These are the times that try cookie makers' sales.
A diet heavy on Oreos, macaroni and cheese, Oscar Mayer hot dogs and Philadelphia Cream Cheese, washed down by Maxwell House coffee and Kool-Aid, has fattened the bottom line for years at Kraft Foods Inc. But now the US' largest food manufacturer is moving to cut back on some of its indulgences.
PHOTO: AFP
An eating revolution that has Americans seeking out healthier food, or at least trying to consume less, has forced Kraft to rethink the way it markets its products and begin reshuffling its lineup.
Growing obesity, the popularity of low-carbohydrate diets and worries about potentially artery-clogging trans fats all have combined to hurt sales at the company, not unlike the plight of other packaged-food makers. Kraft's Oreos, a long-time icon of snackdom, have fairly or unfairly become the bad poster child for trans fats and Atkins and South Beach diet devotees.
Add in soaring commodity costs for milk, cheese, cocoa and coffee and a few other headaches and the result is four straight quarters of profit declines and sluggish revenue and sales volume.
So when the company hosted analysts and reporters for a day-long presentation at its headquarters north of Chicago recently, they got a serving of rare corporate candor from Kraft along with a peek at new items. Chief executive Roger Deromedi admitted the company has been "hammered" lately in four businesses -- cereal, cookies, frozen pizza and candy -- because of competitors' products and the impact of low-carb diets that forgo sweets and starchy foods.
"We have issues in those categories," he acknowledged in lowering Kraft's estimate for 2004 profits.
But Deromedi insisted repeatedly that Kraft's restructuring plan "remains on track" and will start showing better results by year's end.
"There are several factors that will drive our second-half growth," he said, citing recently introduced snacks in particular. "We also expect our marketing spending to build momentum."
Kraft's push for healthier or diet-oriented food began last year when it moved to reduce the fat content in 200 products in North America, cap portions for single-serve packaged snacks, quit marketing snacks at school and encourage healthier lifestyles.
Kraft is cutting 6,000 jobs and closing as many as 20 plants this year in a US$1.2 billion overhaul to reduce operating costs, putting the savings into marketing. It plans to trim its vast portfolio of products. It is selling more snacks in China and other developing markets.
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