky Charms.Chapter 5 Summary General Mills General Mills is a global manufacturer of consumer foods products with more than 100 U. Pillsbury. The addition of Pillsbury has enhanced these strategies and the company’s mix of retail categories offers further opportunities for product and marketing innovation. The company’s major businesses include Big G cereals.S. General Mills is looking to capture a growing share of away-from home food sales. Colombo. channel expansion. Yoplait Light. snacks. pizzas. soups and Mexican foods. a market leader in the US with products such as Yoplait Original. whilst international expansion is also an important target for the company. for $10. On a comparable basis sales grew 6%. baked goods. including natural and organic stores. The strategies are: product innovation. bakery and dough products from Pillsbury. Yumsters. maker of refrigerated dough products. 87 . Green Giant and Old El Paso Mexican foods. international expansion and margin expansion.

in 1866. the company completed its concentration on consumer packaged foods with the spin-off to shareholders of the General Mills Restaurants Division as a separate public 88 . Its global brand portfolio includes Betty Crocker. General Mills formed two important strategic joint ventures: Cereal Partners Worldwide. Pillsbury. and Snack Ventures Europe. Old El Paso and Bugles. Additionally. General Mills is also a leader in the bakeries and foodservice business as a major supplier of baking and other food products to the foodservice and commercial baking industries. one of the company’s first snack products and in 1967 Pillsbury acquired Burger King. with PepsiCo.000 people worldwide. Charles Pillsbury acquired Minneapolis Flour Mills. Green Giant. It also has more than 100 U. In May 1995. Haagen-Dazs. In the early 1990s. In 1869. Cadwallader Washburn built a flourmill on the banks of the Mississippi River in Minneapolis.S. General Mills was founded through the merger of several milling companies. General Mills introduced Bugles. the company markets organic food products under the brands Cascadian Farm and Muir Glen. In 1928. Pillsbury was acquired by Grand Metropolitan plc in the UK (which later merged with Guinness to form Diageo). In 1966. United States. and refrigerated entrées under the Lloyd’s brand. more than 30 of which generate annual retail sales in excess of $100 million. Pillsbury acquired Green Giant and followed this with the acquisition of Häagen-Dazs in 1983. In 1979. consumer brands. In 1977. In 1989. The company employs 28.About General Mills General Mills is a leading global manufacturer of consumer foods products. General Mills launched Yoplait yoghurt in America. with Nestlé. operates in more than 30 markets around the world and exports to more than 90 countries. History The company has its roots in the late nineteenth century when.

price increases that were implemented to offset higher commodity costs took longer than planned to realise. In 2001. snacks. net sales for the retail operations increased by 25% to exceed $7. manufacturer of refrigerated dough products. soups and Mexican foods. Recent performance A good performance in 2003 despite problems in bakery In the company’s fiscal year to May 2003. Yoplait yoghurt. On a comparable basis (as if the company had owned Pillsbury for all 12 months of both 2002 and 2003) sales grew 6%. On a comparable basis. reflecting a downturn in U. reflecting both a strong performance of existing operations plus an incremental five months of Pillsbury results. Betty Crocker dinner mixes and Progresso ready-to-serve soups. baked goods. The bakeries and foodservice division had a difficult year in 2003. Darden Restaurants. The company’s profit margin expanded as it captured cost synergies from the Pillsbury acquisition and net earnings doubled to $917 million.8 billion pre-tax. the company’s proportionate share of international joint venture revenues increased to more than $990 million.4 billion. foodservice markets.company. General Mills’ net sales grew 32% to $10. Inc. unit volumes increased 4%. for $10. 89 . Comparable unit volumes increased by 2%. In addition. as gains were recorded in every geographic region but Latin America.5 billion.S. net sales for the wholly owned international businesses grew 67% to reach $1. In the United States. Though sales increased by 42%.3 billion. pizzas. For the company’s international business results. led by gains from Big G cereals. In addition. and operating profits grew 66% to $1. operating profits and comparable unit volume were static. General Mills acquired Pillsbury.5 billion from Diageo of the UK. where volumes fell 20% due to difficult macroeconomic conditions.

000 4.506 917 Interim 2003 Interim 2004 (1) 5.Table 5.315 452 5.26: General Mills financial performance 2001—2004 US$ m Turnover Net Earnings 2001 5. 2003.000 0 2001 2002 2003 Interim 2003 Interim 2004 Business Insights Turnover Net Earnings Source: Company accounts 90 . Source: Company accounts Business Insights Figure 5.000 8.000 10. turnover and net earnings $m 12.578 535 Note: (1) 26 weeks ending November 23rd.000 6.450 665 2002 7.949 458 2003 10.15: General Mills financial performance 2001—2004.000 2.

407 1. Green Giant vegetables and meal starters. Pillsbury frozen waffles.438 788 932 7. According to General Mills.S. Wheaties and Lucky Charms. ready-to-eat cereal category. US$ m Big G Cereals Meals Pillsbury USA Snacking Products Yoghurts/Organic/Other Total US Retail Bakeries and Foodservice International 2002 1. Other products from the Pillsbury division include Pillsbury Home Baked Classics.264 778 2003 1.926 899 753 Note: (1) 26 weeks ending November 23rd. with consumer brands such as Cheerios. Betty Crocker potato mixes.799 1. 91 . and Lloyd’s refrigerated entrées. and Totino’s frozen pizza and snacks.300 Interim 2004 (1) 3. Pillsbury is the market leader in the refrigerated dough category. The meals division manufactures convenient dinner options under a number of brands including Helper casseroles. Table 5.27: General Mills performance by division 2002—2004 Net Sales.Table 5. 2003. Source: Company accounts Business Insights Market positioning A portfolio of international brands The company’s major businesses include Big G cereals. a leader in the U.27 illustrates the performance of the various divisions of General Mills in 2002—2003. Old El Paso Mexican foods.144 793 722 815 5. Progresso soups.907 1.866 1.998 1.702 1.

Bisquick baking mixes.90 33.68 6.28: General Mills market shares.20 15.10 4. Chex Mix snack mix. The company believes that Yoplait is a market leader in the United States with products such as Yoplait Original.62 1. Yumsters. 2002 Country Argentina Australia Belgium Brazil Canada China Ireland France Hong Kong Hungary Netherlands Netherlands New Zealand Portugal South Africa Spain US US US US US Venezuela Market Chilled Food Chilled Food Savoury Snacks Chilled Food Confectionery Savoury Snacks Savoury Snacks Savoury Snacks Savoury Snacks Savoury Snacks Savoury Snacks Savoury Snacks Chilled Food Savoury Snacks Savoury Snacks Savoury Snacks Chilled Food Savoury Snacks Dairy Confectionery Dairy Chilled Food Category Overall Overall Overall Overall Sugar Overall Overall Overall Overall Overall Overall Overall Overall Overall Overall Overall Overall Overall Overall Sugar Yoghurt Overall Company Value% Pillsbury Argentina SA Pillsbury Australia Pty Ltd Smiths Food Group BV Pillsbury Brasil Ltda General Mills Canada Inc General Mills (China) Co Ltd Pillsbury Ireland Ltd General Mills France SAS General Mills Inc SVE Hungary Kft Smiths Food Group BV Smiths Food Group BV Pillsbury Australia Pty Ltd Pillsbury Ibérica SA Pillsbury SA (Pty) Ltd Snack Ventures SA General Mills Inc General Mills Inc General Mills Inc General Mills Inc General Mills Inc Pillsbury de Venezuela CA 5. Health Ventures businesses include Small Planet Foods and organic food 92 . General Mills’ snacks division manufactures brands such as Fruit Roll-Ups fruit snacks.40 4. and Gold Medal flour. Pop Secret microwave popcorn and Nature Valley granola bars. Trix yoghurt. and GoGURT.54 Source: Author analysis of Datamonitor research Business Insights The company’s baking products division produces a wide range of baking solutions including Betty Crocker dessert mixes. Colombo.80 3. Betty Crocker cakes and frostings.40 33.13 2. Yoplait Light.78 13.Table 5.80 2.70 0.40 0.40 40.51 22.58 2.30 5.50 0.30 0.55 31.00 0.

com/corporate/businesses/ Business Insights 93 . Many branded products are also sold through non-grocery outlets such as school cafeterias. the portfolio of brands includes HäagenDazs ice cream.brands. whilst Snack Ventures Europe (SVE). restaurants and convenience stores. a joint venture with PepsiCo is a leading snack manufacturer in Europe. a joint venture with Nestlé. part-baked and fully baked dough products and mixes to foodservice operators. Within General Mills’ International Division.16: A selection of brands from General Mills Source: http://www. Green Giant vegetables and Old El Paso Mexican foods. Figure 5. as well as 8th Continent. Cascadian Farm and Muir Glen. General Mills’ bakeries and foodservice division markets unbaked. Cereal Partners Worldwide (CPW). Betty Crocker desserts and mixes. and retail and wholesale bakeries. a soy products joint venture with DuPont. Pillsbury dough-based products.generalmills. builds cereal brands in international markets around the world.

NPD targets consumer megatrends in 2003 In February 2003. which drives unit volume and market share gains. General Mills is looking to capture a growing share of away-from home food sales. In addition. From a financial perspective.Strategies for growth Innovation and international expansion will drive sales In the latter half of 2003 and into 2004 General Mills has set out to focus on four strategies that have already proved successful in the past: Product innovation. texture and nutrition. channel expansion. to build the company’s brands in fast-growing markets around the world.Berry Burst Cheerios Strawberry and Berry Burst Cheerios Triple Berry (strawberries. Freeze-drying maintains a food product’s original appearance. margin expansion. The addition of Pillsbury has enhanced these strategies and the company’s mix of retail categories offers further opportunities for product and marketing innovation. The two new products . including natural and organic stores. International expansion is an important target for the company and it will look to drive sales growth through both its wholly owned operations and joint ventures. the fruit re- 94 . General Mills introduced Berry Burst Cheerios. blueberries and raspberries) provides the taste and experience of fresh fruit through the process of freeze-drying. the company expects to achieve margin expansion through a continuous focus on productivity savings. When milk is added to the cereal. especially with the expansion of distribution networks of the leading brands into fast-growing retail channels. to grow earnings faster than sales. to ensure that the company’s products are available as widely as possible. international expansion.

Pop Secret and Nature Valley brands.Strawberry. In January 2004. microwave popcorn and grain snacks were introduced under the Betty Crocker. strawberries and Cheerios. the bars contain 12 vitamins and minerals and have only 150 calories and two grams of fat per bar. Apple Cinnamon. Berry Burst Cheerios offers consumers the same cholesterol-lowering properties as original Cheerios. Additionally. the company extended the range of Berry Burst Cheerios with Strawberry Banana Berry Burst Cheerios. The new products in fruit snacks. and Blueberry. Pillsbury launched three new products. Crusty Sourdough Dinner Rolls and Extra Large Easy Split Biscuits. General Mills launched Oatmeal Crisp Fruit ‘n Cereal Bars. and Betty Crocker combined to introduce Sesame Street Elmo Fruit Snacks. With health-conscious consumers in mind. the bars were launched in three flavours . Appealing to healthconscious consumers. Like the other Pillsbury Home Baked Classics items. Meeting the convenience requirements of snacking consumers. Soft White Dinner Rolls. the latest addition to their bars line-up that includes Nature Valley and Milk ‘n Cereal Bars. General Mills launched five new snacking products. which include a mix of 12 different inner snack pouches have learning themes and educational games for families to enjoy together. the new dinner rolls and biscuits transfer straight from the freezer to the oven. The innovative packaging of Elmo Fruit Snacks encourages kids to eat and learn. with no thawing or proofing required. Three different themed packages. a variety featuring a combination of real bananas. These learning activities are featured on both the outside and inside of the outer packages and on the individual snack pouches. the nonprofit educational organisation and producers of Sesame Street. Sesame Workshop. dinner rolls and sweet rolls. to extend the company’s line of freezer-to-oven biscuits. They offer 95 . In June 2003.hydrates. a serving (30 grams) of Berry Burst Cheerios contributes 110 calories and provides 70% of the recommended daily allowance for folic acid and 60% of the recommended daily allowance for iron. In September 2003. Also in February 2003.

more than 30 of which generate annual retail sales in excess of $100 million. Buttermilk and Blueberry. SWOT analysis The following section provides a brief appraisal of the performance and strategy of General Mills in the form of a SWOT analysis. Mini Pancakes with Dippin’ Cups are 3-inch diameter pancakes that come with individual syrup cups for dipping. highlighting the relative strengths. Strong brands across several categories General Mills operates more than 100 U.S. Chocolate Chip and Cinnamon. Both the pancakes and syrup cups are microwavable. The acquisition of Pillsbury extended the portfolio so that General Mills is also a leader in the bakeries and foodservice business as a major supplier of baking and other food products to the foodservice and commercial baking industries. Pillsbury extended their range of Pillsbury Waffle Sticks with Dippin’ Cups and additions to the Pillsbury Toaster Strudel pastries line. then store the rest of the bag for later. Consumers can choose from two flavours. weaknesses. opportunities and threats faced by the company. Pillsbury Mini Pancakes with Dippin’ Cups build on the success of their original frozen breakfast dipping product.convenient portion control with a re-sealable bag and individually frozen items. consumer brands. In October 2003. were launched as well as additional flavours of Pillsbury Toaster Strudel pastries. 96 . two new flavours of Pillsbury Waffle Sticks with Dippin’ Cups. and easy for kids to prepare. Additionally. so families can bake just the number they need.

97 .17: General Mills SWOT analysis Company Strengths • General Mills operates more than 100 US consumer brands. whilst international expansion is an important target Company Threats • The threat of higher commodity costs. more than 30 of which generate annual retail sales in excess of $100 million • The acquisition of Pillsbury extended the portfolio Company Weaknesses • Higher supply-chain costs due in large part to higher prices on key commodities • The Bakeries and Foodservice division had a difficult year in 2003 reflecting a downturn in US foodservice markets Company Opportunities • The continued integration of Pillsbury will enhance the company’s growth strategies • General Mills is looking to capture a growing share of away-from home food sales. 2003). The bakeries and foodservice division had a difficult year in 2003.S. reflecting a downturn in U. • Overall trends that see foodservice taking an increasing share of out-ofhome food sales pose a threat to future sales. foodservice markets. volume trends weakened in the second quarter. price increases that were implemented to offset higher commodity costs took longer than planned to realise. In addition.Figure 5. sales and earnings through the first half of the company’s 2004 fiscal year (the six months to November 23. Source: Author research Business Insights Weaker markets and higher commodity costs Although the company achieved growth in unit volume. due in large part to higher prices on key commodities such as wheat. eggs and vanilla. Supply-chain costs are expected to be higher than planned. Operating profits and comparable unit volume were static. oil.

where volumes fell 20% due to difficult macroeconomic conditions. including natural and organic stores.For the company’s international business results. with Nestlé and Snack Ventures Europe. In addition. to the detriment of the company’s performance. In addition. The continued integration of Pillsbury will enhance the company’s growth strategies and the company’s mix of retail categories and offers further opportunities for product and marketing innovation. Joint ventures and international expansion The company is willing to take on joint ventures to realise growth potential in markets where it has insufficient expertise such as Cereal Partners Worldwide. General Mills is looking to capture a growing share of away-from home food sales. Threats General Mills as well as many other companies have had to face up to the threat of higher commodity costs. whilst international expansion is an important target for the company and it will look to drive sales growth through both its wholly owned operations and joint ventures. comparable unit volumes decreased in Latin America. In 2003. especially with the expansion of distribution networks of the leading brands into fast-growing retail channels. 98 . overall trends that see foodservice taking an increasing share of out-of-home food sales do pose a threat to future sales. with PepsiCo. price increases that were implemented to offset higher commodity costs took longer than planned to realise. although out-of home foodservice markets have suffered from slower rates of growth in recent years.

99 .

Chapter 6 Heinz 100 .

and measure and recognise performance. the company announced that it was to make a number of changes to its U. Heinz admits that its biggest growth opportunity is its biggest brand . In July 2003. The company plans to achieve this through growing shares in developed markets. In October 2003. Heinz One Carb Ketchup is designed for consumers who wish to moderate their carbohydrate intake. business structure as part of the company’s transformation of its North America operations into a more effective. The company believes that it has a 30% share of the world’s ketchup market. Nucleotides are nutrients found naturally in breast milk that help develop a baby’s immune system. predictable and faster-growing company. condiments and sauces. its brands hold number one and number two market positions in more than 50 countries. and has set a target of a global market share of 50%. In January 2003. baby foods.S. Heinz announced that it would launch low carbohydrate ketchup.5 billion and Heinz’s top15 brands account for two-thirds of the company’s annual sales. Heinz announced that Farley’s First and Second Milk are now enhanced with nucleotides.Chapter 6 Summary Heinz According to Heinz. Heinz’s Brand Growth Strategy is based on four imperatives designed to drive profitable growth. remove the clutter. The company’s operations may be segmented into three main areas: ketchup.Heinz Ketchup. efficient and customer-focused operation. Heinz disposed of a number of North American businesses and merged them with Del Monte Foods Company in a move designed to make Heinz a more focused. meals and snacks.8 billion in annual sales. building foodservice tabletop ketchup outside the United States and driving usage in emerging markets. In June 2002. 101 . The Heinz brand is worth $2. The businesses together generated approximately $1. squeeze out costs.

tomato soup.About Heinz Based in the United States.5 billion and Heinz’s top-15 brands account for two-thirds of the company’s annual sales and 60% of sales are derived from outside of the United States. In 1886. the first overseas office had opened near the Tower of London and this was joined in 1905 by a factory in Peckham and in 1919 by a site in Harlesden that soon became the second English plant of Heinz. which was sold in a clear glass bottle. History In 1869.S. After horseradish came pickles. then cider vinegar and apple butter. U. In the same year Henry Heinz died of pneumonia at the age of 75. chilli sauce. These were delivered by horsedrawn wagons to grocers in and around Pittsburgh.S. predictable and faster-growing company. Red and green pepper sauces soon followed. Heinz visited England and persuaded Fortnum & Mason to accept all seven of his products for distribution. pickled onions. included North American pet food and pet snacks. baby foods. which together generated approximately $1. baked beans and sweet pickles. the first Heinz product was horseradish. According to the company. as in that of his father. After bankruptcy in 1875. The Heinz brand is worth $2. Henry Heinz restarted production with the help of his family and the company launched a new tomato ketchup product. mustard.8 billion in annual sales (or 20% of annual revenues). Howard. its brands hold number one and number two market positions in more than 50 countries. Heinz disposed of a number of North American businesses and merged them with Del Monte Foods Company in a move designed to make Heinz a more focused. U. The company is also a supplier of branded products to customers in both the retail grocery and foodservice channels. all growth was internal with all 102 . sauerkraut and vinegar. mincemeat. By 1896. He was succeeded by his son. private label soups and U. The businesses. pickled cauliflower.S. tuna. Pennsylvania. Heinz is a global food company. In June 2002. olives. Through the Howard Heinz era.

Heinz performance was on target with its own forecast range and arguably became a stronger global food company following the spin-off of a number of businesses to Del Monte (at the end of 2002). Egypt. Under R. Philippines. companies were acquired in Italy.overseas ventures being built from scratch. the pace of acquisitions and growth quickened. Hungary. Burt Gookin. Portugal and New Zealand and penetrated markets in South Africa. J. and soon the exception became the rule. launching an era in which Heinz became a leader in the nutrition and wellness revolution. CEO in 1998 and Chairman in 2000. South Korea. Heinz had reached the billion-dollar mark in sales. Indonesia. Recent performance In 2003. By 1972. 103 . Heinz II. Dr. William R. who became president in 1941. In the next few years. the Czech Republic. Russia. Singapore and Costa Rica. The company’s international growth strategy continued with the acquisition of companies in The Netherlands.3 billion and generated operating free cash flow of $752 million. Johnson took over as President in 1996. the company disposed of a number of businesses in a merger with Del Monte that was designed to make Heinz a more focused company able to invest more effectively in its strongest brands. China. Botswana and Zimbabwe. O’Reilly became president and CEO in 1979. India. Mexico. who became president in 1966. and several in the United States. Company production bases were launched in Spain. Portugal. The company reduced its net debt by $1. In 2002. This continued to be the policy for most of the tenure of H. The first exception was the acquisition of a food processor in the Netherlands in 1958.

relating to the Heinz/Del Monte transaction. Sales grew by 8.29: Heinz financial performance 2001—2004 US$ m Turnover Operating Profit 2001 6.0% decline in volume. a Canadian-based frozen fish and vegetable business.614 1. to reduce overheads of the remaining core businesses. compared with $833.Greater focus boosts performance in 2003 In 2003 (year ending April 30.986 698 Source: Company accounts Business Insights 104 .236 1.988 989 2002 7. driven by favourable exchange translation rates and acquisitions but were partially offset by a 2.759 Interim 2003 3.938 627 Interim 2004 3. 2003). Financial performance Table 6. in the previous fiscal year. the company recognised charges of $162.24 billion. Heinz reported net income for the year of $566.3 million.2% to $8.4 million after tax. exiting a UK pizza business and the loss on the sale of Omstead Foods. During 2003.300 2003 8.9 million.

led by good performances in the UK and Western Europe.000 2. The company was particularly pleased with its margin performance in Asia Pacific.000 4.000 8. 105 .000 7. Table 6.30 illustrates the performance of the separate divisions over a three and a half year period.Figure 6. Overall volume in Europe increased.000 5.000 3. Heinz reported results for the second quarter ended October 29. primarily related to the sale of the UK frozen pizza business and the Northern European bakery business. driven by higher volumes for John West and Petit Navire seafood. where the operating income margins increased.000 0 2001 2002 2003 Interim 2003 Interim 2004 Turnover Operating Profit Source: Company accounts Business Insights In November 2003. and announced net income of $191.18: Heinz financial performance 2001—2004.5 million. European volume gains were partially offset by decreases in baby food and frozen food products. turnover and operating profit comparison $m 9.3%.5 million.000 1. Heinz Salad Cream and convenience meals. Heinz Europe’s sales increased $60.000 6. and disposals reduced sales 2.

171 245 1.S.041 96 981 82 1. condiments & sauces and frozen meals & snacks). Heinz US “Away from Home” (focused on Heinz’s restaurant and on-the-go eating businesses) and Heinz US “Consumer Products” (retail businesses in ketchup.Table 6. The two units will have full responsibility for all related business functions.834 542 3.S. finance and the supply chain. including marketing.148 554 1.S.151 118 507 46 625 78 320 49 410 55 508 90 387 53 176 20 In January 2003. 106 .388 274 1. the company announced that it was to make a number of changes to its U. Frozen Turnover Operating Profit Europe Turnover Operating Profit Asia/Pacific Turnover Operating Profit Other Turnover Operating Profit 2. Foodservice Turnover Operating Profit Source: Company accounts 1.087 Operating Profit 492 U.30: Heinz divisional performance 2001—2004 US$ m 2001 2002 2003 Interim 2003 Interim 2004 Heinz North America Turnover 2. businesses as follows: North America Consumer Products Turnover Operating Profit U. efficient and customer-focused operation.273 383 n/a n/a n/a n/a 957 84 1.217 477 2.S.510 316 1. Two business units were created.156 200 n/a n/a n/a n/a 2. Heinz reorganised its U.583 389 2. sales.006 225 973 233 650 97 703 107 Business Insights In January 2003. business structure as part of the company’s transformation of its North America operations into a more effective.

Frozen foods represent more than $2 billion in sales. In the United States. the company serves health conscious consumers with Weight Watchers from Heinz and also produces Jane Asher desserts and Linda McCartney meat-free products. the Heinz 57 Sauce and the range of Classico pasta sauces. Bagel Bites and Hot Bites feature in the after-school snacks market. Truesoups specialises in making fresh-ingredient soups for well-known and rapidly growing fast-casual dining chains. The company’s ketchup. The company’s range of condiments include Salad Cream in the UK. beans and pasta. a manufacturer and marketer of frozen. the company’s operations are split between frozen foods and soups. premium. condiments and sauces. 107 . ready-to-heat-and-serve soups for casual dining restaurants and foodservice distributors.5 billion across in 140 countries. Ore-Ida is a branded potato processor that manufactures Funky Fries. Heinz announced that its Foodservice Division had acquired Seattle-based Truesoups. the Orlando range in Spain. meals and snacks. UFC “banana” ketchup in the Philippines and ABC soy sauce in Indonesia. Banquette in Costa Rica. Market positioning Global brand reach The company’s operations may be segmented into three main areas: ketchup. condiments and sauces sales are worth almost $2. The Heinz brand is synonymous with ketchup. Each year. Heinz sells 650 million bottles of ketchup and 11 billion packets of ketchup and dressings each year. In the meals and snacks segment. In the UK. whilst the company also produces Boston Market HomeStyle frozen meals and side dishes. the company manufactures Jack Daniel’s and Yoshida’s grilling sauces.Foodservice In June 2003. baby foods. Heinz’s Foodservice Division represents approximately 40% of Heinz North America’s sales.

10 0. In the beans and pastas sector. According to the company. HJ Heinz Co.50 2. 108 .31: Heinz market shares.70 2. 2002 Country Australia Australia Belgium Belgium India India New Zealand Sweden Sweden Market Savoury Snacks Chilled Food Dairy Dairy Dairy Dairy Chilled Food Dairy Dairy Category Overall Overall Overall Yoghurt Milk Overall Overall Overall Yoghurt Company Value% Heinz Co Australia Ltd. In the UK and India. it is a leader in Italy. a traditional Dutch topping for breakfast toast. according to the company.Table 6.60 5. holds the number one position in the UK market.47 0. Heinz has the Farley’s and Farex brands. The baby food market is worth nearly $1 billion to Heinz.29 0. HJ Heinz Wattie’s of Australia Heinz Co. HJ Heinz India Pvt Ltd Heinz India Pvt Ltd Heinz-Wattie Foods Ltd Svenska Heinz AB Svenska Heinz AB 0. recent acquisitions in Europe have been Honig dry soup in the Netherlands along with HAK vegetables and KDR spreads and sprinkles. Venezuela.20 0. and Australia. Canada.20 2.80 Source: Author analysis of Datamonitor research Business Insights Heinz is a leader in the soup category in Europe and.

heinz. and measure and recognise performance.com/jsp/world. more focused portfolio.Figure 6.Heinz Ketchup with a 30% share of the world’s ketchup market. which concentrates on higher-margin.jsp Business Insights Strategies for growth A focused portfolio The company’s biggest growth opportunity is its biggest brand . 109 . As a result of the decision to dispose of businesses in a merger with Del Monte in 2002.19: A selection of brands from Heinz Source: http://www. Heinz created a simpler. building foodservice tabletop ketchup outside the United States and driving usage in emerging markets. The company plans to achieve this through growing shares in developed markets. Heinz’s Brand Growth Strategy is based on four imperatives designed to drive profitable growth. remove the clutter. and a set target of a global market share of 50%. squeeze out costs.

The new ketchup will 110 . In the United States. NPD targets changing consumer requirements In the UK in November 2003. Heinz launched Mum’s Own jarred savoury recipes. Following the transaction. The promotion was also used to support recent re-branding at Heinz and was used to build consumers’ loyalty and a family association to the brand.higher-growth businesses. Peek-a-Blocks. Heinz announced that it would launch a low carbohydrate ketchup product. based on real mums’ homemade dishes. quality and convenience and was supported via press advertising. Also in the UK. the company announced that it planned to strengthen its portfolio with significantly increased marketing investment in the coming years. The Fisher Price Peek-a-Blocks range consists of six blocks. Fast Fries and Tater Tots. a truck and a wagon. Heinz and Fisher Price. all of which are interactive and encourage learning. Heinz undertook extensive further research in order to better understand mums’ needs and the result was 17 contemporary dishes created by 17 consumer mothers. in October 2003. such as recipe choice. in January 2004. nutritional balance. The Extra Crispy product line is set to be the first of several significant innovations over the next 12-18 months that will address consumer demands for greater convenience and healthy eating alternatives. In October 2003. sampling. a giraffe. teamed up to offer consumers the chance to claim items from the new Fisher Price innovative and interactive range of toys. a leading toy brand. Heinz One Carb Ketchup is designed for consumers who wish to moderate their carbohydrate intake without having to compromise on taste. Heinz ran a token collection scheme for the free Peek-a-Blocks toys across the Heinz Farley’s standard cereals range. by collecting tokens through an on-pack promotion. direct mail and consumer and trade PR. The products aim to meet the needs of new parents and young families.Golden Crinkles. Ore-Ida launched three Extra Crispy versions of its most popular products .

Strong brands and a focused approach According to the company. Classico. highlighting the relative strengths. Heinz announced that Farley’s First and Second Milk are enhanced with nucleotides. Nucleotides play a vital role in developing babies’ immune systems and have been proven to help babies fight off common tummy bugs and upsets by promoting the growth of “good” bacteria in the gut. it should also be noted that 60% of sales are derived from outside of its origin in the United States. LCPs (long chain lipids). Nucleotides are nutrients found naturally in breast milk. weaknesses. is fortified with iron. in addition to its existing 500ml pack. In addition. which is suitable from the age of six months. provides consumers with a variety of products to support healthier/dieting lifestyle needs. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Heinz in the form of a SWOT analysis.contain one gram of carbohydrates per serving and along with Heinz’s No Salt Added Ketchup and Organic Ketchup. energy and protein. Whilst Heinz’s top-15 brands account for twothirds of the company’s annual sales. In July. Farley’s has included nucleotides. Farley’s is also extending its offering in the ready-to-use format range by introducing a new 250ml carton. 111 . at similar levels as found in breast milk. Nucleotides also play an important role in promoting babies’ healthy growth. opportunities and threats faced by the company. whilst Farley’s Follow-On Milk. minerals. to Farley’s First and Second Milk. To meet consumers’ convenience requirements. its brands hold number one and number two market positions in more than 50 countries. the company’s premium pasta sauces brand has introduced a new line of products in the meat-based sector under the Classico Homestyle Meat Selections range and include Classic Beef with Onions and Garlic and Hearty Steak with Burgundy Wine Sauce. Both of these products also contain a full range of vitamins.

In June 2002. It announced that it was to make a number of changes in its US business structure to introduce a more effective. The company has set a target of a global market share of 50% • The company plans to grow shares in developed markets. efficient and customer-focused operation Company Opportunities • The company’s biggest growth opportunity is Heinz Ketchup.60% of sales are derived from outside of the US • Greater focus on core operations Company Weaknesses • In January 2003.20: Heinz SWOT analysis Company Strengths • Strong. the company recognised that operations were not as efficient and streamlined as they should be. Figure 6. build foodservice tabletop ketchup outside the United States and drive usage in emerging markets Company Threats • Whilst its main brand is its biggest strength. Heinz disposed of a number of North American businesses in a move designed to make Heinz a more focused. Source: Author research Business Insights 112 . predictable and faster-growing company. such a reliance on any one category or brand could be considered risky should unforeseen developments hinder the growth or performance of the core markets.The company now has a greater focus on its core operations than it had previously. established brands that hold number one and number two market positions in more than 50 countries • Diversified customer base .

113 .

Chapter 7 Hershey 114 .

-related manufacturing and Hershey International. Kisses. and subsidiaries is the corporation’s largest customer and represented about 17% of sales in 2002. Hershey has identified margin growth opportunities across their supply chains that include product line rationalisation and increased manufacturing efficiency. which included a realignment of the sales organisation and the disposal of non-strategic brands and products. Inc. to manufacture and distribute Kit Kat and Rolo confectionery products in the United States. and VSA. which exports to over 90 countries. The company’s main brands are Hershey’s. Hershey is looking to leverage its core competencies in the broader snack market. The Corporation also has an agreement with Nestlé SA. Hershey’s sales are split as 80% chocolate products and 20% non-chocolate. Albertsons. Operations of Hershey Foods Corporation are concentrated in two divisions. Jolly Rancher. In July 2003. U.S. It believes that targeted adjacent segments offer growth opportunities. as consumers are likely to select well-known brands in a broader array of snacks. Target. Carefree and Ice Breakers. Other large customers include K-mart. Wal-Mart Stores. Reese’s. CVS. including the introduction of new products and various initiatives to streamline its supply chain. Kit Kat. Hershey has license agreements with affiliated companies of Cadbury Schweppes to manufacture and/or market and distribute confectionery products worldwide as well as Cadbury and Caramello confectionery products in the United States.Chapter 7 Summary Hershey Hershey Foods Corporation is a leading North American manufacturer of chocolate and non-chocolate confectionery and chocolate-related grocery products. Twizzlers. The international business outside of North America accounts for less than 5% of total sales. 115 . Hershey announced a number of initiatives in its value enhancing strategy.

Mr. Kisses. In addition to chocolate coatings. as well as chocolate-related grocery products. As the company grew. Jolly Rancher. the Hershey Chocolate Company was born as a subsidiary of Milton Hershey’s existing Lancaster caramel business. the company’s main brands are Hershey’s. and has a variety of international operations. Kit Kat. In 1900. Hershey International oversees the corporation’s international interests and exports to over 90 countries worldwide. Carefree and Ice Breakers. Hershey made breakfast cocoa. sweet chocolate and baking chocolate. 1927. the Hershey Corporation was formed in the State of Delaware in October. Twizzlers. Mr. Operations of Hershey Foods Corporation are concentrated in two divisions. Hershey’s sales are split as 80% chocolate products and 20% non-chocolate products. The International business outside of North America accounts for less than 5% of the Corporation’s total sales.1 billion in 2002. Hershey Chocolate North America is a producer of chocolate and nonchocolate confectionery products.About Hershey Hershey Foods Corporation is a leading North American manufacturer of chocolate and non-chocolate confectionery and chocolate-related grocery products. In the United States. With sales of $4. History In early 1894. Reese’s. believing a large market existed for affordable confections that could be mass-produced. 116 . Hershey sold the Lancaster Caramel Company for $1 million. he retained the chocolate manufacturing equipment and the rights to manufacture chocolate. However.

convenient.820 335 2001 4. Performance in 2003 In July 2003. In 2002. confectionery market is a source of competitive advantage. which included a realignment of the sales organisation and the disposal of non-strategic brands and products. Hershey’s leading brands accounted for almost 60% of retail sales.32: Hershey financial performance 2000—2003 $m Turnover (1) Net Income Notes: (1) Net Sales. Proceeds from the sale of the gum brands totalled approximately $20. Rain-Blo gum balls and Super Bubble bubble gum. the Corporation realised funds from the sale of a group of gum brands to Farley’s and Sathers Candy Company. During the third quarter of 2003. Financial performance Table 7.137 207 2002 4.Recent performance Hershey’s leadership position within the U. The gum brands included Fruit Stripe chewing gum.173 458 117 . These items provide a significant source of incremental sales. Hershey announced a number of initiatives in its value enhancing strategy.120 404 2003 4.S. including the introduction of new products and various initiatives to streamline its supply chain. Source: Company accounts Business Insights 2000 3. however another focus in 2002 was “instant consumables”. Inc. onthe-go confectionery such as loose bars and individual packages of gum and mints.0 million.

Included in the transaction were the rights to sell Sixlets branded products.000 2.000 1.Figure 7. In October 2003. In January 2003. 118 .500 3. SweetWorks purchased the Ovation chocolate brand from Hershey Foods. The 1.500 2.500 4.000 500 0 2000 Source: Company accounts Turnover Net Income 2001 2002 2003 Business Insights In May 2003. Illinois. Also in May. compared with $273 million for the comparable period of 2002.000 3. Net income for the first nine months of 2003 was $312 million.1 million-square-foot distribution centre is expected to be operational by March 2004 as part of the company’s strategy to improve customer service and implement a low-cost supply chain. Hershey launched plans to build a new distribution centre in the Gateway Commerce Centre in Madison County.964 million for the first nine months of 2002. Hershey announced that it had agreed the sale of the Sixlets brand to SweetWorks. turnover and net income $m 4. the company announced that consolidated net sales for the first nine months of 2003 were $2.500 1. under license.21: Hershey financial performance 2000—2003.993 million compared with $2.

At the end of January 2004. Hershey’s principal confectionery brands include: Almond Joy and Mounds candy bars. Reese’s NutRageous candy bar. grocery products in the form of baking ingredients. Fourth-quarter consolidated net sales were $1. Hershey announced its results for the fourth quarter of 2003 and preliminary full-year results for 2003. Reese’s peanut butter cups.6 million. Twizzlers candy. PayDay peanut caramel bar. Cadbury Creme Eggs candy. Net income for 2003 was $457. Reese’s crunchy cookie cups. chocolate drink mixes. Operating profit margins vary considerably among individual products and brands. compared with $1. For the full year 2003.18 billion. compared to $130. the company stated that its plans for the year include accelerating new product launches and introducing higher-margin items. compared with $4.16 billion a year earlier. Sweet Escapes candy bars. and York peppermint patties.12 billion for 2002. Whoppers malted milk balls.9 million. consolidated net sales were $4. in the fourth quarter Hershey recorded net income of $144. dessert toppings and beverages. peanut butter. Hershey’s Nuggets chocolates. compared with $403. Boosted by new products such as Hershey’s S’mores and Swoops. however Hershey believes that margins on confectionery products are generally greater than those on certain other food products. Market positioning Higher margins in confectionery The Corporation’s principal product groups include: confectionery products sold in the form of bar goods. bagged items and boxed items. Hershey’s milk chocolate and milk chocolate with almonds bars. Hershey’s Kisses and Hershey’s Hugs chocolates.6 million for 2002. Announcing the results. Kit Kat wafer bar.3 million in 2002. 119 . TasteTations candy. Jolly Rancher candy.17 billion. Milk Duds candy. Hershey’s Cookies ‘n’ Creme candy bar.

120 .33: Hershey market shares in the Americas.17 0.54 0.60 2. Hershey’s chocolate milk mix. the company exports Hershey’s branded confectionery and grocery products to over 90 countries worldwide. Hershey’s cocoa. and Hershey’s.10 Source: Author analysis of Datamonitor research Business Insights Outside the Americas Internationally. Hershey’s Hot Cocoa Collection hot cocoa mix. Hershey’s chocolate drink. Reese’s and Heath baking pieces. 2002 Country Canada Canada Canada Colombia Mexico Mexico Mexico Mexico US US US US Market Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Dairy Category Chocolate Gum Sugar Sugar Chocolate Sugar Milk Overall Chocolate Gum Sugar Milk Company Value% Hershey Canada Inc Hershey Canada Inc Hershey Canada Inc Hershey Foods Corp Hershey México SA de CV Hershey México SA de CV Hershey México SA de CV Hershey México SA de CV Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp 19. Hershey’s syrup.62 0. The Americas Table 7.90 0.Grocery products include Hershey’s baking chocolate.73 7. Hershey’s Chocolate Shoppe ice cream toppings.77 12.74 1.05 0.40 33. Reese’s peanut butter.20 19.

40 2.10 19.10 1.34: Hershey market shares outside the Americas.07 1.60 5. The Corporation also has an agreement with Societe des Produits Nestlé SA. including minimum unit volume sales.27 Source: Author analysis of Datamonitor research Business Insights Hershey has license agreements with affiliated companies of Cadbury Schweppes to manufacture and/or market and distribute York.82 0. which licenses the Corporation to manufacture and distribute Kit Kat and Rolo confectionery products in the US.20 0. subject to a minimum sales requirement.40 0. 121 .70 0.77 4.05 0. 2002 Country China Greece Hong Kong Japan New Zealand New Zealand Philippines Philippines Philippines Philippines Philippines Russia Saudi Arabia Saudi Arabia Singapore South Africa Taiwan Taiwan Taiwan Thailand Vietnam Market Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Category Chocolate Chocolate Chocolate Chocolate Chocolate Milk Chocolate Sugar Milk Milk Overall Chocolate Chocolate Sugar Chocolate Gum Chocolate Milk Overall Chocolate Chocolate Company Value% Hershey Foods Corp Hershey Foods Corp Hershey Food Ltd Hershey Japan Co Ltd Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Philippines Inc Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp Hershey Foods Corp 6.42 0.32 0. Peter Paul Almond Joy and Peter Paul Mounds confectionery products worldwide as well as Cadbury and Caramello confectionery products in the United States. subject to certain conditions.30 0.40 0.92 1.Table 7.35 0.10 7.60 0.50 5.

as consumers are likely to select well-known brands in a broader array of snacks. the company has identified further margin expansion opportunities across the supply chain that will enable further investment in growth initiatives.S. the company is seeking to increase its leadership position in the U. confectionery market. Targeted adjacent segments offer incremental growth opportunities. the company is looking to leverage its core competencies in the broader snack market. In March 2003. with two components to deliver against this priority. Additionally.S.com/products/ Business Insights Strategies for growth Hershey’s stated mission is to be a focused food company in North America and selected international markets and a leader in every aspect of its business. particularly the North American confectionery market and the U. First. These include product line rationalisation and increased manufacturing efficiency.22: A selection of brands from Hershey Source: http://www. the company stated that accelerating profitable top-line growth was its number-one priority.Product examples Figure 7. market for chocolate-related grocery products.hersheys. Secondly. The company’s cocoa costs will increase in 2004 as a result of recent price increases in the world cocoa 122 .

convenience stores. NPD tracks consumer megatrends in 2003 In April 2003.market. and taste of branded confectionery products. quality. Other large customers include K-mart. chocolate confectionery sector. for the first time in its 109-year history.S. and VSA. Hershey’s customers and competitors Wal-Mart Stores. mass merchandisers. confectionery distributors. concessionaires and food distributors. food brokers and part-time retail sales merchandisers sell the company’s products.S. vending companies. sugar free chocolate confectionery featuring Reese’s Sugar Free Peanut Butter Cup Miniatures. Target. However. Inc. confectionery manufacturers have maintained a very good price-value relationship which has been a major reason behind the fact that private label accounts for only 2% of the market. Hershey sells to between eight and 10 different customer types. The corporation does not see private label products as a significant threat to its sales as it believes that consumers recognise the superior value. chain grocery stores. Albertsons. Full-time sales representatives. a share that it believes is fairly constant. Hershey introduced. In the domestic nonchocolate gum and mint categories the corporation’s largest competitors are Wrigley and Kraft/Nabisco. these raw material cost increases will be offset through a combination of price increases and/or product weight changes. Hershey’s Sugar Free Chocolate sweets. and an improved sales mix. including grocery wholesalers. and subsidiaries is the corporation’s largest customer and represented about 17% of sales in 2002. CVS. followed by Nestlé and Russell Stover. In the U. Hershey’s Sugar Free Chocolate sweets with 123 . Private label – no concern Hershey believes that private label represents around 2% of confectionery category sales. Hershey also believes that U. Hershey’s largest competitor is Mars. wholesalers.

Hershey introduced two new flavours of Hershey’s Kisses Limited Editions: Hershey’s Kisses Mint Chocolates and Extra Creamy Hershey’s Kisses with Toffee & Almonds. Other recent new product introductions from Hershey have included S’mores candy bar (incorporating graham crackers. as well as additional Limited Edition Reese’s products. The brands contain a sugar substitute (lactitol). In the same year. bar. The company positioned the products as having the same high quality and taste. marshmallow and Hershey’s milk chocolate). opportunities and threats faced by the company. packaged in re-sealable on the go containers) and Reese’s mini pieces in portable tubes. delivering a product with only one gram of sugar per 1. chocolate with almonds and chocolate with soy crisps.1 oz. weaknesses. Swoops chocolate slices (in four flavours. an important key to maintaining a low-carbohydrate lifestyle for health conscious consumers. In July. 124 . in response to consumer demand. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Hershey in the form of a SWOT analysis. The bars are formulated with sugar alcohols and fibre in place of traditional sweeteners. Hershey launched one gram Sugar Carb bars to meet increasing consumer interest in foods for low-carbohydrate lifestyles. highlighting the relative strengths. which is slowly metabolised and generally causes only a small rise in blood sugar levels. chocolate. The new chocolate flavour bar contains around 20% fewer calories than a regular Hershey’s milk chocolate bar and has minimal impact on blood sugar levels.Almonds and Hershey’s Sugar Free Dark Chocolate sweets. but without the sugar and about 19% fewer calories. Hershey’s Kisses Rich Dark chocolates were also added to the permanent Hershey’s Kisses collection. The bars will initially be launched in three flavours. In December 2003.

125 . confectionery market is a source of competitive advantage in building relationships with both customers (distribution chains) and consumers.Strengths Hershey’s leadership position within the U. A major company strength is the number of different customer types it sells its products through from chain grocery stores to vending companies.S. delivering better customer service at lower costs. Recent supply chain rationalisation has delivered significant improvements within the company’s logistics area in recent years.

23: Hershey SWOT analysis Company Strengths • Leadership positions within the US confectionery market are a source of competitive advantage • Hershey sells to a diversified range of between 8-10 different customer types • Rationalisation has delivered better customer service at lower costs Company Weaknesses • Dependency upon US markets. including various initiatives to streamline its supply chain. the company has suffered from supply chain inefficiencies and poor customer service. market. sugar free chocolate confectionery Source: Author research Business Insights Weaknesses Dependency upon U. Hershey introduced. has seen recent market share gains in convenience channels • Growth in international markets is an important source of growth • Leverage its core competencies in the broader snack market Company Threats • Raw material cost increases in 2004 will be offset by price increases. market and. markets is a primary weakness for Hershey. In recent years. its international business outside of North America accounts for less than 5% of the Corporation’s total sales.S. Whilst the company has leadership positions in the U. Inc. and an improved sales mix • Consumer health concerns. In April 2003. product weight changes. Hershey announced a number of initiatives in its value enhancing strategy. in particular Wal-Mart. International business outside of North America accounts for less than 5% of the Corporation’s total sales • Supply chain inefficiencies and poor customer service have hindered performance Company Opportunities • New products.Figure 7. and subsidiaries is the corporation’s largest customer and represented about 17% of Hershey’s sales in 2002. which 126 . Wal-Mart Stores.S. for the first time in its 109-year history.S. This makes the company heavily dependent upon the performance of the U. In July 2003. better programming and targeted support at store level.

The company does not expect these to pose too serious a threat to its financial performance as the cost increases will be offset through a combination of price increases and/or product weight changes. has seen recent market share gains. convenience stores have been an area of focus for Hershey. The company has historically been underrepresented in this market segment. The company has stated that strategic alternatives to address the long-term opportunities have been reviewed as it seeks to invest resources proportionally with potential growth prospects. the company has identified further margin expansion opportunities across the supply chain that will enable further investment in growth initiatives. Threats The company’s cocoa costs will increase in 2004 as a result of recent price increases in the world cocoa market. and an improved sales mix. Hershey must also realise that chocolate confectionery markets are increasingly mature and susceptible to declining growth rates. Additionally. better programming and targeted support at store level. These include product line rationalisation and increased manufacturing efficiency. Opportunities In recent years. though a combination of new products. The company is also recognising the threat to 127 .included a realignment of the sales organisation and the disposal of non-strategic brands and products. Hershey has also launched plans to build a new distribution centre as part of the company’s strategy to improve customer service and implement a low-cost supply chain. Growth in international markets has been restricted in recent years and the global marketplace remains an important source of growth to the company.

The brands contain a sugar substitute (lactitol). which is slowly metabolised and generally causes only a small rise in blood sugar levels. 128 .its core chocolate product posed by consumer health concerns and reacting by launching new products such as sugar free chocolate confectionery.

129 .

Chapter 8 Kellogg 130 .

Nutri-Grain. Carr’s.Chapter 8 Summary Kellogg Kellogg is a leading producer of cereal and convenience foods. Keebler. organic growth. vending and foodservice. from an “acquire-andintegrate” approach to one of sustainable. entertainment. difficult trading conditions in the cereal category. Kellogg has reported strong performances in the first half of 2003. Plantation. In May 2003. frozen waffles and meat alternatives. Famous Amos. though the snacks business has faced difficulties. Pop-Tarts. Cheez-It. 2004 will see a change in strategy for the snacks business. Special K. Murray. Kellogg is undertaking a series of productivity initiatives. and food categories. and efficiency initiatives. Between 1997 and 2000. publishing. Eggo. These include a snack plant consolidation. Morningstar Farms. clothing. Rice Krispies. The company responded by accelerating investment in long-term growth strategies. combined with heavy price promotion by competitors and a lack of sustained marketing support. toaster pastries. contributed to falling sales at Kellogg. and Kashi. which continued into the third-quarter. 131 . including cookies. rather than promoting greater volume sales through discounting. In 2004. Austin. cereal bars. technology. A key operating principle for Kellogg is to achieve greater value for the consumer (to ultimately achieve higher value/dollar sales and profit). capacity rationalisation and workforce reduction. Kellogg announced plans to expand its reach beyond the cereal and snack food aisles with extensive licensing initiatives in the toy. including product development. including a stronger presence in traditional supermarkets and in non-traditional channels such as convenience and gas stores. crackers. The acquisition of Keebler in 2001 has helped Kellogg to achieve greater scale in the United States. The company’s products are manufactured in 18 countries and marketed in more than 180 countries around the world and its brands include Kellogg’s.

Plantation. Special K. Loma Linda and Natural Touch products. Kellogg began worldwide expansion of the cereal business with introduction of Kellogg’s Corn Flakes in Canada and in 1922. In 1999. maker of Morningstar Farms. the company built its first plant in Australia. Kellogg is a leading producer of cereal and convenience foods. The company’s products are manufactured in 18 countries and marketed in more than 180 countries around the world and its brands include Kellogg’s. Morningstar Farms. Famous Amos. Eggo. Rice Krispies. cereal bars. Kellogg purchased Worthington Foods. This was followed in 2001 by the acquisition of Keebler Foods Company. History William Kellogg’s accidental discovery of cereal in 1894 marked the beginning of the business. Pop-Tarts. India and China. K. pie crusts and cones. crackers. Keebler. The following year. Carr’s. Kellogg became the first company to print nutrition messages. frozen waffles. a leading cookie and cracker 132 . In 1930. Worthington. In 1914. and Kashi. W. meat alternatives. which produces all-natural foods that are free of highly refined sugars. the company acquired Kashi Company. The mid-1990s saw rapid expansion with the construction of plants in Latvia. Murray. The first production of the newly invented cereal began in 1906 and the first marketing campaigns saw sales of the new product leap from 33 cases to 2. Nutri-Grain. sales started in the UK.900 cases per day. unnecessary additives and preservatives. In 1924. recipes and product information on its packages and in 1938. Cheez-It. Austin. UK. including cookies. toaster pastries. the company built a plant in Manchester.About Kellogg Established in 1906. This was followed by new plants in Mexico in 1951 and Japan in 1963.

Keebler cookies and crackers ($1. foodservice. Pop-Tarts toaster pastries ($500 million). The company also believes that Keebler takes second place in the cookie and cracker categories. food categories”. Additionally. Nutri-Grain cereal bars ($230 million). and mass merchandise stores. These brands include (2000 sales in brackets): Kellogg’s cereal ($2. Recent performance The March 2001 acquisition of Keebler Foods Company was by far the largest acquisition in the company’s history and its more diversified product portfolio will undoubtedly boost the company’s growth. including a stronger presence in traditional supermarkets and in non-traditional channels such as convenience and gas stores. Eggo waffles ($390 million). 133 . which are expected to reach $170 million annually over three years. Morningstar Farms products ($120 million) and Famous Amos cookies ($100 million). Rice Krispies Treats squares ($150 million). Eleven Kellogg and Keebler brands had 2000 retail sales of at least $100 million in the United States. In 2002. Murray cookies ($143 million). The acquisition has helped Kellogg to achieve greater scale in the United States.S. Cost synergies. two of which were greater than $1 billion. club stores. Cheez-It crackers ($313 million).3 billion). The company believes that it now manufactures products that rank first or second in U. Keebler’s direct store door (DSD) delivery system is expected to increase the growth potential of Kellogg snack foods such as Rice Krispies Treats squares and Nutri-Grain bars. Austin snacks ($129 million). vending. will also increase Kellogg’s financial flexibility. the company formed a multi-year global relationship with Disney to launch several new cereal and snack food products.S.manufacturer in the United States. both of which it rates as “growing faster than most other U.5 billion). sales across seven major food categories.

or 8% on a comparable basis. which enabled the company to increase its investment in new products and brand building. the company sold certain assets of Keebler’s Bake-Line private-label unit. including product development. Kellogg implemented a growth strategy designed to restore industry-leading growth and vitality to the company. though they recovered in 2000. Kellogg has reported strong performances in the first half of 2003. and efficiency initiatives. At the same time. Performance in 2003 During April 2002. even after significant reinvestment for future growth. The company responded by accelerating investment in long-term growth strategies. reported net earnings increased by 13% to $599. compared to year-earlier earnings of $529. Through the first nine months of 2003.Between 1997 and 2000. including a bakery in Marietta. which continued into the third-quarter. boosted by owning Keebler Foods for one additional quarter versus the prior year. Perhaps more significantly. operating profit increased by 29%. The decline was attributable primarily to increased production.9 million.1 million. This was followed in January 2003. Oklahoma. with the sale of additional private-label operations. It was driven by strong gross profit margin expansion. the company’s net sales increased by 10%.1%. In 2002. net sales growth was 4%. adjusting for that acquisition and a small disposal. difficult trading conditions in the cereal category combined with heavy price promotion by competitors contributed to the company’s net sales falling by 3. On a comparable basis. to Atlantic Baking Group. technology. operating profits fell by over 17% over the 1997— 1999 period. During the third quarter of 2003 (period ending September 27. distribution. and promotional expenditures for convenience food products and higher energy costs. The poor performance was also attributed to the company having fewer new products in 2000 and a lack of sustained marketing support for products introduced in 1999. the company reported consolidated internal net 134 . In 2000. 2003).

as a combination of brand-building activities and innovation resulted in higher volumes. internal net sales of the U. Over three-quarters of this decline was attributable to two factors: Discontinuance of a low-margin contract manufacturing relationship in May 2003. Operating profit increased by 2% in 2003. such as capacity rationalisation in Australia. taking into account an 11% drop in the fourth quarter. declined by around 4% in the third quarter. an acceleration of stock-keeping unit (SKU) rationalisation. beginning in the second quarter of 2003. cookies. which was led by Latin America and continued growth in cereal and snacks in Mexico in particular. with an increase in net sales of 6% to $8. net sales in the retail cereal channel increased approximately 11%. problems that are expected to persist. (which includes cereal bars and other wholesome snacks. and crackers). as a result of aggressive price-promotion by competitors and a relative lack of innovation and brandbuilding activities.S. U.sales growth of 4. Argentina and the United States. The company attributed this to “substantial reinvestment for the future”. In January 2004. The remainder of the decline was attributable to a fall in cookie sales. Kellogg International recorded net sales growth of 15%.5%.S. snacks business. Excluding the impact of private-label business disposals during the previous 12 months. Whilst Kellogg USA reported net sales growth of 2% in 2003. the company reported full-year financial results for 2003.8 billion. the company absorbed substantial asset write-offs and up-front costs related to productivity initiatives. In addition. as well as other supply-chain and overhead reductions in Europe. 135 .

000 9.000 4.000 5.000 1.000 3.168 2002 8.35: Kellogg’s financial performance 2000—2003 $m Turnover Operating Profit Source: Company accounts 2000 6. These include a snack plant consolidation in Australia.304 1.000 6.087 990 2001 7.Financial performance Table 8. increased by 69% between 2000 and 136 . manufacturing capacity rationalisation in the Mercosur region of Latin America. and plant workforce reduction in the UK. turnover and operating profit $m 10.24: Kellogg’s financial performance 2000—2003.36 illustrates the performance of the various operating segments divisions over a three and a half year period.508 2003 8. management is undertaking a series of productivity initiatives.S.544 Business Insights Figure 8. Table 8.548 1.812 1. Net sales in the U.000 2.000 0 2000 Source: Company accounts Turnover Operating Profit 2001 2002 2003 Business Insights During the second half of 2003 and throughout 2004.000 7.000 8.

Murray. Net Sales Operating Profit Europe Net Sales Operating Profit Latin America Net Sales Operating Profit Other Net Sales Operating Profit Source: Company accounts 2000 2001 2002 2003 3.S.470 253 1.462 235 1.889 876 5. is a leading cookie and cracker manufacturer in the United States.073 5.264 670 4. Keebler is also a leading licensed supplier of Girl Scout Cookies. Table 8. Club. which could add around one percentage point of extra growth to its sales results.525 1.734 280 624 162 650 171 631 170 646 169 716 89 648 103 678 104 802 140 Business Insights The company’s long-term annual growth targets are low single-digit for sales and mid single-digit for operating profit. and Australia/Asia by 2004.629 1. Famous Amos. with brands such as Austin. The company is in the process of reorganising its geographic management structure to North America. Through its Little Brownie Bakers subsidiary. Europe. Cheez-It. Keebler. whilst operating profits rose by 60%. 137 . Market positioning Meeting consumer needs in cereals.055 1.2002. the company’s results for its 2004 fiscal year will include a 53rd week. Plantation Sunshine.36: Kellogg’s divisional performance 2000—2003 $m U. Town House and Zesta.361 246 1. Chips Deluxe. snacks and health foods Keebler. Latin America. Fudge Shoppe. In addition. founded in 1853.

chicken.97 0.37: Kellogg market shares. Each product is minimally processed and free of highly refined sugars. gravy mixes. In 2003. chicken. fish. flavours or colours. chilli and breakfast meats. and preservatives. hot dogs. buffalo wings. corn dogs. Natural Touch also meets consumer’s requirements for food without artificial additives. unnecessary additives. Vegetarian products include meatless burgers. 138 .Table 8. Kellogg’s Rice Krispies celebrated its 75th anniversary with a number of promotions and events.60 0. Natural appeal Kashi was created in 1984 and manufactures all-natural food products such as cereals.20 1. 2002 Country Colombia Colombia Thailand UK US Market Dairy Dairy Savoury Snacks Confectionery Savoury Snacks Category Overall Yoghurt Overall Sugar Overall Company Value% Kellogg de Colombia SA Kellogg de Colombia SA Kellogg (Thailand) Ltd Kellogg Co of Great Britain Ltd Keebler Foods Co 0.30 1. breakfast meats and egg substitutes. The company offers a selection of vegetarian foods including vegetarian hamburgers. Other natural and functional brands include Worthington and Loma Linda. Their products are made from all-natural ingredients with minimal processing. whole-grain rice. The year also saw the 150th anniversary of the Keebler brand. crackers and the GoLEAN slimming system.30 Source: Author analysis of Datamonitor research Business Insights Morningstar Farms is a leading vegetarian food brand in the United States.

Figure 8. As a result the company set more realistic targets.79. Kellogg implemented a growth strategy designed to restore industry-leading growth and vitality to the company. “Set the Right Targets”. Mexico.140/kelloggco/our_brands/index.25: A selection of products from Kellogg Source: http://63. long-term growth.76. This was based on three fundamental targets: “Prioritise to Win”. The company made the decision to prioritise investments first to the United States and then to other core markets. Canada. 139 . The company recognised that in the past targets have been driven by short-term results at the expense of healthy. and Australia/New Zealand. including the UK/Republic of Ireland.html Business Insights Strategies for growth Three fundamental targets In 2000.

A key operating principle for Kellogg is to achieve greater value for the consumer (to ultimately achieve higher value/dollar sales and profit). Realising that execution is at the heart of any food company’s competitive edge. Kellogg launched a woman’s clothing line designed for active woman. a manufacturer of freezer pops.“Sweat the Execution”. The company believes that “volume to value” is the best way to produce sustainable. inspired by the Special K consumer. and geographies. 140 . The company will continue to leverage its consumer recognition and the overall growth of the food and beverage licensing industry with its expanded licensing programme. profitable growth. it has realised additional cost savings from the Keebler acquisition. For children. to introduce Fudge Shoppe Fudge Pops. The company’s managers now appreciate that its portfolio is focused and consistent enough to enable them to share ideas from business to business. In addition. rather than promoting greater volume sales through discounting. the company is now better placed to share proven ideas across functions. businesses. More recently.. which have led to improvements in its gross profit margin. Kellogg linked up with Modern Publishing for a new series of colouring and activity books features Kellogg’s cereal characters in fun settings for kids to colour. in conjunction with Bruce Brown Fashions Inc. the company has focused on selling more of its most profitable brands. from an “acquire-and-integrate” approach to one of sustainable. the company acknowledged that it must be aligned behind a business plan and focused on achieving the delivery of that plan. including new offerings that carry higher margins. organic growth. 2004 will see a fundamental change in strategy for the company’s snacks business. In addition. In the freezer cabinet. Finally. Kellogg has partnered with The Jel Sert Company. In November 2003.

busy consumers In May 2003. In September 2003. mixed berry and chocolatey chip granola bars. The snack bars offer adults an alternative to chocolate confectionery. Seuss’ The Cat in the Hat cereal and Pop-Tarts toaster pastries through a promotion with Universal Pictures/DreamWorks Pictures/Imagine Entertainment’s Dr. Chocolate delight features whipped chocolate blended with toasted grains and toffee bits in a chocolate coating. the first yoghurt filled variety. Kellogg’s Pop-Tarts introduced a new permanent addition to its range. August 2003 saw the introduction of new Kellogg’s Krave snack bars. Available in strawberry and blueberry. C and E. Targeting health conscious consumers that want to manage their chocolate cravings. Kellogg Company launched a limited edition Dr. Krave snack bars contain 11 essential vitamins and minerals and 50% of daily value of anti-oxidants. the new bars have nearly half the fat of leading confectionery bars. while chocolate peanut flavour includes chewy nougat with crispy rice. Pop-Tarts Yoghurt Blasts pastries feature alternating stripes of real fruit with yoghurt filling inside a toastable. as well as being a good source of protein and calcium. berry medley and chocolatey chip granola bites. caramel and chopped peanuts in a chocolate coating. as well as oatmeal raisin. vitamins A. Seuss’ The Cat in the Hat. targeting time poor consumers who do not have the time to prepare breakfast for themselves whilst meeting their family’s needs. Kellogg launched Nutri-Grain Granola Bars and Snack Bites. In November 2003. vanilla-flavoured crust. and have nearly as much calcium as a cup of low fat cottage cheese. These were introduced to “help busy adults succeed in their morning marathons”. 141 . the new products are topped with frosting that coordinates with the colour of the yoghurt filling. This was the latest partnership from Kellogg that uses licensed characters. The bars come in two flavours – Chocolate Delight and Chocolate Peanut.NPD focuses on helping modern. The bars and bites were launched in six varieties: honey oat and raisin.

Eggo French Toaster Sticks.In January 2004. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Kellogg in the form of a SWOT analysis. The company believes that it now manufactures products that rank first or second in U. opportunities and threats faced by the company. the company launched Eggo French Toaster Sticks with two primary customers in mind. print and TV broadcast advertising campaign.S. Eggo French Toaster Sticks take only a few minutes to prepare. which will undoubtedly boost the company’s growth. contain less fat than competitive products. have 220 calories per serving and include a number of key vitamins and nutrients. sales across seven major food 142 . Strengths The company’s products are manufactured in 18 countries and marketed in more than 180 countries around the world. Kellogg’s growth prospects are supported by the company’s underlying strength and stability: its nearly century-long record of leadership in the grain-based food business together with the non-cyclical nature of its products. two of which were greater than $1 billion. children who like French toast and their parents who usually don’t have time to make it. The product launch included an integrated marketing campaign with in-store sampling and point of sale materials. available in original and cinnamon flavours. As the first French toast offering for the Eggo brand. to Vitamin A and Folic Acid. highlighting the relative strengths. The acquisition of Keebler delivered a more diversified product portfolio. weaknesses. along with an online. ranging from calcium and iron. Eleven Kellogg and Keebler brands had 2000 retail sales of at least $100 million in the United States.

• Recent decline was also attributable to a relative lack of innovation and brand -building activities. particularly focused at the convenience market to cater for the on-the-go snack culture. problems which are expected to persist persist. Company Weaknesses • Sales decline expected in 2004.26: Kellogg SWOT analysis Company Strengths • Eleven Kellogg and Keebler brands had 2000 retail sales of at least $100 million in the US. • Kellogg faces significant increases in the prices of certain ingredients. new product development and brand extensions. aggressive SKU eliminations. Figure 8.S. Company Opportunities • Promotions. food categories”. NPD and brand extensions are essential to achieve growth in cereals cereals. packaging. • Possible dependence upon a small number of customers customers. Opportunities To maintain growth in its core cereals markets. • Expand reach beyond the cereal and snack foods with licensing initiatives initiatives.S. Source: Author research Business Insights Weaknesses The company expects another year of sales decline in 2004 for the cookie portion of its U. 143 . Company Threats • Boxed cereal markets are facing pressure from private label alternatives and a perceived lack of convenience convenience. and energy. and discontinuance of a custom manufacturing business during 2003. two of which were greater than $1 billion billion. both of which it rates as “growing faster than most other U. due principally to category factors. the company must embrace a range of strategies including promotions. snacks business. • The acquisition of Keebler delivered a more diversified product portfolio which will undoubtedly boost the company’s growth growth. for the cookie sector due principally to category factors factors.categories and that Keebler takes second place in the cookie and cracker categories. • Keebler acquisition brings stronger presence in traditional supermarkets and in non -traditional channels channels.

In a threat to profitability. 144 . Kellogg will face higher employee expenses and significant increases in the prices of certain grains. and food categories. packaging. which usually demand a higher price point. other ingredients. both domestically and internationally. The Keebler acquisition has helped Kellogg to achieve greater scale in the United States. Following a difficult trading in the years 1997—2000. The company has experienced intense competition for sales of all of its principal products in its major markets. entertainment. Threats Traditional boxed cereal markets are facing pressure from private label alternatives and a perceived lack of convenience. including a stronger presence in traditional supermarkets and in non-traditional channels such as convenience and gas stores. foodservice. clothing. The company is seeking to further expand its reach beyond the cereal and snack food aisles with extensive licensing initiatives in the toy. profitable growth. publishing. the company believes that “volume to value” is the best way to produce sustainable. including new offerings that carry higher margins. the company has focused on selling more of its most profitable brands. and mass merchandise stores. Cost synergies associated with the acquisition will also increase Kellogg’s financial flexibility. and energy. The company will continue to leverage its consumer recognition and the overall growth of the food and beverage licensing industry with its expanded licensing programme.This will include the continued development of cereal into bars. vending. More recently. in 2004. cocoa. club stores.

accounted for approximately 30% of the company’s consolidated net sales and approximately 40% of U. largely within the United States. Wal-Mart and its subsidiaries. net sales. During 2002. the company’s top five customers.S. Its largest customer.The company has a dependence upon a small number of customers. accounted for approximately 12% of consolidated net sales during 2002. collectively. 145 .

Chapter 9 Kraft 146 .

Kraft Foods markets food and beverage brands in five product sectors: snacks. Oscar Mayer meats. Post cereals. Throughout the first nine months of 2003. geographic-based commercial units. Nabisco cookies and crackers. These included trade inventory reductions. and key functions are now to be worldwide in scope. beverages and convenient meals. drug stores.in more than 150 countries. and convenient meals . The company announced three elements to its new strategy: a new global marketing and category development group. Jacobs and Maxwell House coffees. its global ‘One Company’ structure. The company’s brands include Kraft cheese. Philadelphia cream cheese. and Milka chocolates. consumer loyalty and greater in-store emphasis by retailers. Kraft’s brand strategy focuses on fast-growing sectors such as snacks. all of which it believes are growing faster than the traditional grocery channel. These offer the best growth potential and account for the majority of the company’s revenues (around 66% in 2002). grocery. mass merchandisers. warehouse consolidations and store closings. and vending machines. The appointment of Roger Deromedi as the Chief Executive Officer of Kraft in December 2003 reflected the company’s slow sales growth and difficulty launching new brands rather than extending existing brands. Category leadership provides Kraft with the benefits of scale.Chapter 9 Summary Kraft Kraft is the largest branded food and beverage company in North America and the second largest in the world. In January 2004. to better position Kraft to deliver sustainable growth. cheese. several factors contributed to lower than anticipated volume growth at Kraft. Kraft announced a new global organisational structure. 147 . Kraft is seeking to exploit faster growing distribution channels such as convenience stores. beverages. This enables Kraft to win a significant share of a category’s growth and profit.

was established in England. Post cereals.About Kraft Kraft is the largest branded food and beverage company in North America and the second largest in the world. In 1926. at the same time as Kraft Cheese Company Ltd. and Milka chocolates. Joseph Terry later joined the company and the business grew to become Terry’s of York. revenues reached nearly $30 billion and operating companies income was $6.in more than 150 countries. The company’s brands include Kraft cheese. However. Kraft acquired Kohler-Werke of Lindenberg. In 1934.4 billion. Philadelphia cream cheese. Kraft opened his first office in London. This was followed by offices in Hamburg in 1927. Kraft believes its brands hold the market leading position in 21 of its 25 top categories in the United States and 21 of its top 25 country categories internationally. Nabisco cookies and crackers. In 1928. History Kraft has its roots in a diverse range of companies. Oscar Mayer meats. Jacobs and Maxwell House coffees. the company had opened its first plant and began manufacturing its own cheese. Kraft Foods markets food and beverage brands in five product sectors: snacks. beverages. England. the Kraft Cheese Company acquired the Phenix Cheese Corporation. Illinois. Germany and established Kraft 148 . grocery. By 1914. cheese. In 1923. the Kraft name first appeared in 1903 when James Kraft began a wholesale cheese business in Chicago. of Melbourne. In 1924. Vegemite yeast spread was introduced in Australia by Fred Walker & Co. maker of the Philadelphia brand cream cheese (introduced in the United States in 1880). with 100 of those located in North America. In 2002. some of which were established over 200 years ago. The company operates 218 manufacturing and processing facilities worldwide. and convenient meals . The company’s history can be traced back to 1767 when Bayldon and Berry began selling candied fruit peel in York. the Kraft Cheese Company acquired an interest in the company.

Kase-Werke, G.m.b.H. In 1950, Kraft Deluxe process cheese slices and launched them in the United States; the first commercially packaged sliced process cheese in the country. In 1955, the product was introduced to the UK. Also in 1955, Kraft formed Kraft Foods de Mexico, S.A. de C.V. and opened a processing plant near Monterey, Mexico.

In 1988, Kraft was acquired by Philip Morris, making Philip Morris the world’s largest consumer products company. The following year, the food products divisions of Philip Morris, General Foods and Kraft, were joined to become Kraft General Foods. Kraft General Foods International was also established. In 1990, Kraft General Foods International acquired Jacobs Suchard, making it the number one in the European roast and ground coffee market and a leader in confectionery. Acquired brands included Carte Noire, Grand Mere and Jacobs coffee and Suchard, Milka, Toblerone and Cote d’Or chocolates. In 1992, Kraft General Foods International acquired Splendid, the second largest Italian coffee manufacturer, and El Caserio, a leader in processed cheese in Spain. Kraft General Foods International also made 14 other acquisitions during the year.

Between 1992—1993, Kraft moved into the Central and Eastern European market, with the acquisition of five local confectionery companies in the region: Csemege in Hungary, Figaro in Slovakia, Kaunas in Lithuania, Olza in Poland and Republika in Bulgaria. In 1993, Kraft General Foods International acquired Freia Marabou a.s. (Scandinavia’s premier confectioner) and Terry’s of York, in the UK. Also that year, Kraft General Foods acquired the United States and Canadian ready-to-eat cereal business from RJR Nabisco, including the Shreddies and Shredded Wheat cereal products. The following year, Kraft General Foods International acquired the Lyons instant coffee business from Lyons Tetley in the UK. The company also acquired a majority interest in Poiana, Romania’s leading confectioner.

In 1995, Kraft General Foods was reorganised and renamed Kraft Foods, Inc. and Kraft General Foods International was renamed Kraft Foods International (KFI). In 1996, the

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company extended its presence in the Latin American chocolate market with the purchase of Lacta in Brazil.

In 2000, Kraft Foods’ parent company Philip Morris acquired Nabisco Holdings, a world leader in cookies, crackers and snacks, for almost $15 billion. The Nabisco brands were integrated into the Kraft Foods business worldwide. The following year, Philip Morris offered an Initial Public Offering for Kraft Foods. Also in 2001, KFI strengthened its coffee businesses in Central and Eastern Europe and North Africa through the acquisition of several brands including Nova Brasilia in Bulgaria; Nova Brasilia, Classic Brasilier and Prestige in Romania; and Samar and Gaouar in Morocco.

In January 2003, Philip Morris, the parent company of Kraft Foods, changed its name to Altria Group, Inc. to communicate its corporate structure with greater clarity. In addition to owning 84% of Kraft, Altria is the parent company of Philip Morris International, Philip Morris USA and Philip Morris Capital Corporation. It is also the largest shareholder in the world’s second-largest brewer, SABMiller plc.

Recent performance
Performance in 2003 Throughout the first nine months of 2003, several factors contributed to lower than anticipated volume growth at Kraft. These factors included trade inventory reductions, resulting from several customers experiencing financial difficulty, warehouse consolidations, store closings and retailers’ stated initiatives to reduce working capital. To improve volume and share trends, Kraft announced in September that it would increase investment in certain U.S. businesses in 2003 and expects this to continue into 2004.

In the first nine months of 2003, Kraft realised volume gains of 0.6%, largely due to growth in the beverages, desserts and cereals segments, growth in developing markets,
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new product introductions and the impact of acquisitions. These were partially offset by the impact of disposals and lower consumption in certain categories, particularly U.S. cookies. Net revenues over the first three-quarters of the year increased by $804 million (3.7% on the same period in 2002) and operating income increased by $43 million (1.0%).

At the end of January 2004, Kraft announced it was to cut 6,000 jobs as part of its strategy aimed at strengthening performance and achieving long-term growth targets. A global restructuring programme is expected to involve the closure of up to 20 of Kraft’s production facilities worldwide and the elimination of about 6,000 positions at all levels of the company, or about 6% of its total workforce, over the next three years.

The announcement came as the company reported full-year 2003 net revenues of $31.0 billion, compared to $29.7 billion in the previous year. Commenting on the results, CEO Roger Deromedi stated: “While Kraft’s fourth quarter results were in line with our expectations, we clearly are not satisfied with our performance in the quarter or for the full year.”

Financial performance Table 9.38: Kraft financial performance 2000—2003
$m Net Revenues Operating Income
Source: Company accounts

2000 22,922 4,012

2001 29,234 4,884

2002 29,723 6,114

2003 31,010 6,011
Business Insights

The appointment of Roger Deromedi as the Chief Executive Officer of Kraft in December 2003 reflected the company’s slow sales growth and difficulty launching new brands rather than extending existing brands. Whilst the company has found success with brand extensions for such products as Oreos and Jell-O, it has failed to produce new brands that private labels cannot easily reproduce as a ‘me-too’ product.

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Figure 9.27:

Kraft financial performance 2000—2003; turnover and operating income

$m
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2000
Source: Company accounts

Net Revenues Operating Income

2001

2002

2003
Business Insights

The following table illustrates the performance of each of the reporting divisions of Kraft over the 2000—2003 period.

Table 9.39: Kraft divisional performance 2000—2003
$m -Cheese, Meals and Enhancers Net Revenue Operating Income -Biscuits, Snacks and Confectionery Net Revenue Operating Income -Beverages, Desserts and Cereals Net Revenue Operating Income -Oscar Mayer and Pizza Net Revenue Operating Income 2000 2001 2002 2003

7,923 1,845

8,732 2,099

9,172 2,210

9,439 2,230

293 100

5,071 966

4,887 1,051

4,801 887

4,267 1,090

4,237 1,192

4,412 1,136

4,567 1,247

2,829 512

2,930 539

3,014 556

3,100 556

Source: Company accounts

Business Insights

152

Table 9.40: Kraft divisional performance 2000—2003 continued
$m Total Kraft Foods North America Net Revenue Operating Income -Europe, Middle East and Africa Net Revenue Operating Income -Latin America and Asia-Pacific Net Revenue Operating Income Total Kraft Foods International Net Revenue Operating Income
Source: Company accounts

2000

2001

2002

2003

15,312 3,547

20,970 4,796

21,485 4,953

21,907 4,920

6,398 1,019

5,936 861

6,203 962

7,045 1,012

1,212 189

2,328 378

2,035 368

2,058 270

7,610 1,208

8,264 1,239

8,238 1,330

9,103 1,282
Business Insights

Acquisitions and sales In March, Kraft reached a preliminary agreement to acquire the Family Nutrition Company S.A.E., a leading producer of biscuits and snack cakes in Egypt. The Family Nutrition Company was a privately owned family business with 2002 revenues of approximately $40 million and employing over 1,800 people.

In April 2003, Kraft reached an agreement to sell its retail rice business in Germany, Austria and Denmark to Ebro Puleva SA, a leading Spanish producer of sugar, dairy and rice products. The sale includes the reis-fit brand marketed in Germany and Austria and ris-fix sold in Denmark.

In September 2003, Kraft announced plans to sell its Invernizzi branded cheese business in Italy to Groupe Lactalis, a leading French producer of dairy products. The proposed sale includes the Invernizzi gorgonzola, crescenza and mozzarella businesses and a manufacturing facility in Caravaggio, Italy. The transaction reflects Kraft’s strategy of focusing on growing its leading brands in its core categories. In Italy, these brands include Philadelphia, Sottilette, Susanna, Giravolte, Jocca and Osella cheeses, Hag and

153

Nabisco is the company’s umbrella brand for the cookies and crackers business and has over $3. The Americas Our other leading brands include Oscar Mayer. Philadelphia. a privately held manufacturer of natural products. The two dominant brands are Kraft and Nabisco. a leading coffee brand marketed in more than 78 countries. with $3. beverages.6 billion in revenues. The company believes that Kraft. and Post. Simmenthal canned meats and Milka.. Inc. Market positioning Coverage across five global product sectors Kraft’s brand portfolio covers five global product sectors: snacks.5 billion in sales. though it also includes salad and spoonable dressings. a ready-to-eat cereal brand in the United States. 154 . Maxwell House. a leading global cream cheese brand. the leading processed meats brand in the United States. barbecue sauce and other products.Splendid coffees. grocery. packaged dinners. Also in September. is the world’s leading brand of cheese. Cote d’Or and Toblerone chocolates. and convenient meals. cheese. Kraft announced the acquisition of the Back to Nature brand cereal and granola business from Organic Milling.

20 17.20 0. 2002 Country Argentina Argentina Brazil Brazil Canada Canada Canada Canada Canada Colombia Mexico Mexico US US US US US US US US US US Venezuela Venezuela Venezuela Venezuela Market Confectionery Confectionery Confectionery Savoury Snacks Chilled Food Confectionery Confectionery Dairy Dairy Confectionery Dairy Dairy Confectionery Dairy Dairy Chilled Food Confectionery Dairy Dairy Dairy Savoury Snacks Confectionery Dairy Dairy Savoury Snacks Confectionery Category Chocolate Chocolate Chocolate Overall Overall Chocolate Sugar Cheese Overall Sugar Cheese Overall Sugar Cheese Overall Overall Sugar Cheese Overall Yoghurt Overall Gum Cheese Overall Overall Sugar Company Value% Kraft Suchard Argentina SA Nabisco Terrabusi Kraft Foods Brasil SA Kraft Foods Brasil SA Kraft Canada Inc Kraft Canada Inc Kraft Canada Inc Kraft Canada Inc Kraft Canada Inc Nabisco Royal Colombiana SA Kraft Foods de México SA de CV Kraft Foods de México SA de CV Callard & Bowser Suchard Inc Churny Cheese Inc Churny Cheese Inc Kraft Foods Inc Kraft Foods Inc Kraft Foods Inc Kraft Foods Inc Kraft Foods Inc Kraft Foods Inc Nabisco Foods Co Alimentos Kraft de Venezuela CA Alimentos Kraft de Venezuela CA Nabisco de Venezuela CA Nabisco de Venezuela CA 12. Singapore and South Korea.45 29.10 3. Indonesia. Hong Kong.82 Source: Author analysis of Datamonitor research Business Insights Asia-Pacific Important markets for the company’s Philadelphia cream cheese brand in Asia-Pacific are Australia.98 7. 155 .67 26. Hong Kong.10 7. Indonesia.41: Kraft market shares in the Americas. Kraft Singles have important shares in Australia.12 4.40 3. Major markets for the company’s Ritz crackers brand include China.20 4. Japan.60 8.23 0.04 5. In the dressings sector Vegemite is one of Australia’s best-known brands and is also popular in New Zealand.90 2. Taiwan and Thailand.50 33.52 21.50 2.50 1.60 10.Table 9. Malaysia. South Korea and the Philippines.80 1.20 0.90 5. Hong Kong. Philippines.20 9. Singapore.76 3.70 0.

30 48.47 29.50 2.22 62.70 31.95 0.40 3.60 3.70 1.40 5.90 1.00 4.07 0.10 0.75 53.10 4.72 1.20 3.20 2.60 1.45 1.00 1.20 2.60 0.42: Kraft market shares in Asia-Pacific.40 49.57 16.00 0. 2002 Country Australia Australia Australia Australia China Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Indonesia Indonesia Indonesia Indonesia Japan Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia New Zealand New Zealand Philippines Philippines Philippines Philippines Philippines Singapore Singapore Singapore Singapore Singapore South Korea South Korea South Korea South Korea Taiwan Taiwan Taiwan Taiwan Taiwan Thailand Thailand Thailand Thailand Market Confectionery Dairy Dairy Confectionery Savoury Snacks Confectionery Confectionery Confectionery Dairy Dairy Savoury Snacks Confectionery Dairy Dairy Savoury Snacks Savoury Snacks Confectionery Confectionery Confectionery Dairy Dairy Savoury Snacks Dairy Dairy Confectionery Confectionery Dairy Dairy Savoury Snacks Confectionery Confectionery Dairy Dairy Savoury Snacks Dairy Dairy Dairy Dairy Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Category Chocolate Cheese Overall Sugar Overall Chocolate Gum Sugar Cheese Overall Overall Chocolate Cheese Overall Overall Overall Chocolate Gum Sugar Cheese Overall Overall Cheese Overall Chocolate Sugar Cheese Overall Overall Chocolate Sugar Cheese Overall Overall Cheese Overall Milk Overall Chocolate Gum Sugar Cheese Overall Chocolate Sugar Cheese Overall Company Value% Kraft Jacobs Suchard (Australia) Kraft Foods Ltd Kraft Foods Ltd Nabisco Group Ltd Nabisco (China) Ltd Kraft Foods Ltd (Asia) Kraft Foods Ltd (Asia) Kraft Foods Ltd (Asia) Kraft Foods Ltd Kraft Foods Ltd Kraft Foods Ltd Kraft Ultrajaya Indonesia PT Kraft Ultrajaya Indonesia PT Kraft Ultrajaya Indonesia PT Kraft Ultrajaya Indonesia PT Yamazaki Nabisco Co Ltd Kraft Foods Malaysia Kraft Foods Malaysia Kraft Foods Malaysia Kraft Foods Malaysia Kraft Foods Malaysia Nabisco Group Ltd Kraft Foods Ltd Kraft Foods Ltd Kraft Foods (Philippines) Inc Kraft Foods (Philippines) Inc Kraft Foods (Philippines) Inc Kraft Foods (Philippines) Inc Nabisco Philippines Inc Kraft Foods (S) Pte Ltd Kraft Foods (S) Pte Ltd Kraft Foods (S) Pte Ltd Kraft Foods (S) Pte Ltd Kraft Foods (S) Pte Ltd Kraft Co Ltd Kraft Co Ltd Dongsuh Foods Co Ltd Dongsuh Foods Co Ltd Kraft Foods Taiwan Ltd Kraft Foods Taiwan Ltd Kraft Foods Taiwan Ltd Kraft Foods Taiwan Ltd Kraft Foods Taiwan Ltd Kraft Foods (Thailand) Ltd Kraft Foods (Thailand) Ltd Kraft Foods (Thailand) Ltd Kraft Foods (Thailand) Ltd 1.80 2.20 0.52 1.07 1.Table 9.30 1.20 1.35 3.20 3.50 3.10 9.90 2.00 0.70 6.80 Source: Author analysis of Datamonitor research Business Insights 156 .50 0.40 14.50 12.30 0.40 0.02 6.

In the snacks markets. whilst Lux is available in the Ukraine. Lithuania and Russia. Polish and Slovakian confectionery markets.10 2.79 Bulgaria Confectionery Bulgaria Confectionery Bulgaria Dairy Bulgaria Dairy Bulgaria Savoury Snacks Czech Republic Confectionery Czech Republic Confectionery Hungary Confectionery Hungary Dairy Hungary Dairy Poland Confectionery Romania Confectionery Romania Confectionery Romania Savoury Snacks Ukraine Confectionery Source: Author analysis of Datamonitor research Business Insights Middle East and Africa Saudi Arabia is an important market in the dessert sector for Kraft’s Dream Whip. a whipped cream dessert-topping product.34 6. 2002 Country Market Category Chocolate Sugar Milk Overall Overall Chocolate Sugar Chocolate Milk Overall Chocolate Chocolate Sugar Overall Chocolate Company Value% Kraft Foods Bulgaria AD Kraft Foods Bulgaria AD Kraft Foods Bulgaria AD Kraft Foods Bulgaria AD Kraft Foods Bulgaria AD Kraft Jacobs Suchard spol sro Kraft Jacobs Suchard spol sro Kraft Foods Hungária Kft Kraft Foods Hungária Kft Kraft Foods Hungária Kft Kraft Foods Polska Sp zoo Kraft Foods Romania SA Kraft Foods Romania SA Kraft Foods Romania SA Kraft Foods Ukraina Open JSC 45. Kraft also manufactures Prince Polo & Siesta. Poland and Slovakia.02 33.Eastern Europe Milka is a leading chocolate confectionery brand. a crunchy biscuit product that has significant shares in the Czech Republic. Hungarian.24 0.24 1.58 0.10 19. Hungary.30 13. Major markets for the brand in Eastern Europe include Bulgaria. Czech Republic. a crunchy wafer brand that is popular in Czech Republic. 157 .88 26. Estrella is popular in Latvia.70 0.70 0.60 0. Table 9.20 14.43: Kraft market shares in Eastern Europe.47 20. Poland and Slovakia and 3-Bit.

40 1. Belgium. 158 .44: Kraft market shares in the Middle East and Africa.10 4. Netherlands.10 6. Portugal. Scandinavia. Italy. France.90 0.45 12.90 0. Ireland.89 Source: Author analysis of Datamonitor research Business Insights Western Europe The Philadelphia cream cheese brand has several important European markets.40 6. 2002 Country Morocco Morocco Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia South Africa South Africa South Africa South Africa South Africa Market Confectionery Confectionery Confectionery Dairy Dairy Savoury Snacks Dairy Confectionery Confectionery Dairy Confectionery Confectionery Category Sugar Sugar Chocolate Cheese Overall Overall Overall Chocolate Sugar Cheese Gum Sugar Company Value% Kraft Foods International Nabisco Group Ltd Kraft Jacobs Suchard Ltd Kraft Jacobs Suchard Ltd Kraft Jacobs Suchard Ltd Nabisco Arabia Co Ltd Nabisco Arabia Co Ltd Kraft Foods International Kraft Foods International Kraft Foods International Nabisco South Africa (Pty) Ltd Nabisco South Africa (Pty) Ltd 2.50 0. Germany. Spain and the UK. Spain.Table 9. Switzerland and Turkey. These include Austria. Major markets for the Milka brand in Western Europe include Austria.40 1. Holland.22 16. Germany. Italy.47 1. Belgium.

42 9.90 9.1 29.00 1.37 0.75 2.47 2.12 7.10 0.20 12.60 0.55 0.10 2.20 0.45: Kraft market shares in Western Europe.10 46.30 0.20 13.60 1.80 0.80 1.20 4.60 2.40 4.00 0.10 0.90 3.90 0.90 23.70 0.90 0.18 5.40 Chocolate Kraft Foods Österreich GmbH Cheese Kraft Foods Österreich GmbH Milk Kraft Foods Österreich GmbH Overall Kraft Foods Österreich GmbH Overall Kraft Foods International Chocolate Kraft Foods Belgium SA Sugar Kraft Foods Belgium SA Cheese Kraft Foods Belgium SA Overall Kraft Foods Belgium SA Overall Estrella A/S Chocolate Kraft Freia Marabou A/S Cheese Kraft Freia Marabou A/S Milk Kraft Freia Marabou A/S Overall Kraft Freia Marabou A/S Chocolate Kraft Jacobs Suchard Ltd Chocolate Kraft Foods Finland AB Milk Kraft Foods Finland AB Overall Kraft Foods Finland AB Overall Kraft Foods France SA Chocolate Kraft Foods France SA Milk Kraft Foods France SA Chocolate Kraft Foods Deutschland GmbH & Co Cheese Kraft Foods Deutschland GmbH & Co Milk Kraft Foods Deutschland GmbH & Co Overall Kraft Foods Deutschland GmbH & Co Chocolate Kraft Foods Hellas SA Cheese Kraft Foods Hellas SA Milk Kraft Foods Hellas SA Overall Kraft Foods Hellas SA Chocolate Kraft Foods Ireland Ltd Sugar Kraft Foods Ireland Ltd Cheese Kraft Foods Ireland Ltd Overall Kraft Foods Ireland Ltd Chocolate Kraft Jacobs Suchard SpA Cheese Kraft Jacobs Suchard SpA Milk Kraft Jacobs Suchard SpA Overall Kraft Jacobs Suchard SpA Chocolate Kraft Foods Nederland BV Sugar Kraft Foods Nederland BV Cheese Kraft Foods Nederland BV Overall Kraft Foods Nederland BV Chocolate Kraft Foods Norge AS Sugar Kraft Foods Norge AS Cheese Kraft Foods Norge AS Overall Kraft Foods Norge AS Chocolate Kraft Foods Portugal Lda Cheese Kraft Foods Portugal Lda Milk Kraft Foods Portugal Lda Overall Kraft Foods Portugal Lda 159 .80 0.04 4.79 6.3 10.00 26.70 3.14 3.30 0.20 2.20 2.94 0.60 11.Table 9.36 4. 2002 Country Austria Austria Austria Austria Belgium Belgium Belgium Belgium Belgium Denmark Denmark Denmark Denmark Denmark Egypt Finland Finland Finland France France France Germany Germany Germany Germany Greece Greece Greece Greece Ireland Ireland Ireland Ireland Italy Italy Italy Italy Netherlands Netherlands Netherlands Netherlands Norway Norway Norway Norway Portugal Portugal Portugal Portugal Market Confectionery Dairy Dairy Dairy Chilled Food Confectionery Confectionery Dairy Dairy Savoury Snacks Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Chilled Food Confectionery Dairy Confectionery Dairy Dairy Dairy Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Dairy Dairy Dairy Category Company Value% 33.40 13.26 0.60 0.00 1.

40 5.30 5.27 1. Kraft published an announcement in the national press regarding a Lunchables product recall. According to Bob Fenton from Kraft Foods: “The whole thing about Lunchables is that they should be bought as an occasional treat and our research shows that many youngsters don't have more than seven or eight a year”.46: Kraft market shares in Western Europe. as a result of an isolated manufacturing incident at a third party supplier.Source: Author analysis of Datamonitor research Business Insights Table 9. Kraft Foods announced it was cutting the average salt content from 2.15 0.20 2.37 0.50 1. A small number of packs of Dairylea Lunchables StacKems were found to contain small fragments of wire in the cracker biscuit. 160 .35 1.10 2. In May 2003.40 10.30 0.30 3.35 4.97 0. Lunchables. In the UK. a selection of cheese.60 Chocolate Kraft Foods España SA Sugar Kraft Foods España SA Cheese Kraft Foods España SA Overall Kraft Foods España SA Chocolate Kraft Sverige AB Sugar Kraft Sverige AB Cheese Kraft Freia Marabou Sverige AB Milk Kraft Freia Marabou Sverige AB Overall Kraft Freia Marabou Sverige AB Chocolate Kraft Foods (Schweiz) AG Sugar Kraft Foods (Schweiz) AG Cheese Kraft Foods (Schweiz) AG Milk Kraft Foods (Schweiz) AG Overall Kraft Foods (Schweiz) AG ChocolateMarsa Kraft Gida Sanayii ve Ticaret AS Overall Kraft Foods UK Ltd Chocolate Kraft Foods UK Ltd Sugar Kraft Foods UK Ltd Cheese Kraft Foods UK Ltd Overall Kraft Foods UK Ltd Source: Author analysis of Datamonitor research Business Insights Product examples In the convenience sector.5 grams to 2 grams a pack. France.40 46. Italy and the UK.60 5. in August 2003.51 3.70 0. 2002 Country Spain Spain Spain Spain Sweden Sweden Sweden Sweden Sweden Switzerland Switzerland Switzerland Switzerland Switzerland Turkey UK UK UK UK UK Market Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Chilled Food Confectionery Confectionery Dairy Dairy Category Company Value% 6. at a time when the Food Standards Agency recommended salt levels in children’s food should be cut. cracker and meat prepacked lunches are popular in Belgium.02 0.

kraftfoodservice. Kraft also serves foodservice markets. New foodservice products include: Available in 1-gallon bulk and 2 oz. portion control pouches . 161 . portion control cups (2 oz) to add flavour to menu items with products such as Kraft Ranch. and Honey Mustard Dressings.com to feature a searchable library of over 750 recipes. Kraft Foodservice has launched www. product information catalogues and new product news.Kraft Signature Oriental Sesame Dressing.Figure 9. Blue Cheese.com/brands/ Business Insights Foodservice In addition to the retail products.28: A selection of brands from Kraft Source: http://www. Kraft Sweet n' Sour and Tartar Sauces and Bull’s Eye Barbeque Sauce.kraft.

as part of a strategy to better position Kraft to deliver sustainable growth.S.S. The new Global Marketing & Category Development division will lead Kraft’s growth agenda by driving category development across countries with global category strategies.S. Kraft’s geographic-based commercial units will be grouped into North America Commercial and International Commercial. These organisations will leverage local category strategies. Kraft announced a new global organisational structure. Firstly. new-product growth platforms and marketing expertise. with direct responsibility for country-bycountry marketing and sales. U.Oscar Mayer branded bacon. its global ‘One Company’ structure. Thirdly. snacks. U. and Latin America & Asia Pacific. snacks. All three groups will work together in alignment with the company’s global consumer sectors beverages. Canada & North America foodservice. cheese & dairy. cheese. Strategies for growth New structure for 2004 In January 2004. convenient meals. a new global marketing and category development group is being formed to accelerate growth and global expansion. to increase effectiveness and drive cost savings across Kraft’s business system. 162 .S. convenient meals. beverages & grocery. including profit and loss responsibility. geographic-based commercial units will be responsible for driving strong results country by country with the best programmes and execution for local consumers and customers. Kraft Foods will have six segments: U. and grocery. key functions are to be worldwide in scope. Middle East & Africa. For financial segment reporting purposes. The company announced three elements to the new strategy. Europe. Secondly. growth platforms and global marketing developed in cooperation with the Global Marketing & Category Development group. U.

any growth strategy must focus on these and especially those in fast-growing sectors such as snacks. all of which it believes are growing significantly faster than the traditional grocery channel. or calorie content. African-Americans and Hispanics population groups are growing almost five times faster than the rest of the population and the company is seeking to improve its coverage of distribution channels that serve such consumers and developing new products that will appeal to these consumers.Brand strategies drive performance Fast-growing sectors One of Kraft’s most important strengths is the power of its brands. NPD. or other nutrients. to foods fortified with vitamins. sugar. Health The company has also recognised that it must be responsive to consumer’s demands for products with positive health. To maximise growth. or nutritional attributes. and vending machines. the company is also introducing premium products to meet consumers’ needs. These sectors offer the most significant global growth potential and account for the majority of the company’s revenues (around 66% in 2002). In a similar vain. acquisitions and marketing support help build the brands and capture an increasing share of category sales. Kraft’s current share of total food and beverage sales in these alternate channels is not as high as in the grocery channel. beverages and convenient meals. to soy-based meat alternatives. In developing markets where purchasing power is increasing. These range from reductions in fat. In the United States. and its opportunity for growth is greater. the company is also to target fast-growing demographic and economic segments. mass merchandisers. 163 . Distribution channels In addition. minerals. Kraft is seeking to exploit faster growing distribution channels such as convenience stores. energy. drug stores. As such.

licensing arrangements and disposals. have valuable brands. To help maintain the company’s leadership positions in its principal categories. pursue tactical fill-in acquisitions. or which. In turn. the Middle East. introduce additional brands across key price segments within the categories where Kraft already have a presence. it has formed worldwide councils. Latin America and Asia Pacific. Kraft disposes of businesses that do not meet growth or return expectations. in developing markets. Kraft announced a series of commitments that are to focus in four key areas: product nutrition. Advantages of global category leadership Category leadership provides Kraft with the benefits of scale. which in turn helps generate resources to reinvest in marketing and product innovation. by divesting them. beverage and cheese categories in developing markets where Kraft already have a presence. that lack strategic fit. Initiatives respond to health concerns In July 2003. especially in snacks and beverages. the company’s strategy has four key components: Introduce additional snack. will improve productivity. Kraft is also pursuing growth in Central and Eastern Europe. which share best practices. marketing 164 .Kraft manages its business and brand portfolio through acquisitions. and/or provide improved scale and market positions. This enables Kraft to win a significant share of a category’s growth and profit. In developing markets. enter developing markets where Kraft does not yet have a presence. Acquisitions and licensing arrangements seek to add businesses that are in fast-growing categories. in response to rising obesity rates around the world. consumer loyalty and greater in-store emphasis by retailers.

measures and timetables for implementation. Where marketing is concerned. opportunities and threats faced by the company.practices. introducing guidelines for the nutritional characteristics of all products and making improvements to existing products and providing alternative choices. Improving information to the consumer is also a commitment from Kraft. In the area of product nutrition. it is to introduce guidelines for all advertising and marketing practices. 165 . including markets where no restrictions exist. including the provision of nutrition labelling in all markets worldwide (including markets where labelling is not required). the company is seeking to eliminate all in-school marketing. to encourage appropriate eating behaviours and active lifestyles. weaknesses. highlighting the relative strengths. As a part of the process. Additionally. Kraft formed a global council of advisors to help it structure its ongoing response to obesity and develop policies. standards. consumer information and public advocacy and dialogue. including advertising and marketing to children. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Kraft in the form of a SWOT analysis. Kraft is committed to placing a cap on the portion size of single-serve packages. adding nutrition and/or activity-related information on product labels and company websites and the introduction of guidelines for the use of healthrelated claims in all markets. It also intends to apply locally appropriate criteria to use with the vending industry in different regions of the world to determine the selection of Kraft products to be sold through in-school vending machines.

Category leadership provides Kraft with the benefits of scale.Scale and leadership brings advantages Competitive and scale advantages come with size and leadership. Kraft is the largest branded food and beverage company in North America and the second largest in the world. while reducing costs and improving productivity and margins. The company’s global scale including its position as the largest branded food and beverage company in North America and the second largest in the world enables it to be more efficient and effective in expanding brands geographically. 166 . Kraft believes its brands hold the market leading position in 21 of its 25 top categories in the US and 21 of its top 25 country categories internationally. consumer loyalty and greater in-store emphasis by retailers.

167 . consumer loyalty and greater in-store emphasis by retailers • Global scale enables it to be efficient and effective in expanding geographically. store closings and retailer initiatives to cut working capital Source: Author research Business Insights Difficulty launching new brands Recent management changes reflected the company’s slow sales growth and difficulty launching new brands rather than extending existing brands. however its acquisition of Nabisco has provided it with expertise in both cereals and snack bars. Kraft faces the challenge of reducing or removing trans fats from many of its products • Reduced volume growth due to trade inventory reductions. the company has been relatively slow to tap into the market for cereal bars.Figure 9. while reducing costs and improving productivity and margins Company Weaknesses • Recent management changes reflected the company’s slow sales growth and difficulty launching new brands • Until structural changes in January 2004. Whilst the company has found success with brand extensions. In comparison to competitors. developing markets and categories Company Threats • Consumer health concerns. it has failed to produce new brands that private labels cannot easily reproduce.29: Kraft SWOT analysis Company Strengths • Leadership provides Kraft with the benefits of scale. beverages and convenient meals • Leverage brands in new. warehouse consolidations. Kraft was not positioned to fully exploit global growth opportunities Company Opportunities • Exploit faster growing distribution channels which are growing faster than the traditional grocery channel • Growth strategy must focus on brands in fast-growing sectors: snacks.

Opportunities In addition. any growth strategy must focus on these and especially those in fast-growing sectors such as snacks. in response to rising obesity rates around the world. Kraft is seeking to exploit faster growing distribution channels such as convenience stores. Kraft’s current share of total food and beverage sales in these alternate channels is not as high as in the grocery channel. measures and timetables for implementation. 168 . mass merchandisers. consumer information and public advocacy and dialogue. One of Kraft’s most important strengths is the power of its brands. Kraft expects to achieve significant cost savings as it integrates the operations of Nabisco with Kraft Foods around the world. As a part of the process. providing a significant opportunity for growth. Kraft formed a global council of advisors to help it structure its ongoing response to obesity and develop policies. beverages and convenient meals. drug stores. Threats With an increasingly health-conscious focus. Kraft also faces the challenge of reducing or removing trans fats from many of its products and this will remain a target for 2004. all of which it believes are growing significantly faster than the traditional grocery channel. and vending machines. Kraft announced a series of commitments that are to focus in four key areas: product nutrition. standards. Over the next few years. As such. In July 2003. marketing practices.

169 .

Chapter 10 Masterfoods 170 .

The increase in popularity of cookie bars in the United States in 2002.372 million. bringing together companies with an annual turnover of €1. The company remains privately owned and operates its three core businesses. the Americas. though Masterfoods’ cookie line has grown into a $53 million brand. Mars and Twix. under the Masterfoods name in most parts of the world. snackfood. Mars Alimentaire. by the merger of Mars Confectionery and Pedigree Masterfoods. The company’s brands also include Uncle Ben’s. Masterfoods USA introduced its first bite-sized line. a merger of Mars GmbH and Effem GmbH formed Masterfoods GmbH in January 2001. Milky Way. Serving convenience and impulse markets. Also in January 2001. The company manufactures many top snack food and confectionery brands including M&M’s. Snickers. Masterfood believes it enjoys greater flexibility and autonomy. the first mass-produced parboiled rice product whose range has now extended to include pasta and sauces. In Germany. Masterfoods in the UK announced that the recipes used for Mars and Snickers bars have changed amid health fears over a fatty ingredient. in January 2003. with sales of over €1.Chapter 10 Summary Masterfoods Mars operates in over 100 countries. 171 . Three Musketeers or Milky Way sweets in a pouch. In May 2003. In the UK. all subsidiaries of Mars. largely initiated by both Nabisco and Masterfoods USA slowed in 2003.500 million. petcare and main meal food. Masterfoods was formed in January 2002. Doveurope and Unisabi. Asia and Australia/New Zealand the combined businesses are run on a regional basis. In Europe. Popables features miniature Snickers. came together to form Masterfoods France. As a privately owned corporation.

In 1920. Mars also operates a smaller business. Mars was also the first company to apply modern manufacturing techniques to parboil rice on a large scale. In the 1930s Forrest Mars made the first move into pet food and pioneered the development of the European pet food industry. Together with other confectionery brands such as Snickers. snackfood. under the Masterfoods name in most parts of the world. Outside the Masterfoods structure. Masterfoods USA records annual sales in excess of $5 billion and operates 15 manufacturing facilities. they became the foundation of a global snack food business. petcare and main meal food. He created a successful formula that was then transferred to the United States and the rest of the world. The company remains privately owned and operates its three core businesses. the Milky Way bar was launched in the United States (which is known in Europe as the Mars bar).About Masterfoods Mars is a $14 billion business operating in over 100 countries. Just six years after its 1946 launch. MEI/Drinks Group. which makes drinks vending systems and electronic coin changers and other electronic transaction solutions for a range of industries. History The company was established when Frank Mars and his wife Ethel started making and selling a variety of butter-cream confectionery from their home in Tacoma Washington in 1911. Uncle Ben’s became one of America’s top selling brands of packaged long grain rice before being introduced successfully to international markets. 172 .

herbs and spices (dry & wet). Masterfood believes that it enjoys unrivalled flexibility and autonomy. beans. relishes. It operates a portfolio of leading brands including Mars. a number of products were added to the Masterfoods range: mustard. M&M’s and Snickers. paprika. In 1952. The very first product manufactured under the Masterfoods brand was Bread & Butter Cucumbers. privately owned corporation. Performance in 2003 Confectionery brands account for the large majority of the company’s sales. In the 1960s the company was still importing speciality foods from overseas. In Europe. Henry and his sons a launched a brand name for their products. The first herbs and spices in glass jars were also produced in 1954 and included products such as celery salt and vanillin sugar. each reporting in to a Regional President. one being Uncle Ben’s rice from Mars in the United States. the United States and Canada. shelf stable dips. In 1950. However despite a 173 . A relationship was formed which eventually led to the purchase of the business in 1967. John. Asia and Australia/New Zealand the combined core businesses are run on a regional basis. Lemon Aid and mint jelly. sauces.Master Foods of Australia was founded by Henry Lewis in 1926 and passed onto his son’s. David and Victor before becoming part of the Mars family’s group of companies in 1967. and throughout the Asian and Pacific region as well as supplying the food service and industrial sectors. which was first registered in 1945 where it was used on re-packaged goods such as herbs and spices. marinades. Masterfoods. Recent performance As a profitable. Master Foods of Australia now offers over 700 products in categories as diverse as mustards. pasta and stir fry sauces and dressings. It exports to New Zealand. the Americas.

Milky Way. The Americas The company’s brands also include Uncle Ben’s. In the beverages sector. Twix. Mars’ products are individually wrapped items available in multipacks. the company has faced difficulty in maintaining sales growth in recent months. In 2003. Market positioning Household names in confectionery. manufacturers are aware that consumers see biscuit categories as less unhealthy than chocolate products. Mars and Twix.strong portfolio. In October 2003. In the pet care sector. a market that is set for higher growth rates than traditional chocolate confectionery. snacks. Additionally. Snickers. the first mass-produced parboiled rice product whose range has now extended to include pasta and sauces. rice and vending The company manufactures many top snack food and confectionery brands including M&M’s. Mars and Bounty. pet food. Mars’ Masterfoods USA announced it was conducting a review of its media buying and planning business in the United States with a view toward consolidating it. 174 . Waltham manufactures food brands such as Whiskas and Pedigree. Mars extended some of its confectionery brands into biscuits. designed to take advantage of the latest snacking and lunch box trends. Mars’ Bisc& range includes biscuits topped with M&M’s. the company operates vending systems including Klix and Flavia.

the company started manufacturing dog food and two years later a 175 .07 10. Masterfoods Polska is based in Sochaczew.40 Confectionery Confectionery Confectionery Savoury Snacks Confectionery Source: Author analysis of Datamonitor research Business Insights Asia-Pacific Effem China develops.45 1. In 1992. Table 10.47: Country Chile US US US Venezuela Masterfoods market shares in the Americas.48: Country Japan Malaysia Malaysia Philippines South Korea Thailand Vietnam Masterfoods market shares in Asia-Pacific.67 11.72 0.Table 10. 2002 Market Category Chocolate Chocolate Sugar Chocolate Chocolate Chocolate Chocolate Company Value% Master Foods Ltd Mars Inc Mars Inc Mars Inc Masterfoods Korea Mars Confectionery of Australia Mars Inc 1.20 9.60 9.10 4.32 30. 2002 Market Category Chocolate Chocolate Sugar Overall Chocolate Company Value% Mars Inc Mars Inc Mars Inc Mars Inc M&M Mars 0. The company employs over 500 people in Huairou and a further 300 sales associates across different cities in China. produces and markets a range of snack food and pet food products for sale in China (including Hong Kong) and for export to Japan.10 Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Source: Author analysis of Datamonitor research Business Insights Eastern Europe In Poland.45 14.51 6. 45 kilometres west of Warsaw and employs 1.400 people. The site includes the head office built in 1994 and four factories.

second dry pet food factory was opened. 176 . Between 1995 and 2001. the company established further snack food and wet pet food factories.

50 0. was acquired.10 Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Source: Author analysis of Datamonitor research Business Insights Middle East and Africa Master Foods South Africa was established in 1996. Pretoria in 1998. the business more than quadrupled in growth. 2002 Market Category Chocolate Sugar Chocolate Sugar Chocolate Milk Overall Chocolate Sugar Chocolate Sugar Chocolate Sugar Chocolate Chocolate Sugar Company Value% Masterfoods Bulgaria EOOD Masterfoods Bulgaria EOOD Master Foods ks Master Foods ks Masterfoods Hungary Kft Masterfoods Hungary Kft Masterfoods Hungary Kft Master Foods Polska Master Foods Polska Master Foods Romania SRL Master Foods Romania SRL Mars LLC Russia Mars LLC Russia Master Foods Slovakia Masterfoods & Effem Masterfoods & Effem 4.75 0. making Streamers and Big Time.12 1.10 0.62 2.37 1.60 12. two of the most recognised confectionery brands in South Africa. In just three years.49: Country Bulgaria Bulgaria Czech Republic Czech Republic Hungary Hungary Hungary Poland Poland Romania Romania Russia Russia Slovakia Ukraine Ukraine Masterfoods market shares in Eastern Europe.Table 10. a dry food manufacturing facility was added to the site following the acquisition of the Royco soups and sauces business in 2002.97 2.30 2.10 5.65 7. Based in Cape Town. Sovereign Sweets.17 1. 177 .50 2. The market was initially developed through the import of the company’s established brands and the first manufacturing facilities and offices were built in Rosslyn. In 2000. a local sugar confectionery business.62 9.15 5.

Mars Alimentaire.24 37.372 million and 2.97 11. Also in January 2001.10 15. 2002 Market Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Category Chocolate Chocolate Sugar Chocolate Chocolate Chocolate Milk Overall Chocolate Sugar Company Value% Mars Inc Master Foods Middle East Mars Inc Mars BV Mars Inc Master Foods Master Foods Middle East FZE Master Foods Middle East FZE Mars Inc Mars Inc 5. with sales of over €1.99 8.50 1.10 23.Table 10.60 0.30 0.55 0. 2002 Market Category Chocolate Overall Chocolate Chocolate Chocolate Chocolate Chocolate Overall Chocolate Sugar Milk Overall Chocolate Sugar Milk Company Value% Masterfoods Austria OHG Masterfoods Austria OHG Masterfoods NV SA Masterfoods Denmark A/S Master Foods Oy Masterfoods France SA Masterfoods GmbH Masterfoods GmbH Masterfoods NV SA Masterfoods NV SA Masterfoods NV SA Masterfoods NV SA Mars Ireland Mars Ireland Mars Ireland 10.87 0.10 Confectionery Savoury Snacks Confectionery Confectionery Confectionery Confectionery Confectionery Savoury Snacks Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Source: Author analysis of Datamonitor research Business Insights 178 .350 employees. all subsidiaries of Mars.20 13.40 11.900 employees with an annual turnover of €1.24 6.40 0.22 Source: Author analysis of Datamonitor research Business Insights Western Europe In Germany.500 million.18 1.24 1.70 1.71 5.50 0.10 0.17 14. Table 10. came together to form Masterfoods France. bringing together 1.51: Country Austria Austria Belgium Denmark Finland France Germany Germany Greece Greece Greece Greece Ireland Ireland Ireland Masterfoods market shares in Western Europe. a merger of Mars GmbH and Effem GmbH formed Masterfoods GmbH in January 2001.50: Country Egypt Egypt Egypt Israel Morocco Saudi Arabia Saudi Arabia Saudi Arabia South Africa South Africa Masterfoods market shares in the Middle East and Africa. Doveurope and Unisabi.52 6.82 4.

Figure 10.90 0.com/What_do_we_do&63/ Business Insights 179 . The company was based near Milan until 1990 when a new site at Belgioioso was built. which has been operating in Italy since 1978.10 Savoury Snacks Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Confectionery Dairy Dairy Source: Author analysis of Datamonitor research Business Insights Masterfoods Italy was formerly known as Dolma S.a.92 24. Product examples In the UK. The Belgioioso site also includes a pet food factory that opened in 1996.19 5..p.80 12.52: Country Ireland Italy Netherlands Netherlands Norway Portugal Sweden UK UK UK UK Masterfoods market shares in Western Europe. Masterfoods was formed in January 2002.30 0. by the merger of Mars Confectionery and Pedigree Masterfoods.50 8.30: A selection of brands from Masterfoods Source: http://www.mars.Table 10.15 21.09 9.60 4. 2002 continued Market Category Overall Chocolate Chocolate Sugar Chocolate Chocolate Chocolate Chocolate Sugar Milk Overall Company Value% Masterfoods Ireland Ltd Masterfoods Italia SpA Mars BV Mars BV Masterfoods Norway AS Masterfoods de Portugal Inc Masterfoods Sweden AB Masterfoods UK Ltd Masterfoods UK Ltd Mars UK Ltd Mars UK Ltd 0.09 0.

The company has recently initiated the MastersProgram. Combos. ring tones and other mobile content for Masterfoods and the company’s brands. and the Ethel M Chocolates line of specialty gourmet chocolates. O2 will also develop games. Starburst. Dove. It provides escalating discounts to member operators who purchase from one or more areas of its brand portfolio. Twix. Kudos. Serving convenience and impulse markets. which is exclusively for foodservice professionals. although Masterfoods’ cookie line has grown into a $53 million brand. Cookies&. Milky Way. Twix. The company also sells M&M’s and Skittles in containers for vehicle cup holders. Snickers Cruncher and Maltesers confectionery being provided with a number which they can send a text message to in order to potentially win a prize. Skittles. Snickers. Bounty. 180 . Chococollect started in April 2003 and initially ran for eight months. making the company the eighth-largest cookie vendor. Snickers. in January 2003. Masterfoods USA introduced its first bite-sized line. It represents the following brands: Uncle Ben’s. The Chococollect initiative will see consumers of promotional packs of Mars. M&M’S. Three Musketeers or Milky Way sweets in a pouch. Ebly. Product developments in the UK have recently seen mobile telephone operator O2 receive a contract from food manufacturer Masterfoods to run an on-pack text message promotion. Popables features miniature Snickers.Foodservice MasterFoodServices is the foodservice division that provides solutions to the foodservice industry. Strategies for growth NPD plays a vital role in growth The increase in popularity of cookie bars in the United States in 2002. Seeds of Change. largely initiated by both Nabisco and Masterfoods USA slowed in 2003. and 3 Musketeers Brands.

weaknesses. These have boosted company sales that were coming under threat from more intense competition. Hydrogenated vegetable fat has been removed from the chocolate bar because of its links with high cholesterol levels and heart disease. Masterfoods entered the energy bar sector with Snickers Marathon. as well as a breath freshener product. privately owned corporation. Masterfoods in the UK announced that Mars and Snickers bars have had their recipe changed amid health fears over a fatty ingredient. opportunities and threats faced by the company. positioned as a thirst quencher.” designed to provide a long-lasting energy boost. In recent years the company has begun to reduce its reliance on chocolate confectionery sales with a number of brand extensions. Aqua Drops. while the latest developments have included 181 . highlighting the relative strengths. Snickers Marathons are 2-ounce bars with either a chewy chocolate peanut or multigrain crunch. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Masterfoods in the form of a SWOT analysis. which account for the majority of Mars’s confectionery sales. fruit and creme.In May 2003. Brand names carry cross-category As a profitable. The company’s strength lies in its chocolate confectionery brands. each fortified with 16 vitamins and minerals. In August 2003. Other new launches from Masterfoods USA in 2003 included a new Starburst flavour. Mars led the confectionery category extension into ice cream markets. The bars also contain around 10g of a “special protein blend. Masterfood believes that it enjoys unrivalled flexibility and autonomy.

182 . particularly in marketing and promotion activity Masterfoods SWOT analysis Company Weaknesses • High dependence upon chocolate markets.following entry into the energy bar sector. The brand extension policy also offers economies of scale. these may only take growth so far and the company should look to innovate and expand into carefully targeted. but as yet unrelated sectors. Despite undertaking successful brand extensions.31: Company Strengths • Strong portfolio of category – leading confectionery brands • Recent fall in reliance on chocolate confectionery sales with a number of brand extensions • Brand extensions offer economies of scale.extensions into cake bars and biscuits. particularly in the marketing and promotion of its products. a market with higher growth rates than chocolate confectionery • Functional confectionery . can other brands be extended into high growth categories? Company Threats • Increasingly mature nature of chocolate confectionery. Figure 10. which is susceptible to declining growth rates • Health-wise consumers look to products they see as being healthier or a sugar-free alternatives Source: Author research Business Insights High dependency on chocolate The company’s dependence upon chocolate markets could be perceived as a weakness. especially given that chocolate confectionery markets are increasingly mature and susceptible to declining growth rates. given that those markets are increasingly mature and susceptible to declining growth rates Company Opportunities • Extension of confectionery brands into biscuits.

manufacturers are aware that consumers see biscuit categories as less unhealthy than chocolate products. 183 . Additionally. the company. a market that is set for higher growth rates than traditional chocolate confectionery. must be concerned with the increasingly mature nature of the segment. In line with other confectionery manufacturers. Masterfoods in the UK announced recipe changes amid health fears over a fatty ingredient. which is susceptible to declining growth rates. when Masterfoods entered the energy bar sector with Snickers Marathon. Mature markets and health-wise consumers With a large proportion of sales dependent upon chocolate confectionery. For example in May 2003. increasingly aware of the health implications of indulging themselves on confectionery. perhaps more than most. the company’s cocoa costs will increase in 2004 as a result of recent price increases in the world cocoa market. consumers. it has added products ranging from breath mints to organic frozen foods and drink vending machines. will start to look to products they see as being healthier or a sugar-free alternative. Mars extended some of its confectionery brands into biscuits. Opportunities outside of traditional chocolate markets were also extended in August 2003. It is only recently that chocolate manufacturers have introduced such alternatives and the company cannot afford to be left behind such initiatives. Additionally. Additionally.Further potential for brand extensions In 2003.

184 .

Chapter 11 Nestlé 185 .

Nesquik. Nescafé. The company divides its brand portfolio into 10 sectors: baby foods. beverages. chocolate and confectionery. Perrier and Vittel. whilst ice cream and water benefited from the exceptionally hot European summer. prepared foods. foodservices. with more than 470 factories around the world and sales of more than CHF 81 billion. Buitoni.Chapter 11 Summary Nestlé Nestlé believes it is the undisputed leader in the food industry. ice cream. Kit Kat. dairy products. One of Nestlé’s key strategies is to grow its existing products through innovation and renovation while maintaining a balance in geographic activities and product lines. Nestlé has a joint venture with General Mills outside North America. Nestlé recorded organic growth of 5. Smarties. In June 2003. The company’s leading brands include Alete. As a result of the deal. breakfast cereals (through a joint venture with General Mills). The joint venture has recently launched of breakfast cereal brands into the cereal bar market. 186 . Nestlé announced it received the go-ahead to combine the Nestlé Ice Cream Company with Dreyer’s Grand Ice Cream Inc. After a challenging first half of 2003. Extrême. Cereal Partners Worldwide. Maxibon. Coffee-Mate. Crunch. Product categories such as soluble coffee and frozen and chilled culinary products performed well in the first nine months of 2003. which is active in more than 80 countries.4% over the first nine months of 2003. Nestlé will own approximately 67% of the equity of Dreyer’s Holdings. bottled water and pet care.

Sanpellegrino and Vittel). founded in 1866 by Americans Charles and George Page. The Anglo-Swiss Condensed Milk Company. petcare (Pro Plan. a trained pharmacist. The company divides its brand portfolio into 10 sectors: Baby foods (with brands including Alete and BEBA).About Nestlé Nestlé believes it is the undisputed leader in the food industry. chocolate & confectionery (Crunch. ONE. dairy products (Coffee-Mate. with more than 470 factories around the world and sales of more than CHF 81 billion. foodservices. prepared foods (Maggi. Gloria and LC1). Smarties and Kit Kat). The Nestlé Company. Fancy Feast and Felix). extended its product line in the mid-1870s to include cheese and infant formulas. breakfast cereals (through a joint venture with General Mills) ice cream (Extrême and Maxibon). Nescafé and Nestea). Nesquik. which had been purchased from Henri Nestlé by 187 . Tidy Cats. beverages (Milo. bottled water (Perrier. wheat flour and sugar in an attempt to develop an alternative source of infant nutrition for mothers who were unable to breast feed. Farine Lactée Nestlé was soon marketed in much of Europe. History In the mid-1860s Henri Nestlé. Buitoni and Stouffer’s). began experimenting with various combinations of cow’s milk. After initial success.

and from 1960 to 1974. Nescafé became an instant success and was followed in the early 1940s by Nestea. becoming Nestlé Alimentana Company. the UK manufacturer of preserves and canned foods. Throughout this period. Nestlé added chocolate to its range of food products after reaching an agreement with the Swiss General Chocolate Company. The 1920s saw Nestlé’s first expansion beyond its traditional product line. they quadrupled. responded by launching a condensed milk product of its own and the two companies remained competitors until their merger in 1905. 188 . The company formed by the 1905 merger was called the Nestlé and Anglo-Swiss Milk Company. Germany and Spain. In 1947. and Bombay to supply the rapidly growing Asian markets. In 1907. From 1950 to 1959. UK. The acquisition of Crosse & Blackwell.Jules Monnerat in 1874. Eight years of research produced a soluble powder that has since revolutionised coffee-drinking habits worldwide. Nestlé merged with Alimentana S. The close of World War II marked the beginning of the most dynamic phase of Nestlé’s history. Meanwhile. the manufacturer of Maggi seasonings and soups. Hong Kong. Libby’s fruit juices (1971) and Stouffer’s frozen foods (1973). Warehouses were built in Singapore. Condensed milk exports increased rapidly as the company replaced sales agents with local subsidiary companies. By the early 1900s. the Brazilian Coffee Institute sought new products to reduce Brazil’s large coffee surplus. sales of instant coffee nearly tripled. its second-largest export market.. as did the purchase of Findus frozen foods (1963). Dozens of new products were added as growth within the company accelerated and outside companies were acquired. In 1930. sales of Nescafé continued to rise. followed in 1950. The manufacture of chocolate became the company’s second most important activity. it was operating factories in the United States. In 1904. the company began full-scale manufacturing in Australia.A. Nestlé’s growth was based on its policy of diversifying within the food sector to meet the needs of consumers.

RIG measures the like for like volume growth achieved by the Group from one year to the next and excludes the impact of selling price increases. including a public offer of $3 billion for Carnation. the company took the decision to diversify for the first time outside the food industry when it became a major shareholder in L’Oréal. the company divested a number of non-strategic or unprofitable businesses. Organic growth.S. Also in 2002. and it also acquired Chef America. Since then. primarily due to difficult trading conditions in Latin America and Japan. In the same year. contributed 8.4% to sales with the biggest impact on sales in 2002. a leading cosmetics manufacturer. net of divestitures. being the acquisition of Ralston Purina. manufacturer of pharmaceutical and ophthalmic products. Nestlé’s improved financial performances led to a new round of acquisitions. as well as on profitability. Acquisitions. Nestlé recorded real internal growth (RIG) of 3. a U. Ralston Purina was acquired (2002). ice cream business was to be merged into Dreyer’s. Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories.4%.-based hand-held frozen food product business. the acquisition of Spillers Petfoods of the UK (1998). the company made two major acquisitions in North America: Nestlé announced that its U. which excludes acquisitions and divestitures (measured at constant exchange rates). a U. the former Perrier Vittel water business was re-named Nestlé Waters. Between 1980 and 1984. 189 .In 1974. Recent performance In 2002.S. was 4.9%. This was below the company’s trend target of 4%. Consolidation since 1996 has been demonstrated by the acquisition of the Italian mineral water concern San Pellegrino (1997). Nestlé’s rapid growth in the developing world partially offset a slowdown in the company’s traditional markets in the 1970s.S. and also with the decision to divest the Findus brand in order to concentrate on high added-value frozen food products (1999). In 1984.

780 Source: Company accounts Business Insights 190 .4% though sales fell to CHF 64.219 5. Financial performance Table 11.4% due to an adverse foreign exchange impact (at constant exchange rates sales increased by 6. Performance in 2003 After a challenging first half of 2003.3%.6% growth.763 Nestlé financial performance 2000—2003 2001 84. Nestlé announced its results for the first nine months of the year in October.6 billion. Oceania and Africa organic growth of 4. The Americas region recorded organic growth of 5.53: CHF m Sales Net Profit 2000 81.681 2002 89. outperformed the more mature Western European markets.8%). the strength of the Group’s brands allowed it to increase prices in line with its strategy to maintain margins despite difficult economic conditions. The company recorded organic growth of 5.656 Interim 2003 41.160 7.422 5. Markets in Eastern Europe.9%.437 2.Nestlé set itself a target of achieving an organic growth rate of between 5-6% for 2003 as a whole. The Japanese market also saw the first signs of a recovery. with 10% growth. a drop of 2.564 Interim 2002 44. European operations achieved organic growth of 2.698 6. In Latin America. In Asia. which recorded 1.2% was achieved despite disruption caused by SARS and troubles in the Ivory Coast.

Figure 11.000 40. on the other hand.000 70.000 50. was handicapped both by the hot weather and the price increases earlier in the year in response to higher cocoa prices. turnover and operating income CHF m 100. 191 .000 60.000 30. whilst ice cream and water benefited from the exceptionally hot European summer.000 0 2000 2001 2002 Interim 2002 Interim 2003 Business Insights Sales Net Profit Source: Company accounts Product categories such as soluble coffee and frozen and chilled culinary products performed well in the first nine months of the year.000 90.000 80. Chocolate.000 10.32: Nestlé financial performance 2000—2003.000 20.

Table 11.54:
Sales CHF m Beverages Coffee Nestlé Waters Other

Nestlé Divisional Performance 2000—2003
2000 23,044 9,096 5,947 8,001 22,048 12,471 4,989 3,807 781 14,564 7,336 7,228 10,974 8,427 1,406 1,141 6,068 4,724 81,422 2001 24,023 8,937 7,418 7,668 23,041 13,061 5,366 3,770 844 15,092 7,566 7,526 11,244 8,745 1,377 1,122 6,232 5,066 84,698 2002 23,325 8,287 7,720 7,318 23,376 12,339 5,143 5,010 884 15,834 8,711 7,123 10,774 8,493 1,306 975 10,719 5,132 89,160 Interim 2003 11,195

Milk products, nutrition & ice cream Milk products Nutrition Ice Cream Other Prepared dishes & cooking aids Frozen & chilled Culinary & others Chocolate, confectionery & biscuits Chocolate Confectionery Biscuits PetCare Pharmaceutical products Total Group
Source: Company accounts

11,031

7,573

4,415

4,674 2,549 41,437
Business Insights

In an effort to improve the growth and performance of Nestlé’s ice cream business and enhance its competitive position, in January 2003, Nestlé announced it had acquired the Mövenpick ice cream brand worldwide (with the exception of the New Zealand manufacturing operations). Mövenpick Group operates its ice cream business mainly through licensing agreements with companies in Germany, Norway, Sweden, Finland, Egypt and Saudi Arabia. In Germany, the key market for Mövenpick ice cream, the Schöller Company, acquired by Nestlé in March 2002, held the license. Whilst Nestlé will continue to manufacture Mövenpick ice cream products in Switzerland, the agreement does not include other Mövenpick food businesses such as coffee, jams, chilled dairy products and wine nor the Hotel and Restaurant Business, which will continue to be owned by the Mövenpick Group.

192

In June 2003, Nestlé announced that the Federal Trade Commission in the United States had cleared the transaction that combines the Nestlé Ice Cream Company and Dreyer’s Grand Ice Cream Inc. Dreyer’s acquired Nestlé’s U.S. frozen dessert business in exchange for a shareholding of Dreyer’s Grand Ice Cream Holdings, Inc., a newly formed public holding company. Nestlé will own approximately 67% of the equity of Dreyer’s Holdings.

As part of the agreement Dreyer’s must sell its Dreamery and Whole Fruit Sorbet brands. Nestlé will sell most of its distribution operations in the United States to CoolBrands. Additionally, Dreyer’s and Masterfoods U.S.A. terminated their ice cream joint venture by the end of 2003, and Unilever had the right to terminate its Ben&Jerry’s distribution relationship with Dreyer’s. Dreyer’s is the largest manufacturer and distributor of ice cream and frozen dessert products in the United States. The company sells ice cream under the Dreyer’s and Edy’s brand names in 14 western states in the United States and just the Dreyer’s brand in parts of Asia.

In December 2003, Nestlé reached an agreement on the sale of its dairy business in Turkey to Danone. The transaction concerns the Nestlé Turkey chilled dairy and UHT milk products. However, Nestlé will retain a presence in the dairy market in Turkey through one of its key strategic brands, Nesquik, and through Nestlé Cocuk (will initially be manufactured by Danone for Nestlé). Nestlé hopes that the sale of this business will allow Nestlé Turkey to grow by focusing its resources on its wellestablished core categories.

Market positioning
“Factories or operations in almost every country in the world” Nestlé claims to be the largest food and beverage company in the world, with factories or operations in almost every country in the world.

193

In North America, Nestlé operates the Häagen-Dazs brand. In 1999, Nestlé and Pillsbury announced the formation of a 50/50 joint venture to include Nestlé’s novelty ice cream business in the United States and Pillsbury’s U.S. Häagen-Dazs frozen dessert business.

The Americas In February 2004, Brazil’s antitrust regulator, CADE, ruled against Nestlé’s acquisition of the chocolate manufacturer Garoto. Under Cade´s ruling, the local subsidiary of Swiss food giant Nestlé will have to sell Garoto to a third party holding a share of less than 20% of Brazil´s chocolate market. Through Garoto, Nestlé had boosted its market share to 50% from 29%.

Table 11.55:
Country Argentina Argentina Argentina Argentina Argentina Brazil Brazil Brazil Brazil Brazil Canada Canada Canada Chile Chile Chile Chile Colombia Colombia Colombia Colombia Colombia Mexico Mexico Mexico Mexico Mexico Market Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Dairy Dairy Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Dairy Dairy Dairy Dairy

Nestlé market shares in the Americas, 2002
Category Chocolate Sugar Milk Overall Yoghurt Chocolate Sugar Milk Overall Yoghurt Chocolate Milk Overall Chocolate Milk Overall Yoghurt Chocolate Sugar Cheese Milk Overall Chocolate Cheese Milk Overall Yoghurt Company Value% Nestlé Argentina SA Nestlé Argentina SA Nestlé Argentina SA Nestlé Argentina SA Nestlé Argentina SA Nestlé Brasil Ltda Nestlé Brasil Ltda Nestlé Brasil Ltda Nestlé Brasil Ltda Nestlé Brasil Ltda Nestlé Canada Inc Nestlé Canada Inc Nestlé Canada Inc Nestlé Chile SA Nestlé Chile SA Nestlé Chile SA Nestlé Chile SA Nestlé de Colombia SA Nestlé de Colombia SA Nestlé de Colombia SA Nestlé de Colombia SA Nestlé de Colombia SA Nestlé México SA de CV Nestlé México SA de CV Nestlé México SA de CV Nestlé México SA de CV Nestlé México SA de CV 2.67 0.45 13.70 7.80 3.60 26.66 3.75 17.30 13.90 23.10 14.72 3.90 2.00 23.94 30.90 22.20 30.60 13.72 6.90 0.30 14.10 9.60 20.92 5.70 11.00 11.00 24.30

Source: Author analysis of Datamonitor research

Business Insights

194

Table 11.56:
Country US US US US US Venezuela Venezuela Venezuela Venezuela Venezuela

Nestlé market shares in the Americas, 2002 continued
Market Category Overall Chocolate Sugar Milk Overall Chocolate Gum Sugar Milk Overall Company Value% Nestlé USA Inc Nestlé USA Inc Nestlé USA Inc Nestlé USA Inc Nestlé USA Inc Nestlé de Venezuela SA Nestlé de Venezuela SA Nestlé de Venezuela SA Nestlé de Venezuela SA Nestlé de Venezuela SA 0.51 6.32 3.65 2.40 1.50 52.78 3.42 7.25 6.10 3.10

Chilled Food Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Dairy Dairy

Source: Author analysis of Datamonitor research

Business Insights

Asia-Pacific Introduced in 1938, today CRUNCH is Nestlé’s third largest confectionery brand sold in about 40 countries worldwide and is available in the following varieties: Nestlé CRUNCH, Nestlé White CRUNCH, Nestlé CRUNCH Pieces, Nestlé Buncha CRUNCH and more recent products Nestlé Crunch with caramel and Nestlé CRUNCH assorted minis.

Table 11.57:
Country Australia Australia Australia Australia Australia China China China Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong India India India India India Market Confectionery Confectionery Dairy Dairy Dairy Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy

Nestlé market shares in Asia-Pacific, 2002
Category Chocolate Sugar Milk Overall Yoghurt Chocolate Milk Overall Chocolate Sugar Milk Overall Yoghurt Chocolate Sugar Milk Overall Yoghurt Company Value% Nestlé Australia Ltd Nestlé Australia Ltd Nestlé Australia Ltd Nestlé Australia Ltd Nestlé Australia Ltd Nestlé (China) Ltd Nestlé (China) Ltd Nestlé (China) Ltd Nestlé Hong Kong Ltd Nestlé Hong Kong Ltd Nestlé Hong Kong Ltd Nestlé Hong Kong Ltd Nestlé Hong Kong Ltd Nestlé India Ltd Nestlé India Ltd Nestlé India Ltd Nestlé India Ltd Nestlé India Ltd 17.44 32.98 4.20 4.00 9.90 7.72 3.70 3.40 9.50 6.00 40.41 39.60 35.10 21.12 4.02 2.50 2.40 7.70

I Source: Author analysis of Datamonitor research

Business Insights

195

Table 11.58:
Country Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Japan Japan Japan Japan Japan Malaysia Malaysia Malaysia Malaysia Malaysia New Zealand New Zealand New Zealand New Zealand Philippines Philippines Philippines Philippines Philippines Philippines Singapore Singapore Singapore Singapore Singapore Singapore South Korea South Korea South Korea Taiwan Taiwan Taiwan Taiwan Thailand Thailand Thailand Thailand Thailand Vietnam Vietnam Vietnam Vietnam

Nestlé market shares in Asia-Pacific, 2002 continued
Market Category Chocolate Sugar Milk Milk Overall Overall Chocolate Milk Overall Overall Yoghurt Chocolate Sugar Milk Overall Yoghurt Chocolate Sugar Milk Overall Chocolate Chocolate Sugar Milk Overall Yoghurt Overall Chocolate Sugar Milk Overall Yoghurt Sugar Milk Overall Chocolate Sugar Milk Overall Chocolate Sugar Milk Overall Yoghurt Chocolate Milk Overall Yoghurt Company Value% Nestlé Indonesia PT Nestlé Indonesia PT Nestlé (M) Bhd Nestlé Indonesia PT Nestlé (M) Bhd Nestlé Indonesia PT Nestlé Japan Ltd Nestlé Japan Ltd Nestlé Japan Ltd Nestlé Snow Co Ltd Nestlé Snow Co Ltd Nestlé (M) Bhd Nestlé (M) Bhd Nestlé (M) Bhd Nestlé (M) Bhd Nestlé (M) Bhd Nestlé New Zealand Ltd Nestlé New Zealand Ltd Nestlé New Zealand Ltd Nestlé New Zealand Ltd Goya Foods Inc Nestlé Philippines Inc Nestlé Philippines Inc Nestlé Philippines Inc Nestlé Philippines Inc Nestlé Philippines Inc Nestlé Singapore Pte Ltd Nestlé Singapore Pte Ltd Nestlé Singapore Pte Ltd Nestlé Singapore Pte Ltd Nestlé Singapore Pte Ltd Nestlé Singapore Pte Ltd Nestlé Korea Ltd Nestlé Korea Ltd Nestlé Korea Ltd Nestlé Taiwan Ltd Nestlé Taiwan Ltd Nestlé Taiwan Ltd Nestlé Taiwan Ltd Nestlé (Thailand) Ltd Nestlé (Thailand) Ltd Nestlé (Thailand) Ltd Nestlé (Thailand) Ltd Nestlé (Thailand) Ltd Nestlé Vietnam Ltd Nestlé Vietnam Ltd Nestlé Vietnam Ltd Nestlé Vietnam Ltd 4.12 5.22 1.00 25.80 1.00 25.20 2.95 2.90 1.80 0.20 0.80 27.21 10.89 33.70 33.40 24.40 13.19 29.49 3.70 2.50 6.55 11.64 5.55 48.00 36.90 57.50 0.93 23.26 11.79 11.30 8.40 0.50 1.07 1.70 1.20 3.55 5.72 7.10 5.20 17.97 3.80 22.20 17.50 4.30 1.67 7.90 8.40 10.30

Confectionery Confectionery Dairy Dairy Dairy Dairy Confectionery Dairy Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Confectionery Dairy Dairy Dairy Chilled Food Confectionery Confectionery Dairy Dairy Dairy Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Confectionery Dairy Dairy Dairy

Source: Author analysis of Datamonitor research

Business Insights

196

particularly in the chocolate confectionery in South Africa and the milk markets in Egypt and Saudi Arabia.30 21.29 2.54 3. 197 .90 1.Eastern Europe Nestlé originally entered dairy markets with shelf stable brands such as Nido.05 0.70 0.77 5.70 0. Table 11.30 0.20 Source: Author analysis of Datamonitor research Business Insights Middle East and Africa Nestlé holds strong positions in several markets in the Middle East and Africa.20 0.60 15.37 3.60 56.59: Country Bulgaria Bulgaria Bulgaria Bulgaria Czech Republic Czech Republic Czech Republic Czech Republic Hungary Hungary Hungary Hungary Poland Poland Poland Slovakia Slovakia Slovakia Slovakia Slovakia Slovakia Romania Romania Russia Russia Ukraine Ukraine Market Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Dairy Dairy Confectionery Confectionery Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Dairy Nestlé market shares in Eastern Europe.30 1. Nespray.95 47.10 1.15 2.20 0.20 1.58 0.82 18.90 2.80 1. It has since built an international presence in the chilled dairy and ice cream sectors under the Nestlé brand. 2002 Category Chocolate Sugar Milk Overall Chocolate Sugar Milk Overall Chocolate Sugar Milk Overall Sugar Milk Overall Chocolate Gum Sugar Sugar Milk Overall Chocolate Sugar Milk Overall Chocolate Milk Company Value% Nestlé Sofia AD Nestlé Sofia AD Nestlé Sofia AD Nestlé Sofia AD Nestlé Cesko sro Nestlé Cesko sro Nestlé Cesko sro Nestlé Cesko sro Nestlé Hungária Kft Nestlé Hungária Kft Nestlé Hungária Kft Nestlé Hungária Kft Nestlé Polska Sp zoo Nestlé Polska Sp zoo Nestlé Polska Sp zoo Nestlé Slovensko sro Nestlé Slovensko sro Nestlé Cesko sro Nestlé Slovensko sro Nestlé Slovensko sro Nestlé Slovensko sro Nestlé Romania SRL Nestlé Romania SRL Nestlé Zhukovskoye Morozhenoye Nestlé Zhukovskoye Morozhenoye Nestlé SA Nestlé SA 19.30 33. La Lechera and Carnation.09 10.88 6.

30 1.50 19.80 17.00 Source: Author analysis of Datamonitor research Business Insights Western Europe In the company’s convenience foods sector. Maggi merged with Nestlé in 1947.60 2.30 10.20 9. Buitoni.Table 11.80 42.90 14.42 4. 2002 Market Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Category Chocolate Sugar Milk Overall Yoghurt Chocolate Sugar Milk Overall Chocolate Sugar Milk Overall Chocolate Sugar Cheese Milk Overall Company Value% Nestlé Egypt SAE Nestlé Egypt SAE Nestlé Egypt SAE Nestlé Egypt SAE Nestlé Egypt SAE Nestlé Maroc SA Nestlé Maroc SA Nestlé Maroc SA Nestlé Maroc SA Nestlé SA Nestlé SA Nestlé SA Nestlé SA Nestlé South Africa (Pty) Ltd Nestlé South Africa (Pty) Ltd Nestlé South Africa (Pty) Ltd Nestlé South Africa (Pty) Ltd Nestlé South Africa (Pty) Ltd 3.09 7.11 5. became part of the Nestlé Group in 1988. which has been producing pasta and sauces in Italy since 1827.40 8.60: Country Egypt Egypt Egypt Egypt Egypt Morocco Morocco Morocco Morocco Saudi Arabia Saudi Arabia Saudi Arabia Saudi Arabia South Africa South Africa South Africa South Africa South Africa Nestlé market shares in the Middle East and Africa. 198 .82 32.85 20.87 4.50 10.02 1.

30 3.00 0.90 12. 2002 Market Category Chocolate Milk Overall Yoghurt Overall Chocolate Sugar Milk Overall Yoghurt Chocolate Sugar Milk Overall Chocolate Sugar Milk Overall Chocolate Sugar Milk Overall Yoghurt Overall Chocolate Milk Overall Yoghurt Chocolate Sugar Milk Overall Overall Chocolate Sugar Milk Overall Overall Chocolate Sugar Cheese Milk Overall Yoghurt Chocolate Milk Overall Yoghurt Company Value% Nestlé Österreich GmbH Nestlé Österreich GmbH Nestlé Österreich GmbH Nestlé Österreich GmbH Nestlé Belgilux SA Nestlé Belgilux SA Nestlé Belgilux SA Nestlé Belgilux SA Nestlé Belgilux SA Nestlé Belgilux SA Nestlé Danmark A/S Nestlé Danmark A/S Nestlé Danmark A/S Nestlé Danmark A/S Suomen Nestlé Oy Suomen Nestlé Oy Suomen Nestlé Oy Nestlé France SA Nestlé France SA Nestlé France SA Nestlé France SA Nestlé France SA Nestlé France SA Nestlé Deutschland AG Nestlé Chocoladen GmbH Nestlé Deutschland AG Nestlé Deutschland AG Nestlé Deutschland AG Nestlé Hellas SA Nestlé Hellas SA Nestlé Hellas SA Nestlé Hellas SA Nestlé Ireland Ltd Nestlé Ireland Ltd Nestlé Ireland Ltd Nestlé Ireland Ltd Nestlé Ireland Ltd Nestlé Italiana SpA Nestlé Italiana SpA Nestlé Italiana SpA Nestlé Italiana SpA Nestlé Italiana SpA Nestlé Italiana SpA Nestlé Italiana SpA Nestlé Nederland BV Nestlé Nederland BV Nestlé Nederland BV Nestlé Nederland BV 6.60 11.14 5.50 3.Table 11.60 0.40 6.30 2.89 0.68 14.52 1.85 11.72 3.97 0.40 2.00 0.10 2.30 0.70 1.20 0.21 27.80 4.40 11.90 Confectionery Dairy Dairy Dairy Chilled Food Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Confectionery Confectionery Dairy Chilled Food Confectionery Confectionery Dairy Dairy Dairy Chilled Food Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Chilled Food Confectionery Confectionery Dairy Dairy Chilled Food Confectionery Confectionery Dairy Dairy Dairy Dairy Confectionery Dairy Dairy Dairy Source: Author analysis of Datamonitor research Business Insights 199 .42 0.07 2.5 6.60 1.70 11.07 0.17 0.09 0.1 16.36 19.47 12.50 0.70 1.40 6.80 1.60 0.20 7.61: Country Austria Austria Austria Austria Belgium Belgium Belgium Belgium Belgium Belgium Denmark Denmark Denmark Denmark Finland Finland Finland France France France France France France Germany Germany Germany Germany Germany Greece Greece Greece Greece Ireland Ireland Ireland Ireland Ireland Italy Italy Italy Italy Italy Italy Italy Netherlands Netherlands Netherlands Netherlands Nestlé market shares in Western Europe.40 7.40 18.42 10.40 4.72 0.30 5.

200 .

72 0.Table 11.50 3.92 0.that is active in more than 80 countries.00 9.20 Chilled Food Confectionery Confectionery Dairy Dairy Dairy Confectionery Dairy Dairy Dairy Dairy Chilled Food Confectionery Dairy Dairy Dairy Dairy Confectionery Confectionery Confectionery Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Source: Author analysis of Datamonitor research Business Insights Product examples Nestlé has a joint venture with General Mills outside North America .17 1.40 10.62: Country Norway Norway Norway Norway Norway Norway Portugal Portugal Portugal Portugal Portugal Spain Spain Spain Spain Spain Spain Sweden Sweden Switzerland Switzerland Switzerland Switzerland Turkey Turkey Turkey Turkey Turkey Turkey UK UK UK UK UK Nestlé market shares in Western Europe.54 5.87 0.80 19. 2002 Market Category Overall Chocolate Sugar Milk Overall Yoghurt Chocolate Cheese Milk Overall Yoghurt Overall Chocolate Cheese Milk Overall Yoghurt Chocolate Sugar Chocolate Milk Overall Yoghurt Chocolate Sugar Cheese Milk Overall Yoghurt Chocolate Sugar Milk Overall Yoghurt Company Value% Nestlé Norge AS Nestlé Norge AS Nestlé Norge AS Nestlé Norge AS Nestlé Norge AS Nestlé Norge AS Nestlé Portugal SA Nestlé Portugal SA Nestlé Portugal SA Nestlé Portugal SA Nestlé Portugal SA Nestlé España SA (Grupo) Nestlé España SA (Grupo) Nestlé España SA (Grupo) Nestlé España SA (Grupo) Nestlé España SA (Grupo) Nestlé España SA (Grupo) Nestlé Sverige AB Nestlé Sverige AB Nestlé Suisse SA Nestlé Suisse SA Nestlé Suisse SA Nestlé Suisse SA Nestlé Gida Sanayii AS Nestlé Gida Sanayii AS Nestlé Gida Sanayii AS Nestlé Gida Sanayii AS Nestlé Gida Sanayii AS Nestlé Gida Sanayii AS Nestlé UK Ltd Nestlé UK Ltd Nestlé UK Ltd Nestlé UK Ltd Nestlé UK Ltd 2.30 0.80 13.Cereal Partners Worldwide .80 12.86 3. The joint venture began in 1990.20 5.30 8.90 25.71 27.70 2.11 11.60 1.77 22. and its rapid growth has been characterised by strong branding and lately the launching of breakfast cereal brands into the fast-growing cereal bar market.50 2.70 3.94 10.80 22.86 4.50 2.30 0.50 29.80 6. 201 .50 10.10 3.10 0.

forecourts etc. the Ortega Nachos Bar.33: A selection of brands from Nestlé Source: http://www. FoodServices Russia and FoodServices USA.shtml Business Insights Foodservice Nestlé FoodServices provides food and beverage professionals with a wide selection of branded products and solutions to meet the growing opportunities to service consumers in out-of-home channels. C-stores. 202 .Figure 11.cerealpartners.nestle. is a self-serve station for use in schools. FoodServices France.asp and http://www.com/Html/Brands/index. For example.co.uk/brands. FoodServices Malaysia. The sector is split on a geographical basis with five operating units: FoodServices Australia.

the company has implemented four efficiency programmes: GLOBE (Global Business Excellence). The company has stated that it will not sacrifice the long-term potential of products in favour of short-term performance gains. product availability and consumer communication. Nestlé has four key strategies.34: Self-service snacking facility from Nestlé FoodServices Source: Company information Business Insights Strategies for growth One of Nestlé’s key strategies is to grow its existing products through innovation and renovation while maintaining a balance in geographic activities and product lines. Through product innovation and 203 . product innovation. Driving growth and improving margins Nestlé’s four pillar strategy is based on operational performance. Project FitNes and Target 2004+ (MH97). In addition. which it is using to drive growth. IC3 (Increasing Customer and Channel Contributions). IC3 is an initiative based on benchmarking the company’s performance at comparable retail customers and then working to improve the lower performing ones.Figure 11.

The first of these. where and how they want them. derivatives of existing products. The three major projects Nestlé has implemented three projects with the goal of improving the company’s margins. Product availability. finally. launched at the start of 2002. The project recorded savings of CHF 1. GLOBE. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Nestlé in the form of a SWOT analysis. 204 . highlighting the relative strengths. Target 2004+ was launched in January 2002 as an industrial efficiency programme (following the MH97 project).2 billion in 2002. the third driver of growth. weaknesses. brand extensions or packaging innovations. opportunities and threats faced by the company. the company aims to ensure that its portfolio of products is updated through new technologies and creative ideas. aims to ensure that consumers have access to the company’s products when. whilst a focus on consumer communication hopes to drive growth by building brand loyalty. is a programme tasked with improving the performance and operational efficiency of the businesses. either through new products and brands. The programme was launched in July 2000 and runs to 2006. project FitNes is focused on reducing administrative costs by 1% of the company’s food and beverage sales by 2005. and total savings from the project are expected to reach CHF 2 billion by 2004.renovation.

Nestlé commands competitive and scale advantages • Category leadership helps generate consumer loyalty and achieve greater in-store emphasis by retailers • Cereal Partners Worldwide: strong branding and an innovative approach Nestlé SWOT analysis Company Weaknesses • The company’s ice cream business had underperformed. Nestlé is able to command both competitive and scale advantages. Nestlé seeks to take advantage of scale. whilst leaving individual operating decisions to country managers with specific expertise and experience in their companies. on a global scale. on a global scale. thus retaining an element of focus on individual operations that are not dictated to from a global headquarters.A global perspective As a market leader. Realising this. the company has made efforts to improve the growth and performance of the business and enhances its competitive position Company Opportunities • The European dairy market remains a key strategic area for Nestlé with initiatives to prioritise this sector • Brand extensions can boost sales in stagnant or declining segments and can be used to leverage expertise in successful categories • Extending sales in non -retail channels Company Threats • Consumer trends towards healthier eating will impact sales of indulgent products in favour of reduced -fat alternatives • Chocolate confectionery markets are increasingly mature and susceptible to declining growth rates Source: Author research Business Insights 205 .35: Company Strengths • A market leader. Figure 11. Category leadership across a diversified portfolio of sectors also helps the company to generate consumer loyalty and achieve greater in-store emphasis by retailers. As a global operator.

Nestlé has successfully launched brand extensions into chilled desserts and ice creams. Rolo and Smarties desserts. in comparison to Masterfoods. which are also perceived to be less unhealthy than chocolate confectionery. Nestlé also extended some of their confectionery brands into biscuits. In 2003. the European dairy market remains a key strategic area for Nestlé. whilst in Eastern Europe organic growth will provide the platform for greater sales. the Milkybar brand was extended to widen the consumer base by differentiating between consumers. it must be aware of consumers’ increasing awareness of the health implications of indulging themselves on confectionery. Nestlé has also extended brands within the confectionery market along age and gender lines. In Western Europe. a faster growing segment than traditional confectionery markets. Milkybar Munchies were labelled ‘For Adults’ while Milkybar Choos were targeted at children. The Group has launched a series of initiatives aimed at refocusing and prioritising this sector. making use of its substantial dairy expertise to introduce Milkybar. The LC1 brand was recently licensed to a third party in Germany and Nestlé also reached an agreement with Emmi in Switzerland concerning the production and distribution of its Hirz chilled dairy lines. the company sees opportunities to grow by extending coverage in non-retail channels. for example. Health implications for indulgent products Though the company is not as heavily dependent upon confectionery markets. Future brand extensions may be used to boost sales in stagnant or declining segments or to leverage expertise in particularly successful categories. While 206 .Successful brand extensions Despite the recent sale of dairy activities in Turkey. After the company saw that KitKat Chunky cannibalised KitKat sales.

As a leading player in chocolate confectionery. which are susceptible to declining growth rates. from consumer trends towards healthier eating and position its products accordingly. in line with other confectionery manufacturers.particularly pertinent for the confectionery markets. Nestlé must be aware of the threat to food markets in general. the company’s cocoa costs are likely to increase in 2004 as a result of recent price increases in the world cocoa market. 207 . a proportion of Nestlé’s sales are under threat from increasingly mature markets. Additionally.

Chapter 12 Unilever Bestfoods 208 .

in 2004. health and wellness. 209 . choosing to replace them with broad objectives to increase cashflow and returns to shareholders in dividends and share buybacks. Unilever is the world’s biggest ice cream business and its symbol in the ice cream is the Heart.Chapter 12 Summary Unilever Bestfoods Unilever is one of the world’s leading suppliers of fast moving consumer goods in foods. the company abandoned the growth targets set for the final year of Path to Growth. Unilever acquired Bestfoods for an aggregate consideration of €26. Cornetto. Slim-Fast.1 billion. ice cream and frozen foods. The foods business spans several categories including savoury and dressings. particularly those that feature high levels of consumer trust. spreads and cooking products. the company announced it was disappointed with top line growth in 2003. the company generated foods sales of €27 billion and owned eight foods brands with sales in excess of €1 billion. stronger brands. Magnum. Unilever made 20 acquisitions. Solero and Carte d’Or. In 2002. Breyers and Ben & Jerry’s and Hellmann’s. launched in 1997 to unite Unilever’s ice cream brands. However. The company is seeking to extend brands across product categories. home care and personal product categories. Birdseye. During 2000. Findus. Leading brands include Knorr. the most important of these were Bestfoods. The business is based on two global divisions: Unilever Bestfoods and Home and Personal Care. Despite the integration of Bestfoods. Ben & Jerry’s and Slim-Fast. The company’s Path to Growth strategy was designed to accelerate top-line growth and increase operating margins with a series of initiatives to focus on fewer.

in practice. ice cream and canned foods businesses. home care and personal product categories. headed by the Group’s joint chairmen. In 2002. Over one-half of the company’s sales are generated by food division brands. they had operations in over 40 countries. Unilever introduced improved technology to the business. History Unilever was created in 1930 when the British soapmaker Lever Brothers (founded in 1885) merged with the Dutch margarine producer. In the 1930s. Although these companies are separate legal entities. health and wellness. responsible for divisional strategy and for implementation across the world. he began to diversify into foods. Margarine Unie grew through mergers with other margarine companies in the 1920s.About Unilever Bestfoods Unilever is one of the world’s leading suppliers of fast moving consumer goods in foods. The foods business spans several categories including savoury and dressings. the company generated foods sales of €27 billion and owned eight foods brands with sales in excess of €1 billion. The business grew and new ventures were launched in Latin America. acquiring fish. The business is based on two global divisions: Unilever Bestfoods and Home and Personal Care. The company believes that this structure allows for faster decision-making and strengthens its capacity for innovation by more effectively integrating research into the divisional structure. spreads and cooking products. The Unilever Group has two parent companies: Unilever NV and Unilever plc. Margarine Unie. ice cream and frozen foods. Both divisions have an executive board. with separate stock exchange listings. 210 . The Executive Committee is responsible for setting global strategy for overall business performance. Lever established soap factories around the world. Between them. In 1917. Unilever operates as a single business with a single management team – the Executive Committee of the Board.

Inc. Unilever announced plans to sell a number of North American brands and related assets from its Unilever Bestfoods portfolio and in August 2001. a subsidiary of Associated British Foods plc. In May 2001. through its subsidiary Unilever United States.083 million.. the sale of the Iberia Foods business was completed. for a total of approximately $360 million in July 2002. Inc. the company completed the sale of Loders Croklaan Group. 211 . had combined sales of $310 million in 2001.9 billion. During 2000. The businesses were being divested as a result of undertakings given to the European Commission in connection with the acquisition of Bestfoods. to IOI Corporation Berhad of Malaysia for €217 million and in December 2002. In 2000. The brands and related assets. Disposals included the European Bakery Supplies Business. a subsidiary of Nippon Suisan Kaisha Limited for US$175 million. acquired Bestfoods for an aggregate consideration of €26. an international speciality oils and fats business. the most important of these were Bestfoods. the company announced an agreement to sell the Bestfoods Baking Company for a debt free price of €1. the company sold its dry soup and sauces businesses in Europe for a debt free price of €1 billion. Unilever. In October 2000..Sales and acquisitions Since the announcement of the Path to Growth strategy in February 2000. Ben & Jerry’s and Slim-Fast. Unilever made 20 acquisitions. In November 2002. acquired by Unilever in connection with the October 2000 acquisition of Bestfoods. In February 2001.3 billion. Benedicta. Unilever sold its North American seafood businesses to Nippon Suisan (USA). In January 2001. a culinary business in France. and various other smaller businesses and brands. In the food business. Inc. Unilever also disposed of 27 businesses for a total consideration of approximately €642 million. Recent significant activity in the company’s food business was the sale of 19 food brands to ACH Food Companies. which was completed in October 2000. the company has sold a total of 87 companies with sale proceeds of €6. Annual sales of the businesses total approximately € 435 million.

Unilever announced a 10% rise in net profit before exceptional items. However. including low-carb items. Poor performances from Slim-Fast were thought to be largely attributable for the lower sales growth.5%-6.Recent performance Unilever concentrates cash in the parent and finance companies in order to ensure maximum flexibility in meeting changing business needs. third party borrowings and loans from parent and group financing companies that is most appropriate to the particular country and business concerned. The diet food and drinks business suffered following the popularity of low-carbohydrate diets. 212 . the company announced it was disappointed with top line growth in 2003. Operating subsidiaries are financed through the mix of retained earnings. sales growth in its leading brands. well short of the target rate of 5. As a result. Good progress in the vast majority of the business was not yet sufficient to offset the weaknesses in a limited number of under-performing businesses when taken in conjunction with some one-off factors in the first half of 2003. Slim-Fast’s revenues fell by one-fifth last year. Leading brand growth revised downwards in 2003 Despite the successful integration of the Bestfoods acquisition and having reshaped the company’s brand portfolio (including the sale of 110 businesses).6% from the company’s overall sales growth. was just 2. a key objective of the Path to Growth strategy launched four years ago.5%. In its preliminary 2003 results.0%. Unilever is re-launching Slim-Fast with a wider variety of products. knocking 0.

36: Unilever financial performance 2000—2003. BEIA .000 30.582 5. whilst family 213 .000 0 2000 Source: Company accounts Group Turnover Group Operating Profit 2001 2002 2003 Business Insights Difficult economic conditions in a number of countries in Europe in 2003 were reflected in market growth rates that slowed significantly.000 40. turnover and operating profit €m 60.000 10. Exceptional summer weather in Europe in 2003 had a largely neutral effect on Unilever with benefits to ice cream and RTD Tea but not for savoury.514 7.501 Notes: (1) Excluding share of sales from joint ventures.269 2002 48. The company saw growth in spreads and cooking products for its heart health brands Becel/Flora.700 7.260 2003 (2) 47.63: €m Group Turnover (1) Group Operating Profit (3) Unilever financial performance 2000—2003 2000 47.Before exceptional items and amortisation of goodwill and intangibles.000 20.794 2001 51.000 50. (2) Unaudited and provisional results released February 2004.Financial performance Table 12.270 7. Source: Company accounts Business Insights Figure 12. frozen food and cooking products.

good performances from Hellmann’s. Table 12.848 225 7.430 391 4. acquisitions and disposals impacted upon overall performance in 2003. (2) Re-stated 2002 turnover figures. In North America.052 n/a 7.950 296 9.681 797 6.215 354 4.517 n/a Notes: (1) at constant exchange rates. Wellness & Beverages Turnover Operating Profit Ice Cream & Frozen Foods Turnover Operating Profit Unilever food divisional performance 2000—2003 2000 2001 2002 (2) 2003 (1) 5. helped by the hot summer weather and innovations including Magnum 7 sins. There were positive developments in Indonesia. Magnum Moments.727 446 7.503 422 9.482 n/a 6.64: €m Savoury & Dressings Turnover Operating Profit Spreads and Cooking Turnover Operating Profit Health.brands such as Rama and Blue Band adopted a strategy of recovering substantial increases in edible oil costs which some competitors have not followed. and by declines in Bertolli olive oil and in Ragu pasta sauces.216 793 5. Magnum snacking bars and the roll out of the Fruit & Fresh mix of yoghurt and ice cream.456 616 7. In Asia-Pacific. whilst Knorr Soupy Snax were launched in India and the Knorr brand recorded good growth in China.670 823 6. The Bertolli brand recorded growth following its extensions into pasta sauces.419 n/a 3.150 267 4. Lipton and Bertolli through pasta sauces and frozen foods and Becel margarine in Canada were partly offset by declines in spreads consumption because of lower butter prices. Ice cream sales grew strongly. dressings and toppings.597 793 9. Source: Company accounts Business Insights 214 .

Shiseido and Unilever. Colgate. Kees van der Graaf. produces and markets a range of milk-based ambient desserts including ready-to-use custard. Nestlé. Cadbury.Total shareholder return positioning Total Shareholder Return (TSR) is a concept used to compare the performance of different companies’ stocks and shares over time. L’Oreal. Beiersdorf. Pepsico.V. ambient dessert products. Within the context of Unilever’s global Path to Growth strategy. Unilever was positioned 12th. Kao. Sara Lee. Unilever agreed to sell its Ambrosia and Brown & Polson businesses to Premier Foods for an undisclosed sum. Philip Morris.). Lion. Board changes announced in February 2004 In February. currently President of Ice Cream and Frozen Foods Europe. will succeed Mr FitzGerald as Chairman of Unilever PLC (and Vice-Chairman of Unilever N. At the end of 2002. outside its target position. Unilever calculates TSR over a three-year rolling period and its TSR target is to be in the top third of a reference group of 21 international consumer goods companies. within foodservice channels. which remains the top one-third of the reference group. Procter & Gamble. In turn. Brown & Polson is a long established brand relating to cornflour and. 215 . It combines share price appreciation and dividends paid to show the total return to the shareholder. Gillette. Clorox. Reckitt Benckiser. Orkla. on a one-year basis its TSR ranking has been in the top one-third of the reference group for each of the last two years. Coca-Cola. a business within Unilever Bestfoods UK. In November 2003. UBF-UK is focussing on a core portfolio of brands and believes that Ambrosia’s and Brown & Polson’s lie outside of this. Patrick Cescau. will succeed Mr Cescau as Foods Director. milk puddings and creamed rice puddings. currently Foods Director. Unilever announced that Niall FitzGerald would retire from the company in September 2004. The companies of the TSR peer group are (alphabetical order): Avon. Heinz. However. Ambrosia. Danone.

Slim-Fast began life in the late 1970s in the United States as a healthy. for example Wall’s in the UK and South East Asia. Unilever is committing 20% more investment in the next three years to marketing and development activities to make the Heart a “power brand”.Looking forward.5 billion. to contribute to this. to frozen food and ice cream Knorr is sold in over 100 markets with sales of around €3. Solero and Carte d’Or. Market positioning From soups and dressings. nutritional slimming aide. It sells ice cream in over 40 countries worldwide. By the end of the year. while still being conscious of their health. 216 . as part of the company’s brand focus programme. Brands ranging from the UK’s Chicken Tonight to Asia’s Annapurna and Latin America’s CICA are all part of the Knorr portfolio. united by the Heart logo. the Middle East and Asia. Africa. Algida in Italy. The brand has grown quickly as modern lifestyles meant that people ate more and exercised less. Unilever’s ice cream companies. Langnese in Germany and Ola in the Netherlands. to over 16%. Streets in Australia. It is growing fast across emerging markets in Latin America. the leading brands should represent 95% of the company’s business. Together they produce brands including Magnum. the company’s 2004 outlook is for low double-digit growth in EPS (BEIA). Unilever believes that the global ice cream business is worth €5 billion. Unilever expects both improved growth in their leading brands and an increased operating margin. Cornetto. are known by different names in different countries. and that it accounts for a 17% market share. Other well-known Unilever ice cream brands include Breyers and Ben & Jerry’s. Kibon in Brazil. Over time. packaging and marketing communication. they are being migrated to share the Knorr name.

Hellmann’s world brands are sold in more than 30 countries in North America.02 0.90 0. Latin America.20 3. convenience stores and fast food restaurants.30 0.30 0.70 1. 2002 Category Company Value% 1.70 6.70 0. Unilever believes that each day.37 1.57 0.40 0.30 3.70 1.30 0.90 0.65: Country Austria Austria Austria Austria Belgium Belgium Belgium Brazil Brazil Chile France France France Germany Germany Germany Greece Greece Greece India Ireland Ireland Ireland Italy Italy Romania South Africa South Africa Spain Spain Switzerland Turkey UK UK UK UK Market Confectionery Confectionery Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Dairy Chilled Food Dairy Dairy Dairy Chilled Food Confectionery Confectionery Chilled Food Dairy Savoury Snacks Confectionery Confectionery Savoury Snacks Dairy Dairy Dairy Dairy Confectionery Confectionery Dairy Dairy Dairy Savoury Snacks Unilever market shares.30 1.20 0.30 0. consumers buy more than one million Hellmann’s products.40 0.67 0.10 0.40 1.50 0.14 4.58 0.57 1.90 Gum Lever Fabergé GmbH Sugar Unilever Bestfoods Austria GmbH Cheese Unilever Bestfoods Austria GmbH Overall Unilever Bestfoods Austria GmbH Cheese Unilever Belgium NV Milk Unilever Belgium NV Overall Unilever Belgium NV Milk Unilever Bestfoods Brasil Ltda Overall Unilever Bestfoods Brasil Ltda Cheese Unilever Bestfoods Chile SA Cheese Unilever Bestfoods France SA Milk Unilever Bestfoods France SA Overall Unilever Bestfoods France SA Overall Bestfoods Deutschland GmbH CheeseUnilever Bestfoods Deutschland GmbH OverallUnilever Bestfoods Deutschland GmbH Cheese Elais Oleaginous Products SA Overall Unilever Hellas SA Gum Unilever Hellas SA Sugar Hindustan Lever Ltd Overall Unilever Bestfoods Ireland Ltd Overall Unilever Bestfoods Ireland Ltd Overall Unilever Bestfoods Ireland Ltd Gum Lever Fabergé Italia SpA Sugar Lever Fabergé Italia SpA Overall Bestfoods Romania SRL Cheese Unilever South Africa (Pty) Ltd Overall Unilever South Africa (Pty) Ltd Milk Unilever Foods España SA Overall Unilever Foods España SA Gum Lever Fabergé Schweiz Gum Unilever Sanayii ve Ticaret Türk AS Cheese Unilever Bestfoods UK Ltd Overall Unilever Bestfoods UK Ltd Overall Bestfoods UK Ltd Overall Unilever Bestfoods UK Ltd Source: Author analysis of Datamonitor research Business Insights Product examples Hellmann’s is a €1.Table 12. Europe and now 217 .7 billion family covering four brands: Hellmann’s Wish-Bone.10 1.S.21 0. These are sold through a variety of channels including supermarkets. Calvé and Amora. U.50 0.20 1.02 2.80 7.50 0.10 4.10 0.

It is now sold across continental Western Europe and also sold in Turkey. Its main market is Germany but it is also sold in Latin America. Rama is the world’s largest margarine brand. Canada and Brazil. margarine brand.S. the UK and Mexico. Flora was launched in the UK in 1964 as a sister brand to Becel and is now also sold in Australasia. Brazil.600 to some 400 leading brands and 218 . Doriana and Dorina are leading margarine brands in Latin America. Blue Band is sold in the Netherlands. UK and a number of other countries.Australia where the brand was recently launched. Becel was launched in the 1960s at the request of the medical profession and was originally sold only in pharmacies. In the Healthy Heart sector. Spain and Central and Eastern Europe. Figure 12.37: A selection of brands from Unilever Source: Unilever Business Insights According to Unilever. The company believes that Country Crock is the number one U. France. Greater brand focus on brands with strong potential Since Unilever’s Path to Growth strategy was launched in 2000. Eastern Europe and North Africa. Arabia. Ireland. the company has reduced the number of brands it manages from 1. South Africa. The brand’s top five countries are the United States.

robusto and classico. NPD has centred on healthy eating and New Blue Band Good Start margarine is fortified with extra calcium and seven essential vitamins. NPD plays a key role Oils. For example. Bertolli has grown annually by an average of 10% in the last three years to over €500 million. fragrante. Blue Band. PG Tips and Marmite in the UK. In the food business. and soybased drink brand AdeS in Latin America. Country Crock Plus Calcium & Vitamins less 219 . Unilever has also announced plans to make greater use of its corporate brand in support of its companies and products around the world. By 2005. the Unilever name will appear on all product packaging. particularly those that feature high levels of consumer trust. bruschetta toppings. dressings and spreads with olive oil. Brands can be local and also spread across categories Not all of the company’s food brands have global appeal. Country Crock and Doriana are the largest of the household-name spreads and cooking product brands that make up the company’s Family brand world. Rama. became a market leader in Italy in 2002: delicato. These brands are sold under more than 20 different names across the globe.just under 250 tail brands. fats and spreads Different oils are used for different tasks in Italy and this led to a new Bertolli range of olive oils which. Maille in France. gentile. Breyers ice cream in the United States. Additionally. By extending beyond the olive oil category and stretching the brand credentials to other products. Eventually. according to Unilever. an example of this is the Bertolli’s Italian-inspired food brand that has grown beyond olive oil into pasta sauces. subsidiary companies will adopt the name and use it on corporate literature and signage. This enables the company to concentrate resources on a portfolio of leading brands with strong growth potential. the company is seeking to extend brands across product categories.

Recent innovations in the traditional Knorr range of bouillons and flavourings have included new varieties influenced by Latin and Asian cooking such as garlic and 220 .activ brand to adjacent categories. Family brand spreads in Belgium. flavourings and preservatives have been banned from the range and there are strict rules on the amount of total fat.fat and calories than butter or margarine and no cholesterol. Innovations have included Steamfresh vegetables and a new range of premium egg pasta meals from Italy. Additionally. which is now in seven markets. for which it now has regulatory clearance. Birds Eye and Findus make up the European family of frozen food brands at Unilever. the company’s priority going forward is to generate growth through a more rapid transfer of successful concepts across markets. The Captain. saturated fat and salt. In frozen foods. NPD has concentrated on convenience – helping people prepare healthy food quickly. and through planned innovations in the areas of kids’ nutrition. Knorr – the ‘number one brand’ Knorr is Unilever’s “number one brand” and its history dates back to 1838 with experiments in drying seasonings and vegetables to preserve their flavour and nutritional value. including Knorr frozen. Frozen foods Iglo. This includes the roll out of the Rama/Blue Band Finesse range of cream alternatives and the extension of the Pro. Germany and the Netherlands are now made with blends of pure natural oils. convenience meals and concepts based on fresh and natural ingredients such as the recently launched range of Steam Fresh vegetables. has been relaunched and all artificial colours. the company is starting to utilise its expertise in frozen food to develop frozen ranges for Knorr and Bertolli. a marketing icon since 1967. Additionally. The company has a strong innovation programme planned for both family and heart health brands into 2004.

Calvé and Wish-Bone. The pro. Its history dates back almost 100 years to when Richard Hellmann. The company recognises that coronary heart disease is the principal cause of premature death worldwide and reducing cholesterol is key to minimising the risks. contains low fat mayo and mayonnaise with olive oil as a healthier option to traditional dressings.activ yoghurt and milk. began selling the mayonnaise made from his wife’s own recipe. pro. Just 2 Good. Knorr frozen meals have also been launched in Europe.activ brand is clinically proven to reduce harmful cholesterol by 10–15% in three weeks. have clinically-proven ways to help consumers maintain a healthy heart. Becel/Flora pro.tomato. Hellmann’s Together with its sister brands. mustard. Hellmann’s continues to innovate and has launched new varieties of salad dressing. fun and squeezable formats. The same cholesterol-lowering ingredients are now being included beyond spreads and cooking products and planned innovations include pro. has helped broaden the brand’s appeal. as well as easy-to-use liquid bouillons. liquid soups.activ’s success has been the support of health professionals and other key opinion formers. including colourful. Amora. new packaging. A vital part of pro. In addition. In addition. Unilever’s Healthy Heart brands. 221 . Hellmann’s expertise is in the dressings sector.activ spreads and cooking products include plant sterols that reduce absorption of harmful cholesterol. a recent arrival to the United States from Germany. Meal kits and ready-to-mix sauces have been introduced to meet the convenience requirements of today’s busy consumers and Knorr has expanded its range of two-step cooking sauces. ketchups and dipping sauces including Hellmann’s Dippin’ Sauces in flavours including Rockin’ Ranch and Honey Mustard Madness.activ has grown the company’s Healthy Heart business to over €1bn in just two years. noodle snacks and pasta sauces. Becel/Flora. Hellmann’s new yoghurt-based mayonnaise.

following the acquisition on Bestfoods. Solero Smoover and Cornetto Soft. flavour or texture. Recent brand innovations have appealed to a growing desire for good-foryou. Recent foodservice innovations have included the Knorr 100% Soup. It was subsequently amended. Leading brands account for over 90% of total business The company’s Path to Growth strategy was designed to accelerate top-line growth and further increase operating margins. the company re-launched the Heart as a symbol of “the serious fun of ice cream”. Path to Growth commits Unilever to delivering (by 2004) annual top line growth of 5-6% and operating margins in excess of 16% (before exceptional items and amortisation). a preparation and dispensing system for Lipton Brewed Iced Tea and a new range of lower-fat Hellmann’s dressings. fresh and natural ice cream options and include Carte d’Or Fruit & Fresh. In 2003. Solutions include products that add the right seasoning. that is. for a fast-food chain’s salad bar. 222 . The Heart was launched in 1997 to unite Unilever’s ice cream businesses and brands. which was completed in October 2000. those that are most in demand from consumers. The plan centred on a series of initiatives to focus on fewer. restaurateurs and major hotel and fast-food chains to create food solutions that help grow their business. Strategies for growth Unilever’s strategy is to focus research and development and marketing on their leading brands. available through specialised Hellmann’s dispensers. stronger brands to accelerate growth.Unilever is the world’s biggest ice cream business and its symbol in the ice cream is the Heart. UBF Foodsolutions operates in 65 countries worldwide. pre-prepared ingredients that save time in a busy kitchen and new ways of serving food on a large scale at consistent quality. Foodservice Unilever Bestfoods (UBF) Foodsolutions works with customers including caterers.

The company’s leading brands now account for 93% of its total business (up from 75% in 1999). It will innovate in the fastest growth segments of the market and also grow its brands outside their current geography and category structures into new and emerging markets. By 2004 Unilever expected its leading brands to represent 95% of the business (the figure reached 93% at the end of 2003). 223 . The company’s portfolio has been reshaped and enhanced through acquisitions and the sale of 99 businesses that did not have acceptable growth or margin potential. the company has achieved faster growth in its leading brands and progress with the integration of Bestfoods and its disposal programme. The increase in brand power should reflect the contribution from acquisitions. It will look beyond narrow category definitions to adjacent segments for many of its brands. Unilever announced that it is to remove its sales and margin targets for 2004 (as defined in Path to Growth) and replace them with broad objectives to increase cashflow and returns to shareholders in dividends and share buybacks over five years. The cornerstone of the plan is the focus of product innovation and brand development on a portfolio of around 400 leading brands. savings of €0. In February 2004. backed by more effective innovations with fewer projects. In addition to the Path to Growth restructuring. Ultimately. the planned acceleration in exit from the non-corporate businesses and the disposal or ‘harvesting’ of tail brands. faster rollout and increased speed to market.Now in the final year of Path to Growth. which will lead to less fragmentation of resource and bigger hit innovations. Unilever expects to achieve greater share through a more focused portfolio of brands in highly fragmented markets. The shift in focus followed stock market criticism of the company for failing to fulfil its promise of revenue growth.8 billion were expected to be generated through the integration with Bestfoods.

As part of its new “Unilever in 2010” strategic plan. In 2002. Strength demonstrated by core brands Unilever’s core strength is demonstrated by the power and global appeal of its main brands. These brands belong to a diversified group of food categories. weaknesses. the company is setting aside around €2.5 percentage points added to the operating margin. opportunities and threats faced by the company.0 billion per year for acquisitions which would focus on its existing product groups.Looking beyond the Path to Growth Speaking after the release of preliminary 2003 results. Chairman Antony Burgmans hinted at plans for acquisitions to boost the market position of its 14 product categories with a particular focus on Asian markets. with no plans to expand into categories such as mineral water or yoghurt. Unilever is hoping for average revenue growth of between 3. Over the period of 2005 to 2010. SWOT analysis The following section provides a brief appraisal of the performance and strategy of Unilever in the form of a SWOT analysis. highlighting the relative strengths. with a further 2. reducing the company’s risk to down turns in any one sector. 224 . the company owned eight foods brands with sales in excess of €1 billion. As the company’s portfolio has been reshaped and enhanced through acquisitions and disposals its leading brands now account for 93% of its total business (up from 75% in 1999).0%. in February 2004.0%-5.

reducing the company’s risk to down turns in any one sector •Greater focus: the company has reduced the number of brands it owns Company Opportunities • Innovate in the fastest growth segments of the food industry • Look beyond category definitions to adjacent segments for many of its brands •The Knorr brand has potential in emerging markets in Latin America. the Middle East and Asia Company Threats • Low-carb diet threat to sales of Slim Fast products • Consumer healthy eating trends away from indulgent. Africa. full-fat and some processed foods Source: Author research Business Insights The company’s Path to Growth strategy continues to offer growth opportunities and greater efficiencies. as the company increases levels of outsourcing and sees advantages from its global procurement programme. With over a year to go until Unilever reaches the end of Path to Growth.38: Company Strengths Unilever Bestfoods’ SWOT analysis Company Weaknesses • Though the company has made progress. Eight foods brands with sales in excess of €1 billion • Diversified group of food categories. 225 . a number of weaker and under-performing businesses remain in the company’s portfolio • Power and global appeal of brands. the company is aware of the difficulties in certain areas of its business and is committed to improving performances. a number of weaker and under-performing businesses remain in the company’s portfolio. Further gains are envisaged throughout 2004. Underperforming businesses remain Though the company has made progress.Figure 12.

towards products such as soups and pastas. largely due to the success of low-carbohydrate diets. which were particularly pronounced in the United States. Low-carb diet threat to Slim Fast Unilever reported disappointing Slim Fast sales in 2003. towards foods that are perceived to carry greater health and nutritional benefits. a variety of snack bars and websites promoting diet advice. This comes just as recent innovation in the Slim Fast brand has been aimed at repositioning the brand. 226 . Africa. In line with other food manufacturers. quality and range of alternatives they demand. Unilever expects to innovate in the fastest growth segments of the food industry and also grow its brands outside their current geography and category structures into new and emerging markets. that may see moves away from indulgent. full-fat and some processed foods. the Middle East and Asia. Increasingly. in healthier formats. Together with Slim Fast ice cream. Through the realisation of the Path to Growth strategy. it will look beyond category definitions to adjacent segments for many of its brands. the brand is more closely aligning itself with competitors such as Weight Watchers from Heinz. The brand has significant potential in emerging markets in Latin America.Brand extensions and emerging markets Though Knorr is Unilever’s key brand growth opportunities remain. Unilever faces a threat to its sales from consumer health trends. It is up to Unilever to respond to these trends by designing new products that offer consumers the choice. away from the meal replacement category.

227 .

Chapter 13 Industry Opinion Survey 228 .

Cadbury-Schweppes and Masterfoods are perceived to be the least successful innovators. When it comes to moving into new international markets. Hershey is perceived to be less successful than the other global leaders at communicating its brand messages. with 42% predicting ‘high growth potential’ in the region’. Respondents believed that this growth was likely to be sourced to NPD and innovation. by increasing their market share at the expense of their competitors. 229 . with almost 30% of respondents believing the company is ‘weak’ in this area. survey respondents perceive Unilever and Nestlé to be the most successful companies. Convenience issues had a strong influence on the strategies of the global food leaders in 2003. ahead of issues such as healthy eating. Among the leading global food companies. This was seen as the most important issue shaping the strategies of the leading companies. Over one-quarter of respondents felt that Danone was well placed to deliver ‘very strong growth’ over the next three years. brand recognition. pleasure and indulgence. innovating and launching new products into developed markets is the strategy most likely to deliver growth in the short-term future. Danone and Unilever stand out as being the two companies most responsive to new customer trends.Chapter 13 Summary Industry Opinion Survey Over one-third (36%) of respondents believe that the global food leaders increased their dominance in 2003. Over 80% of respondents believe that the Asia-Pacific region offers the greatest growth opportunities for the global food leaders. NPD.

Introduction This chapter presents the results of the Business Insights Global Food Leaders Industry Opinion Survey. Food leaders: geographical strategies. retailers. changes in market shares. spotting growth opportunities and marketing activity. manufacturers and ingredients companies from Europe and the United States. It then goes on to identify the competitive positioning of the global food leaders. focusing on the role of the global food leaders in today’s food markets allowing insight into the thoughts and predictions of their industry peers. Food leaders: the future. merger and acquisition activity. Therefore. but then positioning the companies against themselves in terms of reacting to customer trends. marketing activity and NPD initiatives. this chapter is divided into four main sections: Food leaders: 2003 performance. The survey begins by assessing the performance in 2003 of the global food leaders against their peers in terms of financial performance. The survey was designed to be strategic and forward-looking. innovation. Food leaders: competitive positioning. 230 . collectively at first. The survey then looks at the opportunities for expansion into new markets around the world and identifies which of the companies are best placed to exploit growth in the coming years and how they will achieve it. conducted in December 2003 with the help of more than 50 senior level respondents from across the food industry.

Figure 13. as over 70% of those surveyed pointed towards ‘above average’ levels of innovation and new product launches by the global leaders. new market share packaging Marketing budgets and advertising spend Merger and acquisition activity Very strong growth/activity above average Growth/activity above average but not exceptional Average market growth/activity Growth/activity less than average but not stagnant or declining Very low growth/stagnating market or activity Source: Global Food Leaders Industry Opinion Survey Business Insights 231 . Establishing market the launch of new consumer dominance i. Respondents believed that this growth was likely to be sourced to NPD and product innovation.e.Food leaders: 2003 performance In terms of sales growth. new products trends i.39: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Growing revenues Increasing profitability Global food leaders: performance in 2003 Increasing Innovation i.e. almost one-half of the respondents surveyed (43%) believed that the global food leaders recorded above average growth in 2003. Product innovation drives growth in market share Over one-third (36%) of respondents believe that the global food leaders increased their dominance in 2003. by increasing their market share at the expense of their competitors.e. though their performance was not expected to be particularly exceptional. Respondents were more inclined to believe that the global food leaders had the ability to increase their 2003 profits over and above the industry average.

NPD and branding strategies of the global food leaders.Marketing and advertising expenditure in the food industry were also driven by the global food leaders in 2003. brand recognition. Food leaders: competitive positioning The survey asked. ahead of issues such as healthy eating. in the context of several other consumer trends and market influences: how important have the three food megatrends of health. This was seen as the most important issue shaping the strategies of the leading companies. convenience and indulgence been in shaping the marketing. One-half of respondents believed that the growth in spend of the global leaders was above the industry average. product. Convenience shapes strategy ahead of brand recognition and pleasure Over 40% of respondents believe that convenience issues had a strong influence on the strategies of the global food leaders in 2003. pleasure and indulgence. 232 .

40: How important have the three food and drinks megatrends been in shaping the marketing. product. 233 . almost 15% believe they only have a marginal influence. NPD and branding strategies of the global food leaders? Green issues and environmental concerns Threats posed by the growth of private labels Discounts/promotions/special offers Innovations and product advantages from packaging Brand recognition Pleasure (the importance of premium and indulgent products) Healthy eating Convenience Economic downturn 0% 20% 40% 60% 80% 100% Very low influence Average influence Very strong influence Some influence Growth above average but not exceptional Source: Global Food Leaders Industry Opinion Survey Business Insights Whilst healthy eating was viewed as the second most important issue shaping corporate strategies overall. This suggests that whilst convenience remains by far the most important consumer trend facing food manufacturers. Whilst over one-fifth of respondents suggested that private labels are exerting a ‘strong influence’ on the corporate strategies of the food leaders (a similar proportion to healthy eating). a larger share of respondents regarded both brand recognition and pleasure/indulgence as having a ‘strong influence’ rather than ‘healthy eating’. pleasure and healthy eating) and are all of similar importance. the second tier of trends is difficult to separate (branding.Figure 13.

41: Rating the global food leaders: reacting to customer trends Hersheys International Heinz Kelloggs General Mills Unilever Bestfoods Masterfoods (Mars Inc. Heinz has also made a number of changes in its U. Cadbury-Schweppes and Masterfoods are perceived as being relatively slower to react to changing customer trends in the food industry. Figure 13. 234 . One in five respondents believe that Kraft is relatively slow to react to consumer trends. At the same time.S. Two business units were created. Following trading difficulties. Heinz US “Away from Home” and Heinz US “Consumer Products”.) Kraft Danone Cadbury-Schweppes Nestlé 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very weak Weak Average performance Strong Very strong Source: Global Food Leaders Industry Opinion Survey Business Insights In addition. Danone and Unilever stand out as being the two companies most responsive to new customer trends. business to make it a more customer-focused operation. the company appointed Roger Deromedi as the Chief Executive Officer in December 2003.Danone and Unilever react more quickly to customer trends The survey respondents believe that. among the global food leaders.

42: Rating the global food leaders: innovation Hersheys International Heinz Kelloggs General Mills Unilever Bestfoods Masterfoods (Mars Inc. Figure 13. Cadbury and Hershey could do better at spotting cross-category opportunities In terms of the ability of a manufacturer to spot cross category expansion opportunities. Over 85% of respondents believe the company is either a ‘strong’ or ‘very strong’ innovator.) Kraft Danone Cadbury-Schweppes Nestlé 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very weak Weak Average performance Strong Very strong Source: Global Food Leaders Industry Opinion Survey Business Insights Among the leading global food companies.Unilever perceived as the leading innovator When it comes to innovation. the survey respondents believed that Unilever is by far the strongest company in this area. Cadbury-Schweppes and Masterfoods are perceived to be the least successful innovators. Nestlé and Heinz perceived as the next best innovators. with Danone. survey respondents believe Unilever. followed by Nestlé to be the most successful 235 .

Over 40% of respondents also believe that Hershey is ‘weak’ or ‘very weak’ at expanding across international borders.) Kraft Danone Cadbury-Schweppes Nestlé 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very weak Weak Average performance Strong Very strong Source: Global Food Leaders Industry Opinion Survey Business Insights Hershey is perceived to be relatively weak at moving into new markets When it comes to moving into new international markets. whilst over one-third believe that Cadbury-Schweppes and Hershey are ‘weak’ or ‘very weak’ in this area. survey respondents once again perceive Unilever and Nestlé to be the most successful companies.companies. Figure 13. Almost 90% of respondent believe that General Mills is ‘average’ at spotting cross category opportunities. 236 .43: Rating the global food leaders: identifying cross-category expansion opportunities Hersheys International Heinz Kelloggs General Mills Unilever Bestfoods Masterfoods (Mars Inc.

Figure 13. with over 70% of respondents believing the company is either ‘strong’ or ‘very strong’ in this area. with almost 30% of respondents believing the company is ‘weak’ in this area. Cadbury-Schweppes. an increase of 28% on 2002 levels. with the increase being due to the acquisition of Adams. This represents marketing: net sales ratio of 10. a company also perceived to be relatively ‘weak’ in this area announced in February 2004 that its marketing expenditure in 2003 was £702 million. Hershey is perceived to be less successful at communicating its brand messages.44: Rating the global food leaders: country coverage/moving into new countries Hersheys International Heinz Kelloggs General Mills Unilever Bestfoods Masterfoods (Mars Inc.9%.) Kraft Danone Cadbury-Schweppes Nestlé 0% Very Weak 10% 20% 30% 40% 50% 60% 70% Strong 80% 90% 100% Weak Average performance Very strong Source: Global Food Leaders Industry Opinion Survey Business Insights Nestlé leads the way in terms of marketing strength In terms of marketing and communications. which already had a higher 237 . Nestlé is perceived to be ahead of all the other leading food manufacturers.

the company’s marketing to sales ratio was 9. 238 .9%.) Kraft Danone Cadbury-Schweppes Nestlé 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very weak Weak Average performance Strong Very strong Source: Global Food Leaders Industry Opinion Survey Business Insights Food leaders: geographical strategies Respondents to the industry opinion survey were asked which geographic regions would offer the highest growth potential for the global food leaders over the next three years. with the year-on-year reduction reflecting a lower spend during periods of unfavourable weather conditions in Americas Beverages and European Confectionery sectors.marketing to sales ratio. promotions etc) Hersheys International Heinz Kelloggs General Mills Unilever Bestfoods Masterfoods (Mars Inc. Figure 13. advertising. Prior to acquisitions.45: Rating the global food leaders: marketing and communications activity (website.

Asia-Pacific offers the greatest growth potential Over 80% of respondents believe that the Asia-Pacific region offers the greatest growth opportunities for the global food leaders. Figure 13. the share of respondents believing that the region offers ‘high growth potential’ (above ‘strong growth’) was less than for Asia-Pacific. 239 . with 42% predicting ‘high growth potential’ in the region’.46: Which of the following geographic regions will offer the highest growth potential for your chose global food leaders over the next three years? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Western Europe Eastern Europe North America Latin America Asia-Pacific High growth potential Strong growth Average growth compared to other regions No growth Negative growth/market contraction Middle East and Africa Source: Global Food Leaders Industry Opinion Survey Business Insights Over 40% of respondents believe that North America and the Middle East both offer ‘no growth’ opportunities for the global food leaders over the next three years. Whilst a similar proportion (over 80%) believe there is tremendous growth potential in Eastern Europe. One in three respondents believe the same can be said for Western European markets.

Figure 13.Food leaders: the future Looking to the future.47: Which of the following companies are best placed to compete most effectively over the next three years? Hersheys International Heinz Kelloggs General Mills Unilever Bestfoods Masterfoods (Mars Inc. However. NPD and innovation is the best way to deliver growth Without question. this was followed closely by line extensions and new formats of launching current products in developed markets and by extending current products into new geographical markets. NPD. innovating and launching new products into developed markets is the strategy most likely to deliver growth in the short-term future.) Kraft Danone Cadbury-Schweppes Nestlé 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Very low growth/stagnating market shares and/or revenues Growth less than average Average market growth Growth above average but not exceptional Very strong growth Source: Global Food Leaders Industry Opinion Survey Business Insights 240 . respondents were asked to select the strategies they believe will help the global food leaders grow most aggressively over the next three years.

innovating and launching new products into developed markets Extending current products into new geographical markets 0% 20% 40% 60% 80% 100% Very unlikely Not likely No opinion Likely Very likely Source: Global Food Leaders Industry Opinion Survey Business Insights 241 . Danone is the company most likely to deliver growth Over one-quarter of respondents felt that Danone was well placed to deliver ‘very strong growth’ over the next three years. Whilst a similar proportion of respondents also felt that Nestlé is in a similar position.Category expansion (i. over one-half of respondents (55%) believe that Danone will deliver ‘above average but not exceptional’ growth whilst less than 20% believe this of Nestlé. Figure 13.e. moving from confectionery to frozen food NPD.e. high growth potential market Merger and acquisition activity in developed markets Growth in new areas such as nutraceuticals or probiotics Category expansion i. moving from confectionery to frozen food) was deemed to be the strategy least likely to deliver growth to the global leaders over the next three years.48: Which strategies will help the global food leaders grow most aggressively over the next three years? Merger and acquisition activity in small. with over one in five respondents believing this route is ‘not likely’ to deliver growth. innovation and launching new products into lessdeveloped markets Line extensions and new formats of launching current products in developed markets NPD. Finally. the survey respondents were asked to state which global food leaders are best placed to compete most effectively over the next three years.

Almost one in 10 respondents stated they expect Hershey and General Mills to deliver ‘very low growth’ over the next three years. with over one in three respondents also believing this of Heinz and Hershey. 45% of respondents believe that Kellogg is set to deliver ‘less than average’ growth over the next three years.At the opposite end of the scale. 242 .

243 .

Chapter 14 Conclusions 244 .

drug stores. It seems unlikely that the level and size of acquisitions seen in the last five years will continue though many companies remain open to selective. the leading manufacturers have made a concerted effort to promote the health and nutritional benefits of their portfolios. Categorising the market by consumer trend enables the manufacturer to create new strategies for increasing its market share without cannibalising the market for existing products. ‘bolt-on’ acquisitions. whilst many also see tremendous growth potential in Eastern Europe. Among the world’s larger dairy markets that are also fast growing. NPD. in recent months. it is also the fourth fastest growing. Organic growth can exploit faster growing distribution channels such as convenience stores. innovating and launching new products into developed markets is the strategy most likely to deliver growth in the short-term future. Mexico and Brazil feature prominently. mass merchandisers. there is little evidence that convenience will become less important for consumers in the near future. Whilst being amongst the five largest confectionery markets.Chapter 14 Summary Conclusions Whilst the concepts of convenience and premiumisation are long established. Although it has been a well-documented trend for several years now. all of which may be growing faster than the traditional grocery channels. and vending machines. the UK. China. 245 . Whilst China is the world’s tenth largest dairy market. in terms of market growth. Japan and Russia have been amongst the 10 slowest growing markets over the last six years. The Asia-Pacific region offers the greatest growth opportunities for the global food leaders.

the leading manufacturers have made a concerted effort to promote the health and nutritional benefits of their portfolios. Just one example of this occurred when Masterfoods entered the energy bar sector with Snickers Marathon. although it has been a well-documented trend for several years now. The global food industry To take advantage of the growth opportunities in the global food industry. Over 40% of respondents to the Global Food Industry Survey conducted in 246 . with a forward-looking bias. Snickers Marathons are each fortified with 16 vitamins and minerals and contain around 10g of a “special protein blend. Convenience remains most important However. product categories and growth regions that will be important to the leading companies in the near future. highlighting the consumer trends. These largely centre on the three consumer megatrends of convenience. The chapter then goes on to highlight key strategies that manufacturers are and will be adopting in the food industry if they are to maintain. in recent months. consolidate or even improve their position as global food leaders. Whilst the concepts of convenience and premiumisation are long established.Introduction This chapter presents the main findings of the report. health and pleasure. there is little evidence that convenience will become less important for consumers in the near future. It begins by considering the opportunities for the global food leaders in the food industry. food manufacturers are aligning their product portfolios to more accurately meet the needs of the modern consumer. Manufacturers are also extending product ranges by fortifying products with health benefits.” designed to provide a long-lasting energy boost.

the greatest market opportunities for growth appear to be in the Ukraine and France. whilst many also see tremendous growth potential in Eastern Europe. Japan has been of the slowest growing markets over the last six years. in terms of market growth. in terms of market growth. is also the world’s fastest growing market whilst Mexico. ahead of issues such as healthy eating. Within the larger confectionery markets. Russia. Mexico and Brazil feature prominently. Results from the survey also suggested that whilst convenience remains by far the most important consumer trend facing food manufacturers. pleasure and indulgence.December 2003 believe that convenience issues had a strong influence on the strategies of the global food leaders throughout 2003. the fourth largest market is also the fifth fastest growing market. Among the world’s larger dairy markets that are also fast growing. Asia-Pacific and Eastern Europe are top targets for expansion The results of the Global Food Industry Survey suggest that the Asia-Pacific region offers the greatest growth opportunities for global food leaders. 247 . the second tier of ‘trends’ are difficult to separate (branding. the UK. However. Whilst being the largest market for chilled food. This was seen as the most important issue shaping the strategies of the leading companies. in eighth place. amongst the 10 largest savoury snack markets. brand recognition. within the larger chilled food markets. the greatest market opportunities for growth appear to be in China and Mexico. China. pleasure and healthy eating) and are all of similar importance. Whilst China is the world’s tenth largest dairy market. it is also the fourth fastest growing. Whilst being amongst the five largest markets. Similar patterns emerge in confectionery. Finally. Japan and Russia have been amongst the 10 slowest growing markets over the last six years. Analysis of recent growth in the main food markets around the world confirms this.

alternative strategies have seen manufacturers undertake large-scale acquisitions to become a global food leader. and their ownership and control. However. the company has sold a total of 87 companies with sale proceeds of €6. Since the announcement of the ‘Path to Growth’ strategy in February 2000.Strategies for success The future development of the food industry is largely linked to the strength of brands. 248 . Heinz has also followed this strategy and disposed of certain businesses in recent years in order to concentrate more fully on realising the full potential of its core brands.4 billion from disposals. since 1997.3 billion. with the integration of the Adams business well underway. the company has spent a total of £3. Heinz disposed of a number of North American businesses and merged them with Del Monte Foods Company in a move designed to make Heinz a faster-growing company. particularly following the 2000 acquisition of Bestfoods.3 billion on acquisitions (not all in confectionery markets) though it has also realised £1. More recently. Focus on core brands and strengths A number of the large food manufacturers have disposed of non-core assets in their portfolios in order to focus on their core operations. A good example of a company that has grown rapidly through acquisitions is CadburySchweppes. or to consolidate their position amongst the leaders.600 to around 400 leading brands and just under 250 tail brands. In June 2002. This has reduced the number of brands that the company manages from 1. Unilever is a prime example of such a strategy. Cadbury’s has been going through something of a transition phase. Growth through acquisition Whilst a number of companies have disposed of assets.

‘bolt-on’ acquisitions). which is looking to leverage its core competencies in the broader snack market. Perhaps the best example of growth through acquisition is that of Kraft (although the company itself was acquired by Philip Morris – now named Altria – in 1988). organic growth is set to be the main driver of growth for the global food leaders. publishing. for almost $15 billion. By far the biggest of its acquisitions was the 2000 acquisition of Nabisco Holdings. Categorising the food market by product type or category may not reveal many new sales opportunities for manufacturers. However. Examples of such strategies include Hershey. and food categories. respondents to the Global Industry Survey believe Unilever. a leader in cookies. followed by Nestlé to be the most successful companies. crackers and snacks. clothing. Expansion and cross-category As it seems unlikely that the level and size of acquisitions seen in the last five years will continue (though many companies remain open to selective. The acquisition gave the company a more diversified product portfolio will undoubtedly boost the company’s growth. entertainment. 249 . Kellogg has also announced plans to expand its reach beyond the cereal and snack food aisles with extensive licensing initiatives in the toy. General Mills is now seeking greater organic growth rather than boosting growth rates with further acquisitions. whilst over one-third believe that Cadbury-Schweppes and Hershey are ‘weak’ or ‘very weak’ in this area. In terms of the ability of a manufacturer to spot cross category expansion opportunities. The March 2001 acquisition of Keebler Foods Company was by far the largest acquisition in Kellogg’s history.Following the acquisition of Pillsbury in 2001. categorising the market by consumer trend enables the manufacturer to create new strategies for increasing its market share without cannibalising the market for existing products.

with Danone. NPD. When it comes to innovation. Among the global food leaders. particularly in products and segments that are not easy to replicate via private label alternatives.NPD will be the main driver of growth Over one-third of respondents to the Global Industry Survey believe that the food leaders increased their dominance in 2003. CadburySchweppes and Masterfoods perceived as being relatively slower to react to changing customer trends in the food industry. as over 70% of those surveyed pointed towards ‘above average’ levels of innovation and new product launches by the global leaders. Unilever is perceived to be the strongest company in this area. Respondents believed that this growth was likely to be sourced to NPD and product innovation. by increasing their market share at the expense of smaller manufacturers. Nestlé and Heinz perceived as the next best innovators. Danone and Unilever stand out as being the two companies most responsive to new customer trends. innovating and launching new products into developed markets is the strategy most likely to deliver growth in the short-term future. 250 . At the same time.

251 .

Chapter 15 Appendix 252 .

Terms and abbreviations used in this report A list of the most commonly used terms and abbreviations used in the report and their meanings are provided in the following table. Major companies across Europe and the United States were surveyed to canvass their opinions on a number of issues relating to the issues. 253 . Business Insights carried out a comprehensive survey in December 2003.Chapter 15 Appendix Primary research methodology As a key element of the primary research effort for this report. trends and developments highlighted in this report. key industry sources were surveyed using a combination of telephone interviews and questionnaires by the author. In addition.

growth regulators and livestock feed additives. very low or zero levels of sugars and fats than may be expected for the food type. This is a key trend driving the movement for nutrition ‘‘on-the-go’’. interactive and inspirational elements. Guilt-free indulgence Products that offer the dual benefits of being low and light and claim to be indulgent. Products that are positioned as indulgent or luxurious through their marketing or formulation. pesticides. Refers to products that claim reduced. sensory. Food channels such as takeaways. vitamins. One view is that treating represents additional spend over and above one’s ‘normal’ expenditure. distributed and marketed by specific retailers. Refers to products that have a higher quality and exclusivity positioning than premium goods characterised by a strong brand image and an exceptionally high price. to reach its current value from the value in a base year. Defined here as comprising visual. year on year. Convenience Foodservice Fun Functional and fortified The use of nutrients.Table 15. It is caused by pressure on time and pertains to something that is useful. It is used to describe products that are grown without the use of synthetic chemicals in a farming system that avoids the use of artificial fertilisers. What one consumer regards as a treat another may simply consider normal expenditure. Business Insights Indulgence Low and light Organic Planned impulse Private label Super premium Treating Source: Author’s research 254 . It is the constant percentage rate at which a market would have to grow.66: Term CAGR Terms and abbreviations used in this report Definition The compound annual growth rate (CAGR) is a way of measuring a market’s annual growth over a period of several years. restaurants and catering. It is not the same as average growth but is a more representative measure of annual growth over a number of years. A term that is legally defined by EU Regulation 2092/91. Treating is a usually a personal and very individual activity. available and ready to use. minerals. so a fixed definition of what a treat consists of is difficult to provide. Products that are exclusively manufactured for. fibres and other ingredients to enhance the health benefits of specific products. A consumer shopping pattern whereby products are purchased either at the point of use or in the expectation of use at some appropriate but unknown juncture.

255 .

Breakfast cereals .Concentrated milk Industrially manufactured. Includes sugar-free varieties. Includes industrial. Defined to include artisanal.Gum .Sugar confectionery Dairy . Both ready-to-eat and hot cereals. wafers and those baked instore.Cream Source: Author’s research Business Insights 256 . Includes industrial.67: Market and segment Bakery . egg-based.Savoury biscuits . Milk preserved and concentrated through the removal of water and additional processes. which is processed to be non-grained or to be grained through aeration. cookies. Sugar mass.Chocolate Bars made from cereal products Products which contain either real chocolate or a chocolate compound containing substitute raw material ingredients such as cocoa butter extenders.Sweet biscuits Definitions of food segments used in this report Definition Includes industrial. Confectionery . Chilled long life and frozen cream . artisanal and in-store products. Table 15.Cereal bars . plain. ready-to-eat chilled desserts. assortments.Food segmentation table The following table defines the market segmentations used in the analysis of food markets throughout the report. A type of chewing gum that can be blown into large bubbles. butter-based. artisanal and in-store products. artisanal and in-store bakery products. cream-filled.Morning goods .Cakes and pastries . dry wafers and snack biscuits. chocolate. Also known as bonbons in France.Bread and rolls . Includes crackers. .Chilled desserts .

Fats and spreads . extruded snacks.Potato chips .Fromage frais desserts Definitions of food segments used in this report continued Definition Chilled long life and frozen cream Also known as spreadable fats or yellow fats.Ice-cream . Includes regular. Dairy ice cream and ice milk with fat from either animal or vegetable sources. Fresh pasteurised milk or long-life products.Powdered milk .Table 15. Not included is liquid coffee creamers. This includes only snack nuts and does not include nuts used for cooking. requiring refrigeration.68: Market and segment .Snack nuts Source: Author’s research 257 . .Processed cheese . Potato chips or crisps are products produced directly from the cuts of potatoes. Includes ethnic snacks.Popcorn A variety of maize having hard pointed kernels that puffs up when heated.Natural cheese .Cream . This category only includes fromage frais packaged as a dessert.Yoghurt Snacks . A fresh or ripened dairy product obtained after coagulation and separation of milk. set and drinking formats. Includes both full fat and low fat products.Liquid milk . Covers all packaged processed nuts.Savoury snacks . Fromage frais is also known as curd cheese or quark. Processed cheese is a blend of natural cheese and emulsifier which is heated to stop ripening. Business Insights . corn chips. tortilla chips and pretzels. by either being cooked in oil and salted or dry roasted. bioactive.

34. 216 Austria. 176. 184. 190. 194. 197. 57. 163. 195. 152. 216. 186. 120. 42. 208. 213. 223. 60. 195. 193. 55. 126. 43. 73. 217. 53. 41. 31. 26. 55. 31. 40. 102. 75. 143. 136. 192. 64. 46. 179. 160. 42. 84. 28. 246. 130. 71. 172. 159. 100. 27. 104. 170. 45. 228. 192. 45. 195 dairy. 74. 230. 245. 174. 197 foodservice. 181. 135. 75. 131. 74. 70. 152. 243. 68. 16. 133. 149. 55. 148. 234. 134. 88. 101. 204. 173. 118. 70. 69. 204. 27. 142. 214. 220. 92. 77. 124. 193. 184. 215 bakery. 34. 247. 155. 178. 197. 83. 218 Bestfoods. 148. 43. 158. 152. 209. 74. 152. 155. 215. 254 Eastern Europe. 170. 233. 72. 227.Index Adams. 216 Chile. 80. 227. 232. 31. 31. 52. 56. 77. 37. 210. 58. 58. 119. 77. 30. 31. 255 Europe. 36. 72. 70. 159. 235. 35. 19. 207. 196. 235. 212. 30. 140. 161. 35. 176. 161. 132. 244. 193. 63. 30. 195 Cadbury-Schweppes. 43. 204. 55. 35. 25. 158. 255 Danone. 41. 64. 31. 174. 48. 80. 156. 245 Australia. 61. 200. 79. 96. 50. 37. 156. 115. 215. 212. 62. 107. 176. 154. 77. 83. 70. 26. 96. 45. 26. 76. 42. 71. 126. 216. 213. 87. 31. 75. 154. 172. 158. 215. 92. 76. 119. 108. 59. 40. 31. 52. 92. 25. 149. 232. 161. 41. 69. 67. 174. 75. 167. 51. 77. 185. 37. 52. 131. 59. 156. 84. 245 Egypt. 56. 248 Denmark. 30. 69. 239. 219. 74. 245 Convenience. 60. 38. 233. 138. 20. 42. 44. 76. 58. 178. 45. 94. 162. 102. 215. 55. 73. 175. 83. 243. 245 Bulgaria. 252 Czech Republic. 254 Belgium. 41. 108. 54. 79. 43. 21. 55. 75. 61. 152. 246 Argentina. 149. 243. 254 Frozen food. 28. 216. 63. 154. 218. 131. 43. 158. 52. 154. 97. 254 Finland. 231. 191. 239. 91. 109. 51. 44. 155. 76. 243. 68. 55. 65. 176. 65. 137. 48. 91. 61. 82. 158. 63. 43. 170. 245 Colombia. 37. 77. 206. 30 China. 38. 74. 59. 31. 146. 82. 51. 121. 56. 81. 116. 49. 125. 91. 77. 195. 195. 40. 55. 78. 157. 31. 205. 214. 57. 192 confectionery. 31. 138. 251 258 . 43. 215. 39. 91. 192. 175. 74. 191. 28. 197. 175. 176. 156. 50. 16. 21. 31. 200. 178. 107. 52. 157. 62. 185. 190. 174. 91. 31. convenience. 61. 56. 63. 56. 80. 16. 186. 122. 221. 154. 246 Brazil. 107. 134. 31. 53. 154. 31. 143. 245. 237. 50. 45. 245. 48. 215 European. 95. 209. 192 Asia-Pacific. 48. 114. 196 ethnic. 102. 119. 33. 147. 220 France. 157. 64. 59. 69. 49. 69. 80. 130. 42. 31. 34. 176. 60. 132. 106. 122. 82. 17. 57. 212. 110. 32. 91. 78. 79. 78. 213. 197 drinks. 57. 59. 237. 34. 171. 175. 188. 60. 65. 158. 91. 37. 248 Canada. 154. 246. 50. 48. 190. 81. 76. 120. 159. 44. 190. 64. 138. 193. 173. 31. 131. 180. 243. 121. 243. 36. 111. 170. 30. 57. 62. 52. 227. 59.

214. 194. 187. 138. 177. 247 Germany. 122. 175. 186. 42. 45. 200. 187. 27. 131. 167 Mexico. 224. 28. 240. 106. 43. 243. 176. 177. 252 General Mills. 28. 240. 135. 190. 56. 133. 151. 111. 252 Innovation. 227. 234. 30. 138. ii. 32. 227. 147. 176. 104. 239. 44. 177. 31. 197. 137. 32. 119. 146. 248 manufacturers. 166. 243 Interactive. 69. 37. 247 Latin America. 149. 17. 166. 36. 187. 204. 32. 87. 180. 91. 28. 252 Functional & fortified. 159. 160. 30. 215. 157. 110. 234. 31. 195 India. 170. 214. 232. 36. 91. 62. 246. 203. 37. 138. 203. 36. 107. 161. 139. 149. 27. 125. 176. 34. 196 Nestlé. 68. 132. 75. 197. 143. 33. 102. 161. 49. 157. 59. 244 259 . 184. 130. 215 Indonesia. 248 megatrends. 152. 140. 235. 97 Philip Morris. 149.142. 223 Fun. 156. 92. 219 Greece. 86. 173. 233. 157. 158. 61. 41. 77. 90. 148. 51. 157. 97. 31. 18. 43. 93. 40. 31. 18. 105. 89. 74. 122. 130. 200. 176. 56. 26. 185. 158. 80. 102. 34. 134. 95. 87. 193. 233. 233. 106. 158. 216. 103. 33. 205. 233. 77. 181. 212 indulgent. 120. 41. 154. 83. 204. 31. 199. 56. 197. 86. 35. 217. 70. 34. 213. 216. 31. 231. 215. 38. 59. 215 Keebler Foods. 177. 195. 243. 142. 136. 155. 100. 213. 119. 137. 121. 248 Hershey. 163. 234. 196. 46. 247. 197. 44. 49. 158. 38. 188. 19. 196. 120. 37. 174. 230. 214. 41. 44. 202. 216 Israel. 154. 217. 37. 41. 44. 73. 31. 73. 97. 115. 150. 28. 131. 107. 214. 215. 65. 43. 175. 122. 102. 38. 152. 227. 122. 69. 157. 190. 152. 153. 181. 28. 246. 34. 232. 120. 50. 240. 212. 216. 122. 108. 134. 185. 34. 31. 231. 94. 235. 159. 176. 76. 192. 88. 124. 20. 156. 245 Morocco. 91. 27. 117. 183. 30. 30. 224. 245 organic. 176 Italy. 91. 194. 141. 244. 158. 97. 43. 59. 147. 148. 16. 218 Norway. 120 Hungary. 36. 154. 163. 102. 31. 240. 39. 86. 27. 131. 42. 92. 191. 224. 247 Kellogg. 39. 177. 33. 31. 154. 190. 74. 37. 18. 158. 188. 31. 27. 158. 205. 30. 199. 31. 114. 216. 26. 99. 38. 52. 165. 157. 155. 36. 24. 189. 91. 201. 200. 184. 169. 218 Japan. 92. 199 obesity. 192. 170. 68. 184. 191. 96. 31. 28. 201. 164. 172. 155. 181. 19. 232. 228. 248 Masterfoods. 135. 163. 129. 85. 76. 57. 186. 114. 52. 134. 179. 131. 218. 56. 109. 224 Malaysia. 116. 197. 31. 87. 69. 42. 34. 88. 177. 204. 178. 244. 204. 145. 197. 45. 107. 247 Hong Kong. 74. 40. 52. 77. 57. 33. 118. 102. 123. 31. 46. 126. 102. 40. 194. 61. 31. 247 PepsiCo. 132. 28. 43. 93. 43. 136. 154. 247. 173. 101. 235. 162. 180. 75. 208. 216. 174. 41. 194. 91. 209 Health. 213. 247 Kraft. 155. 113. 152. 97. 87. 120. 243. 93. 139. 171. 148. 36. 215. 252 Heinz. 76. 160. 188. 77. 102. 34. 247 Netherlands. 193. 133. 167. 204. 148. 62. 107. 45. 245. 19. 174. 34. 131. 252 Ireland.

108. 104. 31. 59. 86. 216 South Korea. 37. 91. 186. 86. 130. 216. 130. 41. 178. 102. 31. 84. 101. 199. 102. 106. 38. 76. 216. 97. 87. 95. 40. 199 Switzerland. 44. 57. 195. 174. 102. 211. 56. 217. 214. 134. 78 Taiwan. 19. 57. 245 Ukraine. 38. 107. 139. 120. 131. 227. 243. 36. 78. 59. 216. 156. 156. 135. 195. 42. 161. 100. 43. 100. 45. 148. 181. 91. 61. 207. 62. 120. 245 Sauces and dressings. 78. 137. 148. 155. 31. 110. 32. 59. 34. 195. 80. 173. 247. 31. 40. 40. 191. 101. 217. 43. 90. 78. 106. 77. 248 United States. 233. 215. 246. 177. 251 US. 18. 137. 156. 88. 148. 243. 154. 109. 227 Slovakia. 90. 31. 154. 49. 121. 102. 136. 41. 38. 84. 120. 223. 52. 178. 199. 88. 206. 105. 162. 88. 170. 120. 157. 170. 43. 132. 57. 51. 80. 52. 144. 171. 75. 68. 30. 76. 76. 41. 149. 193 Vietnam. 252 retailers. 39. 59. 132. 153. 186. 159. 46. 36. 146. 20. 102. 91. 213. 252 Romania. 155. 58. 219. 73. 154. 70. 30. 27. 31. 56. 138. 148. 194 260 . 28. 59. 120. 86. 31. 91. 177. 45. 52. 162. 142. 114. 91. 35. 218. 194 Turkey. 159. 137. 43. 102. 45. 109. 176. 218. 200. 190. 228 Venezuela. 38. 63. 18. 33.Philippines. 57. 19. 31. 192. 68. 247. 153. 38. 48. 41. 141. 157. 149. 52. 213. 217. 69. 56. 174. 143. 44. 209. 83. 92. 114. 87. 42. 17. 30. 103. 194 Spain. 36. 68. 94. 110. 106. 31. 44. 220. 154. 215. 156. 37. 39. 55. 222. 44. 31. 87. 155. 199 premium. 56. 191. 70. 106. 175. 93. 194 Thailand. 174. 51. 196. 224. 76. 157. 31. 186. 107. 224. 31. 159. 45. 46. 31. 80. 73. 31. 215. 247 Portugal. 120. 199. 234. 214. 158. 147. 31. 120. 232. 31. 76. 245 Unilever. 156. 45. 88. 39. 172. 210. 159. 215. 59. 134. 173. 195. 148. 106. 102. 41. 136. 208. 34. 216 UK. 219. 155. 162. 175. 191. 147. 31. 45. 41. 255 South Africa. 41. 215 Russia. 80. 58. 177. 204. 94. 154. 175. 69. 175. 46. 215. 138. 209. 31. 79. 21. 214. 192. 194 Pillsbury. 157. 91. 174. 107. 221. 179. 219. 212. 77. 195 snacks. 216 Sweden. 167. 175. 106. 163. 174. 187. 62. 45. 91. 78. 115. 157.

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