Kraft Foods has revamped its trade-promotion practices as part of the “strategic growth plan” begun in January.
Kraft gave investors a six-month update on the four-part plan earlier this week. The top priority is to build brand value, and to do that, Kraft increased marketing budgets for its top brands. That helped boost overall volume sales 4% and revenues 7% for the second quarter ending June 30 (July 20 Xtra).
Kraft revamped its trade spending practices to compensate retailers based on consumer purchases (sell through), not warehouse orders (sell in). The changeover was completed this month. At the same time, the base for sales force incentives has been switched to revenue, not volume sales; that emphasizes profitable growth and makes trade promotion more efficient, Kraft said.
Northfield, IL-based Kraft also is creating specific products and promotions for dollar stores and other growing retail channels. R&D and promos will also target growing consumer segments, including shoppers seeking natural and organic goods.
Kraft undertakes its second goal, transforming its portfolio, with flanker products in underdeveloped segments of its current categories, such as Altoids gum, DiGiorno single-serve pizzas and a single-serve coffeemaker, Tassimo, now testing in France.
Kraft plans to cut costs by trimming SKUs, adopting standard recipes and packaging globally and simplifying its supply chain.
Global expansion centers on core categories (beverages, snacks, cheese and dairy, and convenient meals) in large countries. China, Brazil, Russia, Mexico and India comprise 54% of the developing-market population, but account for only 34% ($1.2 billion) of Kraft’s annual revenues in developing markets. Kraft has doubled revenues from these four countries since 2000.
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