strategic-management

19
Kraft Foods Inc. — 2009
Kristopher J. Blanchard
Crown College
KFT
www.kraftfoodscompany.com
The board of directors of Kraft Foods Inc. declared a regular quarterly dividend of $0.29
per common share of Class A stock payable on July 14, 2009. According to their advertising,
Kraft Foods makes today delicious in 150 countries around the globe. Their 100,000
employees work to make delicious foods consumers can feel good about. Kraft’s American
brand icons include Kraft cheeses, dinners, and dressings, Maxwell House coffees and
Oscar Mayer meats, to global powerhouse brands like Oreo and LU biscuits, Philadelphia
cream cheeses, Jacobs and Carte Noire coffees, Tang powdered beverages, and Milka,
Cote d’Or, Lacta, and Toblerone chocolates.
The largest food company in the United States, Kraft’s first quarter 2009 profit
increased 10 percent and its organic revenues increased 2.3 percent. The company’s North
American sales rose 2.9 percent, helped by much higher demand for its cereals. Kraft’s
second quarter 2009 earnings increased 11 percent to $827 million but sales dropped
5.9 percent to $10.16 billion. The weakest performing segment of the company was North
American Foodservice, which reported a 10 percent drop in sales. Kraft’s European
segment reported a doubling of profit of the quarter.
History
James Kraft founded what is now known as the Kraft Food Company in 1903 when he sold
a few standard varieties of cheese wholesale in Chicago. The company grew and was soon
distributing some 30 varieties of cheese packaged under the brand names of Kraft and
Elkhorn. By 1914, the cheeses were available in most towns across the United States. In
1916, Kraft was granted a patent for what came to be known as processed cheese. Kraft
began to mass-produce a number of specialty cheeses like Gouda and blue cheese and
began to export products to Canada and Europe in 1920; plants would later be established
in both England and Germany.
A key to the success of Kraft Food was James Kraft’s commitment to developing new
products and using innovative advertising methods. Kraft was an early user of all communications
media and, as early as 1911, was advertising on Chicago elevated trains, using outdoor
billboards and mailing circulars to retail grocers. He was among the first to advertise in
consumer journals and was also the first to use colored advertisements in national magazines.
In 1933, the company started to use radio on an extensive scale. It sponsored the onehour
weekly musical and variety show Kraft Musical Review which headlined notable show
business personalities. Kraft’s commitment to innovation was demonstrated through the
variety of products that were introduced. These products include items like Velveeta (1928),
Miracle Whip salad dressing (1933), Kraft macaroni and cheese dinner (1937), Parkay margarine
(1940), sliced processed cheese (1951), and Cheez Whiz (1952).
Even though Kraft Foods has a fairly well-documented company history, it has primarily
operated as a subsidiary to other larger corporations. The first of these was the
National Dairy Company in 1930; Kraft would later be purchased by Philip Morris in 1988
for $12.9 billion. In March 1989, Philip Morris merged Kraft and its General Foods unit into
one entity called Kraft General Foods, Inc. As a result of the merger, the company became