Kraft Foods remains committed to boosting marketing spending $500 million to $600 million this year despite flat volume growth for first-quarter 2004.
Kraft North America reported net revenues of $5.4 billion for the quarter ended March 31, up 2.5% over first-quarter 2003. Volume sales rose 1%. Kraft International net revenues hit $2.3 billion for the quarter, up 9.6%.
Kraft added $75 million to its first-quarter marketing budget, primarily for cheese, cold cuts and snack nuts—high-profile categories for low-carb dieters. Nut volume grew double-digits while cheese and cold cuts held strong, Kraft reported. The budget boost is part of Kraft’s “sustainable growth plan” adopted in January.
Budget increases through yearend (highest in the second quarter) will fund more media advertising, new-product launches, promotions in developing and non-measured retail channels and pricing initiatives to close price gaps.
Pricing is tricky, as commodity costs, especially dairy but also coffee, grains and soybean oil, continue to rise. That prompted Kraft to increase cheese prices at the end of the first quarter, and will affect second-quarter revenue as price changes catch up to commodity costs.
Kraft’s total reported volume rose a mere 0.5%, based on ongoing volume growth of 0.8% offset by divestitures. Cookies and cereal sales were dogged by the low-carb trend; low-carb intros across Kraft’s portfolio later this year should help balance that. Volume sales in North America rose 1%; Kraft International volume fell 0.9% because divestitures outweighed ongoing volume growth of 0.4%. In North America, Kraft reported that volume in non-measured retail channels was up double digits across most businesses.
Kraft projects full-year growth of 3% as new products launch, marketing boosts pay off, and the company incorporates acquisitions such as Veryfine Products, completed in April.
“During the quarter, we made good progress on our sustainable growth plan,” said CFO Jim Dollive in a statement. “Our increased marketing investment drove improved results in key businesses, and our cost restructuring program is on track. Given the early success of these initiatives, we remain committed to increasing our 2004 marketing investment.”
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