External Analysis for Kraft Foods

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Kraft Foods or Kraft Foods Inc. (NYSE:KFT) specializes in the manufacturing and marketing of food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products. (US SEC, 2010). The company operates in more than 155 countries across the globe. It has three main segments: Kraft Foods North America, Kraft Foods Europe and Kraft Foods Developing Markets. Kraft Foods is the second largest food and beverage company in the world after Nestle. Its portfolio consisted of 11 brands which earn Kraft foods more than $ 1 billion worldwide. The brands includes: Oreo, Nabisco and LU biscuits; Milka and Cadbury chocolates; Trident gum; Jacob and Maxwell house coffees; Philadelphia cream cheese; Kraft cheeses ; Oscar Meyer meats (Trefis, 2011). At December 31, 2010, it had operations in more than 75 countries and made its products at 223 manufacturing and processing facilities worldwide. Kraft is an independent public company listed in the stock exchange of NY City and was listed in the Dow Jones industrial average in 2008 (USA Today, 2008). It acquired Cadbury against $ 19.7 billion in 2010 resulting in several boycotts of all Kraft related products. CHAPTER 2

The SWOT analysis of Kraft Foods Inc. is as follows:

Strengths * World’s second largest food company * Strong brand equity * Innovation * Distribution network * Ad Hoc R&D| Weaknesses * Market share * Competition * Debt requirements * Geographic concentration| Opportunities * Expansion in developing markets * Explore Cadbury markets * Repositioning * Offer Organic Products| Threats * Cadbury purchase issues * Fierce competition * Poor implementations on Cadbury division * Unhappy customers|

Kraft Foods Inc. enjoys the position of world’s second largest food company after Nestle (Trevis, 2011). The company masters the manufacturing and marketing of confectionary, food items and beverages. It has more than 11 brands in the markets of America, Europe and Asia. The company has strong brand image and offers innovative products to its customer base. More than 40 of its brands has 100 years heritage (Kraft Foods, 2011). Kraft Foods provides an interesting portrait of a company that employs traditional distribution network as well as 2 tier direct store delivery distribution network (MWPL, 2011). With its continuous Research and development units the company is continuously in a process of offering safe, healthy and innovative products to its customers. The effective R&D is a key to sustain its market position and competition in the industry. 2.1.2 WEAKNESSES

The company is weak on its market performance. Kraft foods acquired Cadbury which no doubt increased its profit ratio to many folds but it also added lot of debt pressure on the company. Along with the debt requirements the company faces cut throat competition with Nestle and Harshey in the markets. Despite of its operations in various markets and presence in US and other markets, the company is weak on geographic concentration. Kraft foods has low market share but it enjoys high margins in grocery business. Kraft has about 9% market share in the $40 billion global grocery market.  Although the grocery division's contribution to Kraft's revenues is lower compared to other divisions, it has EBITDA margins of 33% which are higher than the 14-15% margins in Kraft's other businesses.  The high profit margins make grocery a lucrative business line for Kraft (Trevis, 2011).   2.1.3 OPPORTUNITIES

Kraft Foods has long way to go. It can utilize number of options available currently to get rid of debt requirements and other frills that are causing low market share to the company. Firstly, Kraft Foods can engage itself in the market expansion process. This can be achieved in the developing markets of...
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