Chicago: Food and beverage company Kraft Foods Inc. will focus on 10 countries and 10 brands to expand internationally, rather than taking a blanket approach to launching US brands overseas, the head of its international business told Reuters.
The strategy is the first public discussion of Kraft’s international plans since it hired former Unilever Plc executive Sanjay Khosla to run the division in January 2007, and bought Groupe Danone SA’s biscuit operations in November.
“The idea is not to go all over the place, but to focus on a few places where we can win,” Khosla, president of Kraft International, said in an exclusive interview.
The strategy focuses on 10 countries, 10 brands and five product categories: chocolate, coffee, powdered drinks, biscuits and cream cheese.
In November, Kraft paid $7.82 billion (Rs34,642 crore) to acquire Danone’s biscuit and cereal products business, which included the LU cookie and Tuc cracker brands, to expand overseas, especially in fast growing markets like China.
With the acquisition, Kraft’s international sales increased to $16 billion, representing 41% of Kraft’s total sales, while generating 34% of the company’s operating income.
China, Russia, Brazil and South-East Asia are the four “growth engines” in the 10 international markets, while the other six “scale markets” were Australia, the UK, Spain, France, Italy and Germany.
Kraft will put most of its efforts behind 10 brands: Oreo cookies, Club Social/Tuc crackers, Jacobs and Carte Noire coffees, Philadelphia cream cheese, Tang drink mix and Milka, Cote d’Or, Lacta and Toblerone chocolates.
The 10 “power brands” represent almost 40% of Kraft’s international sales and more than 60% of its profits, Khosla said. So the company is spending more on advertising and research and development.
The Oreo sold in other parts of the world may look nothing like the sandwich cookie marketed in the US since Kraft develops products to fit local tastes. “In countries like China, just marketing Oreos as it was marketed in the US was not working,” Khosla said, noting that Oreo sales were flat for years in Asia. So the company developed a less sweet, less expensive wafer form of Oreo to fit Chinese tastes and pocketbooks, a move that transformed Oreo into the No. 1 cookie brand in China, he said.
The Oreo revamp is one example of a major change at Kraft that has allowed, and even forced, local managers to decide how to market products in their countries, rather than follow a mandate from Kraft HQ in Northfield, Illinois.
Two-thirds of the top 30 managers working for Khosla are new on the job, and they can make decisions based on local tastes—to a point, Khosla said. “What you can’t do is come up with a pink Oreo,” he said.