Kraft lays out growth strategy at CAGNY

by Staff
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NORTHFIELD, ILL. — Irene Rosenfeld, chief executive officer of Kraft Foods Inc., laid out the company’s growth strategy Tuesday at the Consumer Analyst Group of New York conference in Scottsdale, Ariz. Ms. Rosenfeld also provided 2007 earnings guidance and the company’s long-term financial outlook.

The company’s four strategies for growth, as presented by Ms. Rosenfeld are:

  • Rewire the organization for growth.
  • Reframe Kraft's categories to make them more relevant to consumers.
  • Exploit Kraft’s sales capabilities.
  • Drive down costs without compromising quality.

"This is a pivotal time in Kraft’s history, and while there are things we have to fix, our organization is energized about pursuing a number of trajectory-changing initiatives," Ms. Rosenfeld said. "I am confident that our new strategies will return Kraft to predictable and consistent growth."

As a result of its growth strategies, Ms. Rosenfeld said the company expects to organically grow its top line by 3% to 4% in 2007. The company will utilize this growth by investing all of it, as well as restructuring savings, back into the first wave of trajectory-changing growth initiatives. This represents an incremental $300 million to $400 million investment in quality, marketing, R.&D. and capability-building.

As a result of this investment, a higher tax rate, spin-related dilution and divestitures, Kraft predicts earnings per share of $1.50 to $1.55, or $1.75 to $1.80, excluding 25c of restructuring costs, in 2007.

Looking ahead to 2008, the company said it expects its operational turnaround to gain momentum. Kraft again will grow revenue 3% to 4% organically, with operating income exceeding revenue growth. The company will continue to invest a portion of its growth back into the business, including further marketing spending, toward a long-term target of 8% to 9% of net revenue.

"By 2009, we’ll hit our stride," Ms. Rosenfeld said. "We’ll fully realize the financial benefits of our investments and deliver our long-term targets of at least 4% organic net revenue growth and 7% to 9% e.p.s. growth."

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