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Vernon leads charge at ‘New Kraft’ as old Kraft officially splits into two

By Elaine WATSON , 02-Oct-2012

Kraft Foods Group: 'There is no such thing as a mature brand, just tired marketers'
Kraft Foods Group: 'There is no such thing as a mature brand, just tired marketers'

Kraft has officially split into two publicly traded companies: Kraft Foods Group, an $18.7bn North American packaged foods giant with a portfolio of brands including Kraft, Maxwell House, Oscar Mayer, Planters and JELL-O; and Mondelēz International, a $36bn global snacks company with brands including Cadbury, Jacobs, LU, Milka, Nabisco, Oreo, Tang and Trident.  

Mondelēz International now trades on the NASDAQ Global Select Market under the ticker symbol MDLZ and Kraft Foods Group trades as KRFT.

Kraft Foods Group will continue to operate from its existing HQ in Northfield, IL, while Mondelez is based in Deerfield, IL.

Two of the fastest three growing categories in America are nuts and coffee

While the international snacks is a high growth area, Krafts’s North American grocery arm is operating in a far tougher environment, with volumes for most US packaged grocery companies in the center of the store going backwards in the past couple of years, admitted Kraft Foods Group’s new boss Tony Vernon last month.

“What’s most worrisome is that no-one, absolutely no-one, has grown volume over the time period - that has to change and Kraft must lead that change.”

While Kraft has developed some highly innovative new products in recent years, including MiO liquid water enhancers and Philadelphia cooking crème, more exciting launches are to come, especially in nuts and coffee, revealed Vernon.

“Two of the fastest three growing categories in America are nuts and coffee, and we have essentially billion dollar brands in them and a long innovation pipeline especially in coffee.”

There is no such thing as a mature brand, just tired marketers

Vernon: Resources will be allocated 'based on margin, materiality and the momentum of each of those brands'

As for liquid concentrates, he said: “We’re extending the platform with new Crystal Light liquid concentrates just as all of our competitors prepare to launch their imitations.” 

More emphasis will also be placed on health and nutrition, he said. “By 2015 more than half of our sales will be from better-for-you options.”

The way bosses allocate resources to brands will also change, said Vernon, adding that creative advertising campaigns for ‘mature’ brands such as Velveeta and Philadelphia had delivered significant results: “There is no such thing as a mature brand, just tired marketers”.

In the ‘New Kraft, he said,resources will be allocated “based on margin, materiality and the momentum of each of those brands.”

More money will also be pumped into advertising products that appeal to Hispanic consumers, he said.

Ildikó Szalai, senior company analyst at Euromonitor International, said the split would enable both businesses to explore growth opportunities in a wider range of categories and markets.

However, it will also "raise logistical challenges, as well as complications to the management and development of brands under shared ownership, such as Philadelphia or Maxwell House", predicted Szalai.

This is an opportunity to build something extraordinary...

Speaking to staff after ringing the opening bell at the NASDAQ today, Vernon said: “Today is the beginning of a great new company, a totally new Kraft, one with the spirit of a startup and the soul of a powerhouse…  

“We see this as an opportunity to build something extraordinary, to create a renaissance in the North American food & beverage industry."

Click here to read about Kraft Foods Group ceo Tony Vernon’s plans for ‘New Kraft’.

Click here and here to read about where bosses see the most growth potential for Mondelēz.

Click here to see why Mondelez will face tough competition in China and Russia from Mars.

Click here to read our interview with Russ Moroz, VP Research Development & Quality, Kraft Foods.