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KRAFT FOODS BY: AHMOAD WARE
Table Of Contents
External Environment Analysis.........................................................1
Industry Description..........................................................................1-2
Key Success Factors..........................................................................2-3
Economic Conditions........................................................................3-4
Competitive Environment/Rivals......................................................4-5
Five Forces/Attractiveness..................................................................5-8
Driving Force....................................................................................8-12
References.........................................................................................13
Appendix............................................................................................14-21
External Environment Analysis
1
KRAFT FOODS BY: AHMOAD WARE
Kraft Foods Inc is a food processing/global snacks behemoth with a high con-
sumer friendly portfolio of products reaching approximately 170 countries boasting about
$49.2 billion in total revenues. Despite their astounding numbers, Kraft has components
within it’s external environment that are considered strategically relevant factors. The
principal component that has heavily influenced Kraft Foods as well as most of the food
processing industry have been social forces dealing with lifestyle changes, nutrition and
fitness, as well eating habits.
Industry Description
Food processing is the set of methods and techniques used to transform raw ingre-
dients into food or to transform food into other forms for consumption by humans or ani-
mals either in the home or by the food processing industry. Food processing typically
takes clean, harvested crops or butchered animal products and uses these to produce at-
tractive, marketable and often long shelf-life food products. In western Europe and North
America, the second half of the 20th century witnessed a rise in the pursuit of conve-
nience. Food processing companies marketed their products especially towards middle-
class working wives and mothers. Frozen foods (often credited to Clarence Birdseye)
found their success in sales of juice concentrates and "TV dinners". Processors utilized
the perceived value of time to appeal to the postwar population, and this same appeal
contributes to the success of convenience foods today.
Key Success Factors
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KRAFT FOODS BY: AHMOAD WARE
Kraft Inc has set their sights on becoming a global snacks powerhouse and unri-
valed portfolio of brands people love. The complementary nature of their portfolio is at
the heart of the three strategies that will drive their growth:
• Delight global snacks consumers. Consumers around the world are pressed for
time and are looking for on-the-go options. They’re also looking for simple indul-
gences and healthier options. And there’s nothing better than a delicious snack,
like LU biscuits, Planters nuts, Trident gums, and Cadbury or Milka chocolates to
satisfy those desires.
• Unleash the power of our iconic heritage brands. Our iconic heritage brands are
loved by consumers world-
wide. Roughly 80 percent of
these heritage brands hold
number one or number two po-
sitions in their respective cate-
gories and are household
names.
Whether it’s regional brands, like
Philadelphia cream cheese in
Europe and Tang powdered
beverages in Asia Pacific; or
3
KRAFT FOODS BY: AHMOAD WARE
local favorites like, A-1 sauces in the US and Vegemite spread in Australia, we
make delicious products for billions of consumers every day.
• Create a performance-driven, values-led organization. To win in the market, we
need to win with our customers and consumers, and with our colleagues, commu-
nities and suppliers. We’ll do this by living our values: We inspire trust; We act
like owners; We keep it simple; We are open and inclusive; We tell it like it is; We
lead from the head and the heart; We discuss. We decide. We deliver.
Economic Conditions
Although the general economic condition is one that is within a weakened state,
consumers have relished in Kraft products and other processed foods during these finan-
cially binding times due to convenience and affordable pricing. Although unemployment
has increased during the past several years the net revenues for Kraft has continued to in-
crease ranging from $40.5 billion in 2008 to $49.2 billion in 2010. These numbers make
it unequivocally clear that amidst a financial turmoil, that consumer purchases in the pro-
cessed foods industry have increased.
Competitive Environment/Key Competitors
Kraft [NYSE: KFT] has a number of competitors within the food processing in-
dustry. Kraft spans across 170 countries which breaks down as 49% USA, 23% Europe,
4
KRAFT FOODS BY: AHMOAD WARE
and 28% within developing markets. With reach of that nature, competition is for certain.
The direct competitors of Kraft are: Nestle, and Tyson Foods.
Nestle is one of the world's leading Nutrition, Health and Wellness companies.
Their mission of "Good Food, Good Life" is to provide consumers with the best tasting,
most nutritious choices in a wide range of food and beverage categories and eating occa-
sions, from morning to night. In 2010, Nestle boasted $10.4 billion in sales with more
than 25,000 employees nationwide with 25 manufacturing facilities, 46 distribution cen-
ters, and 15 sales offices across the country.
Tyson Foods, Inc. [NYSE: TSN], founded in 1935 with headquarters in Spring-
dale, Arkansas, is the world's largest processor and marketer of chicken, beef, and pork,
the second-largest food company in the Fortune 500 and a member of the S&P 500. The
company produces a wide variety of protein-based and prepared food products and are
the recognized market leader in the retail and foodservice markets we serve. Tyson pro-
vides products and services to customers throughout the United States and more than 100
countries.
Other competitors include, General Mills, ConAgra, Dean Foods, Pepsico Inc.,
Kellogg Co., Coca-Cola Co., and Anheuser-Busch InBev to name a few. Below you will
find other top food processing companies that rival Kraft Foods Inc within the table to the
left.
Five Forces Analysis
5
KRAFT FOODS BY: AHMOAD WARE
In the food processing industry there is high competitive pressures coming from
other firms within the industry. Most of the rivals have diversified the products that they
offer, which puts them all on the same playing field product wise. Due to having more in-
formed customers, many food companies are diligently working on and offering im-
proved healthier products, with competitors such as Nestle, Tyson, and ConAgra to name
a few. Most of the competitors are equal if not in size then in competitive strength, and it
also seems that a majority of these companies are also looking to improve consumer
health with improved products and also expressing the importance of health/fitness.
There are entry barriers within the food processing business. There are high capital
requirements necessary in order to start a food processing business. The amount of capital
will be determined by the size etc that they are looking for. With behemoths such as
Kraft, and Nestle there is high brand loyalty as well as name recognition, since they have
been dominant in this realm for quite some time. With that being said a new entrant
would need the resources/funding to spend on advertising as well as sales promotion to
attempt to overcome the brand loyalty of established companies and build their own cus-
tomer base. A new entrant would also have to deal with difficulties of building and main-
taining a network of distributors as well as the issue of securing space on grocery store
shelves due to the once again already established companies.
There are a few substitutes that food processing companies such as Kraft must en-
dure. Food processing provides consumers with meals within a small preparation win-
dow, which is very convenient for the consumer on the go. However, companies must
deal with organic foods/home prepared meals as well as restaurants. However, with the
6
KRAFT FOODS BY: AHMOAD WARE
huge health trend that most are on now days not only do these companies have to be in-
formed about consumer substitutes, but these companies must also race to meet and sat-
isfy the needs and wants of the general public. With these options in mind it is imperative
for a company such as Kraft to invest in improving and making their products more con-
sumer/health friendly.
Another vital competitive force which is relevant to the food processing industry is
supplier power. Suppliers with potent bargaining power can strip industry profitability
away by charging higher prices, and passing costs on to them, as well as limiting their
chances to locate better deals. Due to the success that Kraft has been having as well as the
high customer satisfaction level, it wouldn’t be in their best interest to change suppliers/
ingredients since customers have come to love the taste as well as other traits within a
particular product. Although changing suppliers wouldn’t be an issue for a large company
such as Kraft, it wouldn’t make sense to do so since they already have a supplier (ingredi-
ents) that their consumer base has become used to.
Since Kraft has established themselves as one of the brand leaders in the food pro-
cessing industry, the risk associated with changing food and ingredient suppliers would
be extremely high. Customers have been utilizing Kraft products for years and have come
to know and love the quality, and the taste that they may have experienced the last time
they indulged with some Kraft Foods products. I am a firm believer that if it isn’t broke,
there isn’t a need to fix it. In other words the formula that Kraft has set in place is work-
ing well so there isn’t a need or want that I can see to change suppliers.
7
KRAFT FOODS BY: AHMOAD WARE
Looking at the buyers/consumers power they gained leverage due to a wealth of
information resources. The more info that buyers have available to them the better they
can compare pricing as well as products via the internet. This plethora of consumer infor-
mation alone is part of the reason that most food processors are migrating toward the pro-
duction of healthier products in addition to the promotion of healthier lifestyles.
Industry Attractiveness
After looking at the five forces and how they relate to Kraft (food processors) it is
clear of the following:
The state of competition in the food processing industry is very strong with a wide vari-
ety of companies/rivals in the mix. Although competition is deep, companies can obtain
good profitability just as Kraft has done (appendix). In regards to entrance, due to high
capital that is needed the entry barriers are somewhat high, which won’t allow for new ri-
vals to gain market share. The food processing industry is one that is ideal as far as the
competitive environment, the suppliers, and buyers have some say but are considered
weak. Overall, the food processing industry when collectively analyzed with the five
forces are slightly strong which have allowed for well run companies both larger and
smaller to earn moderate profits.
Key Driving Force
The food processing industry is impacted heavily by lifestyle changes, eating
habits, and overall health and nutrition concerns. In this realm it is vital to listen to your
consumers/buyers wants and needs, and if you are wise you will provide them with it or
another company will.
8
KRAFT FOODS BY: AHMOAD WARE
Products: Making the foods people love even better
Around the world, people eat and drink about 900 million servings of Kraft foods
products every day. that gives us an enormous opportunity to have a positive impact on
consumers’ health and well-being. so our focus is on making our products more nutritious
and more wholesome, while still delivering the same delicious taste people have come to
expect.
Based on what our consumers tell us (Kraft) they want, we focus our efforts on three ar-eas:
-foods with less fat, sodium, sugar and calories.
-foods with more beneficial ingredients, such as whole grains, fiber, healthier oils and micronutrients.
-foods that are “simpler:” easier-to- understand ingredient lines and fewer artificial in-gredients.
since 2005, we’ve reformulated or launched more than 5,500 products that meet one
or more of these focus areas. Our goal is to continually grow the number of options
in our portfolio that give consumers better choices for healthier and more wholesome
foods. it’s good for consumers and it’s good for business.
Reducing what consumers don’t want
Much of the world’s population is consuming too much sodium. While sodium re-
duction isn’t new for Kraft foods, in 2010 we began to accelerate our efforts to further re-
duce it in our products, without compromising taste or safety. this is a tough challenge for
the entire food industry, but we feel good about our progress:
9
KRAFT FOODS BY: AHMOAD WARE
-in the u.s. and Canada, our largest and most diverse portfolios, we announced plans to
cut sodium by an average of 10 percent by 2012 across the portfolio. in 2010 alone, we
removed nearly 3 million kilograms
(6.5 million pounds) of salt from 340 products. and we plan to reduce sodium
in hundreds more products.
Kraft has also taken what their consumers have said a step further in regards to
health recommendations and labeling of products. Product labeling since 2007, Kraft has
provided nutrition labeling on products worldwide. By following the recommendations
of the Codex Alimentarius, a set of globally recognized, widely used food standards,
Kraft labels provide information on calories plus seven key nutrients where space per-
mits: protein, carbohydrates, sugar, fat, saturated fat, fiber and sodium. On very small
packages and others with limited space, we list calories, protein, carbohydrates and total
fat, per Codex recommendations.
Kraft labels list the amount of each nutrient in a given portion of the product and/
or per 100 grams or milliliters, depending on local regulations. in most cases, our labels
also include the percentage that each nutrient provides of the recommended daily value
(dv), daily intake (DI) or guideline daily amounts (GDAS)—or the local equivalent
where available.
Kraft is also pursuing front-of-pack labeling that delivers meaningful information
at a glance, and are increasing our front-of-pack labeling around the world. in australia
10
KRAFT FOODS BY: AHMOAD WARE
and the Eu, we provide front-of-pack information on calories, based on the percentage of
DI and percentage of GDA, respectively. in the u.s., Kraft supports nutrition Keys a
front-of-pack program, developed by the Grocery Manufacturers Association and Food
Marketing Institute. and in asia Pacific, we are currently exploring front-of-pack options
with the broader food industry. Kraft also provides nutrition information online and via
toll-free consumer call centers. Our healthy living websites in several countries offer life-
style tips and recipes and in the u.s., our Good eating, Good living website provides in-
formation for people living with diabetes.
In closing, Kraft has a strong hold within the industry, and the loyalty of its con-
sumers. Not only are consumers looking for the great taste, but now with todays society
being health conscious, it is imperative for Kraft to react accordingly to sustain as well
as gain market share within their industry. With Revenues in the billions and most im-
portantly the number #1 global position it is very clear that Kraft Foods Inc, is not only
listening to their consumers, but they are putting what they say to use and improving their
products as well as the way of life of its consumers (health factors). It is clear that the key
driving force in the food processing industry, during todays time is dealing with health
and nutrition.
The food processing industry is one with high entry barriers, and high rivalry.
This industry is an attractive one if you have the capital to start, as you will see in the ap-
pendix, many companies along with Kraft have made decent profits within this difficult
but lucrative realm.
11
KRAFT FOODS BY: AHMOAD WARE
References
Thompson, A., Peteraf, M., Gamble, J., & Strickland III, A. (2012), Crafting & Executing
Strategy 18e. McGraw-Hill/Irwin. New York, NY
Tyson Foods (2012) Tyson Foods Inc, Retrieved January, 30, 2012 from
www.tysonfoods.com
Nestle (2012) Nestle Inc. Retrieved February, 4, 2012 from www.nestleusa.com
12
KRAFT FOODS BY: AHMOAD WARE
Kraft Foods (2012) Kraft Foods Inc, Retrieved February 4, 2012 from
www.kraftfoodscompany.com
Kraft Foods (2012) Kraft Foods Facebook, Retrieved February 8, 2012 from
www.facebook.com/kraftfoodscorporate
Kraft Foods (2012) Kraft Responsibility Report, Retrieved February 7, 2012 from
www.kraftfoodscompany.com/SiteCollectionDocuments/pdf/kraftfoods_responsibility_re
port.pdf
Food Processing (2012) Planning for Split, Retrieved February 9, 2012 from
www.foodprocessing.com
Food Processing Top 100 (2012) Top 100, Retrieved February 11, 2012 from
www.foodprocessing.com/top100/index.html
Appendix
Kraft Strategies for Growth
We understand that actions speak louder than words, so at Kraft Foods, we:
13
KRAFT FOODS BY: AHMOAD WARE
Inspire trust
Act like owners
Keep it simple
Are open and inclusive
Tell it like it is
Lead from the head and the heart Discuss, decide, deliver
Create a Performae-Driven, Values-Led Organization
Kraft Foods at a Glance/2010 Consumer Sector Data
Net Revenues in Billions
$ 13.7 confectionery$ 10.8 biscuits
14
KRAFT FOODS BY: AHMOAD WARE
$ 8.8 beverages$ 7.0 cheese$ 5.0 convenient $ 4.0 groceryPercentage of Net Revenues
Total $49.2 (Billion) (www.kraftfoodscompany.com)
This Yea
r
Last Yea
r
Company 2010 Food Sales
2009 Food Sales
2010 Total Company
Sales
2010 Net In-come* (-
loss)
2009 Net In-come* (-
Loss)
1 4 Pepsico Inc. 35,600 22,000 57,838 6,338 5,979
2 1 Nestle (U.S. & Canada)
29,600 28,000 105,000 35,000 10,751
3 3 Kraft Foods Inc.
29,524 23,666 49,207 4,139 3,028
4 2 Tyson Foods Inc. (9/27/08)
27,293 25,903 28,430 765 -551
5 5 Anheuser-Busch InBev
15,296 15,380 36,297 5,762 5,877
6 7 JBS USA 13,342 11,000 32,959 117 65
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KRAFT FOODS BY: AHMOAD WARE
7 6 General Mills Inc. (5/31/09)
12,005 11,951 14,880 1,798 1,535
8 7 Dean Foods Co.
11,758 11,000 12,123 83 228
9 9 Mars Inc. 10,500 10,000 30,000 NA-Private NA-Private
10 10 Smithfield Foods Inc. (5/11/11)
10,264 9,326 12,203 521 -101
11 11 MillerCoors 8,818 8,852 8,818 1,057 859
12 12 Kellogg Co. 8,402 8,510 12,397 1,247 1,208
13 13 Coca-Cola Co.
8,273 8,191 35,119 11,809 6,824
14 14 ConAgra Foods Inc. (5/29/11)
8,002 7,940 12,303 819 723
15 19 Hormel Foods Corp.
7,221 6,534 7,221 396 343
16 20 Cargill Inc. (5/31/11)
7,000 6,000 108,000 2,600 3,334
17 17 Dole Food Co. Inc.
6,893 6,779 6,893 -30 84
18 15 Pilgrim's Pride Corp.
6,882 7,088 6,882 87 -152
19 16 Sara Lee Corp. (7/3/10)
6,819 7,059 10,793 527 380
20 18 Unilever North Amer-ica
6,688 6,540 59,311 6,161 5,243
21 21 Saputo Inc. (3/31/11)
6,025 5,695 6,025 451 376
22 22 Campbell Soup Co. (9/29/10)
5,675 5,630 7,676 844 736
23 24 Hershey Co. 5,671 5,299 5,671 510 436
24 23 Dr Pepper Snapple Group
5,636 5,531 5,636 528 555
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KRAFT FOODS BY: AHMOAD WARE
25 25 Maple Leaf Foods
4,968 5,222 4,968 26 52
26 27 J.M. Smucker Co. (4/3/11)
4,826 4,605 4,826 479 494
27 26 H.J. Heinz Co. (4/27/11)
4,679 4,622 10,707 1,006 882
28 29 Ralcorp Holdings
4,049 3,892 4,049 209 290
29 28 Perdue Farms (3/31/11)
3,900 3,900 4,600 NA-Private NA-rivate
30 30 Grupo Bimbo 3,864 3,823 7,197 341 457
31 31 Del Monte Foods (5/1/11)
3,666 3,740 3,666 661 244
32 34 Land O’Lakes Inc.(B2)
3,455 3,208 11,146 178 209
33 33 Brown-For-man Corp.
3,404 3,226 3,404 572 449
34 36 Agropur Co-operative (10/30/10)
3,345 2,954 3,345 40 33
35 32 Chiquita 3,22 7 3,470 3,227 57 90
36 35 Procter & Gamble Co.
3,135 3,068 78,938 326 (food only)
269 (food only)
37 39 Fortune Brands Inc.
2,666 2,470 7,142 488 243
38 38 Flowers Foods Inc.
2,574 2,601 2,574 137 130
39 49 McCain Foods (6/30/10)
2,555 1,998 6,000 NA-Private NA- Private
40 37 Hostess Brands
2,500 2,700 2,500 NA-Private NA-Private
41 55 Pinnacle Foods
2,437 1,643 2,437 22 303
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KRAFT FOODS BY: AHMOAD WARE
42 47 Borden Dairy (3)
2,400 2,100 2,400 NA NA
43 50 Parmalat Canada
2,382 1,887 2,382 NA NA
44 40 Keystone Foods
2,300 2,300 6,400 NA-Private NA- Private
45 42 Rich Prod-ucts Corp.
2,250 2,200 2,950 NA-Private NA- Private
46 42 Foster Farms 2,200 2,200 2,200 NA- Private NA-Private
47 42 H.P. Hood Inc.
2,200 2,200 2,200 NA-Private NA- Private
48 41 Constellation Brands (2/28/11)
2,088 2,001 3,332 58 99
49 54 Molson Coors Co. (Canada only) (12/25/10)
1,938 1,732 3,254 668 723
50 54 Sanderson Farms
1,925 1,790 1,925 135 82
51 63 TreeHouse Foods Inc.
1,817 1,512 1,817 91 81
52 42 Great Lakes Cheese Co.
1,800 2,200 1,800 NA- Private NA-Private
53 51 Schreiber Foods Inc.
1,800 1,800 4,000 NA-Private NA- Private
54 53 Schwan Food Co.
1,750 1,750 3,000 NA-Private NA-Private
55 48 California Dairies Inc.
1,710 2,060 3,000 NA NA
56 60 Associated Milk Produc-ers
1,700 1,400 1,700 NA NA
57 57 Weston Foods
1,624 1,602 32,008 278 (food only)
117 (food only)
58 56 Canada Bread Co.
1,588 1,726 1,588 61 73
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KRAFT FOODS BY: AHMOAD WARE
59 66 Seaboard Corp.
1,584 1,208 4,386 284 92
60 72 Prairie Farms Dairy Inc.(9/30/10)
1,504 1,345 1,504 NA NA
61 67 The Dannon Co. Inc.
1,360 1,200 1,360 NA NA
62 71 Cott Corp. 1,357 1,174 1,803 58 82
63 58 Michael Foods
1,300 1,543 1,500 NA-Private 69
64 61 Darigold (3/31/11)
1,300 1,300 1,300 NA NA
65 New Advance Pierre Foods LLC
1,300 600 1,300 NA-Private NA
66 59 McCormick & Co. Inc. (11/30/10)
1,223 1,186 3,337 370 300
67 67 American Crystal Sugar Co.
1,204 1,200 1,204 526 536
68 67 American Foods Group LLC (9/30/10)
1,200 1,200 2,100 NA-Private NA- Private
69 67 J. R. Simplot Co. (8/31/10)
1,200 1,200 4,500 NA-Private NA- Private
70 62 Seneca Foods Inc. (3/31/11)
1,195 1,280 1,195 18 48
71 65 Leprino Foods Co.
1,125 1,250 2,150 NA-Private NA- Private
72 74 McKee Foods Corp.
1,100 1,000 1,100 NA-Private NA-Private
73 74 OSI Group 1,100 1,000 4,500 NA-Private NA-Private
74 46 Colgate- Pal-molive Co.
1,025 1,071 15,564 2,203 2,291
75 73 Foremost Farms USA
1,000 900 1,372 25 22
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KRAFT FOODS BY: AHMOAD WARE
76 74 Hilmar Cheese
1,000 1,100 1,300 NA NA
77 63 Riceland Foods
1,000 1,000 1,300 NA NA
78 74 Wells En-teprises Inc.
1,000 1,000 1,000 NA-Private NA-Private
79 79 Snyder's-Lance Inc.
980 918 980 3 36
80 86 Dairy Farm-ers of Amer-ica (2)
927 705 9,800 44 66
81 96 Imperial Sugar Co. (9/30/10)
908 523 908 137 -24
82 80 Lancaster Colony Corp.(6/30/10)
893 910 1,057 115 89
83 85 Sunkist Growers (10/31/10)
874 729 1,013 789 659
84 82 Gilster-Mary Lee Corp.
850 875 850 NA-Private NA-Private
85 84 Lactalis USA Inc./Sorrento
800 660 800 NA NA
86 90 Agri-Mark 781 655 781 11 15
87 81 The Hain Ce-lestial Group Inc.
724 898 917 27 -25
88 84 Sargento Foods Inc. (6/30/10)
700 750 900 NA-Private NA-Private
89 86 Reser's Fine Foods
700 700 700 NA-Private NA-Private
90 91 J&J Snack Foods Corp. (9/25/10)
697 653 697 48 41
91 88 Malt-O- Meal 690 697 690 NA-Private NA-Private
92 89 National Grape Coop-erative
659 673 659 27 81
20
KRAFT FOODS BY: AHMOAD WARE
93 New Diamond Foods Inc.
642 536 680 26 24
94 97 CROPP Co-operative/Or-ganic Valley
619 520 619 NA NA
95 93 John B. San-filippo & Son Inc.(6/24/10)
562 554 562 14 7
96 94 Golden State Foods
560 550 4,000 NA-Private NA-Private
97 94 Gorton's Inc. 560 550 560 NA NA
98 New Ruiz Foods 525 500 525 NA-Private NA-Private
99 100 B & G Foods Inc.
513 501 513 32 17
100 99 Goya Foods Inc.
505 505 1,300 NA-Private NA-Private
21