Kraft Foods has reported strong sales and profit growth in the first quarter as it increased prices and advertising efforts for core brands to tackle higher commodity costs.
Net profit was down 58 percent to $799m for the first quarter ended March 31, compared to $1.88bn in the same period last year, when it recorded a huge gain on the sale of its frozen pizza business. Excluding that sale, its results beat expectations. Revenue grew 11 percent to $12.6bn.
Chairman and CEO Irene Rosenfeld said: "We're off to a stronger-than-anticipated start to the year as our teams around the world execute our growth strategy. Our business fundamentals are solid, and we continue to benefit from brand-building investments which allowed us to successfully deliver net pricing to offset commodities increases and drive top-tier growth. At the same time, we're generating cost savings to reinvest in further growth and expand margins."
Kraft also revised its outlook slightly downwards from 5 percent in February, to 4 percent, in part reflecting its loss of distribution rights for Starbucks’ packaged coffee business. The two companies are currently in arbitration over the split.
The Cadbury effect
In a conference call with investors, Rosenfeld also said the company is positive about its chocolate business following its acquisition of Cadbury last year. These latest results represent the fourth full quarter in which the $19bn acquisition has been reflected in results.
“There's no question that Cadbury has transformed the business as we hoped it would in terms of our portfolio, our distribution capabilities and the geographic footprint,” Rosenfeld said. “And it's certainly playing out in our results. We also feel very good about overall how the business is performing…It’s exceeding our expectations.”
She added that in some developing markets, Cadbury Dairy Milk has grown at almost 20 percent, as opposed to historical growth in the range of 7 percent.