Kraft Foods, reporting that quarterly profits rose less than expected, plans to increase promotional and advertising spending by more than $200 million to try to boost sales for its most disappointing U.S. products.
The consumer packaged goods firm also trimmed its earnings outlook for the full year, saying retailers were cutting orders and sluggish growth was seen in categories like cookies, cheese, cold cuts and biscuits. It also blamed a weak second quarter on cheaper private-label brands taking market share by luring away price-conscious shoppers.
Northfield, IL-based Kraft said it plans to improve share and volume performance in certain categories by increasing marketing spending in the second half of 2003 to narrow price gaps, where appropriate, and build brand equity. It said the right combination of price and promotion can restore growth.
“After assessing consumer takeaway for the first six months of the year, we have determined that incremental marketing spending is required on these businesses to restore a more robust growth profile,” Betsy Holden, the firm’s CEO, said in a statement.
Kraft reported second quarter earnings of $949 million, from $901 million in the year ago quarter. Revenue rose 4% to $7.84 billion from $7.51 billion. Sales volume increased below expectations by 1.7%.
The company plans to continue to look for acquisitions to boost growth. Kraft’s brands include Oreo cookies, Velveeta cheese and Oscar Mayer meats.
Earlier this month, two top executives left the company. Irene Rosenfeld, the president of Kraft Foods, Inc. North American businesses, resigned to pursue other opportunities after less than a year on the job. Michael Polk, the group VP for the North American biscuit business responsible for Oreo cookies, left after 16 years to take a position as senior VP-marketing and COO of Unilever Bestfoods North America.
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