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Discussing food giant Kraft.

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Introduction

Sarah Renfro 6/1/04 Marketing 551 7:05pm section The Wall Street Journal article "Eating Up" (May 21, 2004) discusses how food giant Kraft is responding to changes in the macro-environment and customer demand through various marketing strategies that we have discussed in class. Kraft has enjoyed a long history of growth and success in the food industry; however, they need to recognize and address the changes in the industry to maintain their market position. First, consumer needs and demands for food choices are changing. Currently customers are looking for "healthier, tastier, more sophisticated foods" than what Kraft is offering. There is a growing awareness of food-related health issues that have created new trends in food purchases such as low-carbohydrate diets, natural and organic foods, and gourmet and specialty products. Many of Kraft's products are the antithesis of these trends - high fat snacks (Oreos) and artificial cheese (Velveeta). Additionally, Kraft is facing new pressures in the marketplace. ...read more.

Middle

The overall result for Kraft has been a loss of profits and earnings misses. Other big food companies have successfully modified their products to respond to environmental changes. Campbell's Soup Co. has focused on improving its soups while Unilever revamped Slim-Fast and other products to respond to the low-carbohydrate diet trend. Nestle is looking for growth in the intersection of food and pharmaceuticals - "phood." Kraft is reacting to its recent struggles in several ways. They made a leadership change at the top, demoting the co-CEO who was associated with recent losses and elevating a new CEO who moved quickly to adjust strategy. The company is also working to increase the healthiness of existing products and broaden associations with well known companies such as Starbucks Coffee. New CEO Roger Deromedi stresses that they will continue to focus on traditional, core brands, which represent a majority of profit, while broadening products lines to attempt to serve a range of consumer needs. ...read more.

Conclusion

Specialty and gourmet products require a focus on quality that requires more labor and effort. Can Kraft compete against handmade brie with its automated production cheeses? Kraft's experience with Organic Valley highlights potential problems they may have in the organic market. Kraft's values and operations (mechanized food production and highly technical innovations) are in stark contrast to the principles and values of organic food. Many consumers are drawn to organic products because they value the meaning of organic food - healthier for the body and the environment, produced by companies that with strong ethics. Using organic ingredients in highly processed, artificial food products is in conflict with these values. Will the "natural and organic seeker" accept Kraft as a legitimate producer? By using Back to Nature as an entry into this market, they may avoid some negative branding issue as Back to Nature enjoys name recognition already. Kraft must also continue to respond to changing food fads. They have met the low-carbohydrate demand thru repackaging and re-labeling of existing products. The key to continued growth will be to continually scan the macro-environment and use their considerable resources to respond to emerging trends and consumer demands. ...read more.

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