Kraft CEO: 'We will not tolerate incursions into our market share'
Speaking with investors on its first quarter earnings call, Vernon said: “We will defend and build on our key segments, and they do attract some real competitors, especially Mac & Cheese with 80% market share.
“Salad dressings, mayonnaise, and Miracle Whip are pitched battles right now. Also Jell-O – there are a lot of offerings from competitors in that sweet dessert area.”
Asked how the company will defend and build on its brands, Vernon said a combination of advertising campaigns, innovations, and good, better, best pricing.
“For competitive reasons, I’d rather let you see it at retail when our competitors see it.”
Business unusual
Vernon told investors that the company’s first quarter results are the first to reflect “business as usual at Kraft even though we’re operating as business unusual given the many changes we’re making to create the best North American food and beverage company”.
“In Q1 we outpaced the industry on a unit basis but not in as many categories as I know we’re capable of,” he said. “Also, dollar growth lagged the industry.”
Vernon picked out Kool-Aid franchise as a brand that has enjoyed renewed growth. This “icon in food and beverage” has seen impressive growth with innovations such as the ready-to-drink Kool-Aid Jammers enjoying 30% growth.
By leveraging a full marketing campaign Kool-Aid has gone from a brand worth under $400 million to Kraft’s “newest half billion brand this year”, he said. (The company has 10 brands over $500 million)
“Jell-O and Planters are up next.”
Financial highlights
The company reported a solid Q1, with operating income in the first quarter increasing 9.2% to $809 million.
The company reported top-line gains from investments in innovation for brands such as Velveeta dinners and Kraft Macaroni & Cheese. However, these gains were offset by weakness in JELL-O ready-to-eat desserts, Kraft dressings and Planters snack nuts, said the company.
“We’re off to a solid start,” said Vernon. “Our first quarter results reflect strong returns on our new product innovations to date, as well as the fact that our cost savings outpaced our plans to reinvest in our brands.
“In the months to come, we’ll execute our marketing playbook more broadly across our portfolio and we expect to see good progress in both top- and bottom-line performance for the full year.”
