Philip Morris Executives Address Morgan Stanley Dean Witter Global Consumer Conference

Business Wire, Nov 8, 2000

We also introduced the first frozen pizza with a crust that bakes fresh in the oven, Di Giorno Rising Crust. This premium brand generated $350 million in revenues last year, and has helped drive strong growth in our dynamic frozen-pizza business this year.

We are also using a buy-and-build strategy to expand our business. We've been acquiring solid regional brands and turning them into national power brands. Three of these brands -- Altoids mints, Capri Sun beverages and Tombstone frozen pizza -- generated nearly $1 billion in revenues last year. That's more than triple the amount they generated when we acquired them.

This year, we acquired two brands with similarly strong growth potential in the health and wellness category -- Balance Bar energy and nutrition bars and Boca Burger meat alternatives.

In the coffee business, we established a very successful U.S. licensing deal with Starbucks, which provides us with an entry in the super-premium category at retail.

New products accounted for three-quarters of Kraft North America's incremental volume growth in 1999, and added an average of a half-billion dollars of revenue in each of the last four years.

We are also capitalizing on our powerful one-company sales force to expand the business into alternate channels, such as club and convenience stores. Combined, these outlets accounted for 60 percent of Kraft's growth last year, and 20 percent of total volume.

These actions have helped Kraft achieve the leading position in 18 of the top 20 categories in which it competes.

Kraft merges those brand- and sales-building initiatives with strict cost management. In the four years through 1999, the company will have achieved savings of more than $1.5 billion. Together with our focus on premium products, this has helped our margins grow by nearly 5 points since 1995, to 20 percent -- one of the highest levels in the food industry.

Kraft is also investing significant resources around Web-based initiatives involving consumers and suppliers.

Through September, operating income rose 6 percent while volume grew a solid 2.5 percent. But if you exclude Foodservice and zero in on Kraft's retail business, you'll find that volume was up an even stronger 4 percent.

As in North America, our international food business has been generating profitable growth through a tighter focus on its key brands and categories, by creating new products that meet consumer demand for convenience, and by leveraging its scale.

In confectionery, for example, we have a more aggressive new-products program built around Milka -- the leading chocolate brand in Europe. We are also driving sales through cross-border marketing efforts that allow us to create a single standard of excellence. One example is our global ad campaign for Philadelphia cream cheese. This is now running in 25 key markets and helped fuel the brand's solid 6 percent volume growth last year.

In coffee -- where we are the leader in the key European market with an 18 percent share -- our growth is being led by premium roast-and-ground brands such as Jacobs, Carte Noire and Gevalia, as well as the recently launched Kenco Rappor soluble coffee in the UK.