Kraft looking to 'contemporize' center-store brands

by Keith Nunes
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Kraft is looking to contemporize its Shake 'n Bake, A1 and Jell-O brands.

 

NORTHFIELD, ILL. — Kraft Foods’ innovation efforts on the perimeter of the supermarket appear to be paying dividends and now the company is focusing on the center of the store and extending its reach in non-traditional retail channels.

“Against the backdrop of a challenging consumer and customer environment and some executional missteps, it would be difficult to call this a great quarter or an outstanding first nine months in absolute terms,” said Tony Vernon, chief executive officer of Kraft Foods Group. “However, as we look at our performance relative to our playbook and to our peers and against those backdrops, we made some key progress in several important areas.”

Areas of progress for the company were in its Oscar Mayer P3 Portable Protein Packs, Oscar Mayer Deli Fresh bold line of luncheon meats, Philadelphia soft cream cheese, and its Metacafe brand in Canada.

“It is no coincidence that protein offerings like meat, cheese, nuts are doing quite well,” Mr. Vernon said. “There’s a wind at the back in those categories. They are in the perimeter of the store, (and) we’ve executed our playbook quite well across those businesses even with higher commodity costs.

“That said, we have an obligation to the center of the store and the great brands we have in them to execute the playbook equally well. And we think we can contemporize our offerings in meals and desserts to address the center of the store lack of traffic.”

Mr. Vernon did not provide details about how Kraft may contemporize some of its leading center-store brands, but did note it is a matter of understanding demographics and market trends.

“I’m a believer there are no such things as mature brands and it’s all about energetic idea driven marketers,” he said. “When you think about (it), would you have guessed that Velveeta would’ve had the five-year run it’s had in the face of millennials? It continues to delight.

“So what I look at (with) an A1 or Shake and Bake or Jell-O; I say it’s our job to contemporize the ceremony of those great brands. They actually play to the preparation of the new millennial. The Latina mom was making a dessert for her kids, Jell-O is a perfect fit. We just have to take advantage of where the cohorts are going with our proprietary ideas.”

For the third quarter ended Sept. 27, Kraft Foods’ net income totaled $446 million, equal to 75c per share on the common stock, and an 11% decline compared with the same period of the previous year. Sales grew slightly to $4,400 million compared with $4,394 million during the previous year.

For the first nine months of fiscal 2014, net income fell 19% to $1,441 million, equal to $2.41 per share. Sales for the period declined slightly to $13,509 million from $13,623 million during 2013.

Mr. Vernon said an opportunity for the company going forward will be to achieve brand ubiquity across retail channels.

“We’ve improved our representation in growing channels such as dollar and club,” he said. “In fact, our growth in nontraditional channels is 8% year to date, some five to seven times that of total U.S. retail.”

But, he added, Kraft is still below what he considers to be the company’s “fair share” of the business. He estimated that non-traditional retail channels now represent in the 10% to 15% range of retail sales.
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