Kraft Foods Reviews Sustainable Growth Plan Progress, Highlights New Product Growth Platforms; Kraft Executives Speak at Prudential Back-to-School Conference

Business Wire, Sept 7, 2005

NORTHFIELD, Ill. -- In a presentation to the financial community today, Kraft Foods Inc. (NYSE:KFT), a global leader in branded food and beverages, reviewed progress the company is making on its Sustainable Growth Plan. Roger K. Deromedi, Kraft's Chief Executive Officer, and John Baxter, Executive Vice President, Global Category Development, presented at the annual Prudential Back-to-School Consumer Conference, held in Boston, MA.

In his remarks, Deromedi reported that, despite a challenging operating environment, Kraft is making progress against its Sustainable Growth Plan, citing improvements in consumer brand value, a strengthened new product pipeline, solid growth in developing markets and benefits from the company's restructuring program. He put this progress in the context of some significant challenges that are confronting the food industry this year, including higher-than-anticipated commodity costs, energy and packaging costs, and a highly competitive European marketplace. Deromedi also noted that, in light of these challenges, the company is intensifying its efforts to find ways to simplify its processes, streamline its structure and empower employees to find even more time to focus on consumers.

"We're about a year-and-a-half into our Sustainable Growth Plan, and, although there is much work ahead, I believe Kraft is doing the right things to strengthen our business for the long-term," Deromedi said. "We're continuing to emphasize innovation, maintain our targeted price gaps and make significant investments in marketing to support our brands, even in the face of a difficult operating environment for many of our core categories."

Baxter, in his overview of Kraft's global product growth platforms, emphasized that the company is investing behind fewer, bigger and better new product ideas - such as cracker chips, the Tassimo hot beverage system, beverage stick packs and affordable cheese for developing markets - that can be successful around the world and provide Kraft with sustainable competitive advantage. The company projects new product revenues in 2005 to exceed $1.5 billion, including its South Beach Diet line of products, which recently achieved $100 million in revenues after only six months in market.

Kraft did not change its previous 2005 full-year guidance for E.P.S. from continuing operations of $1.73 - $1.78 (including an estimated $0.22 per share in exit and implementation costs for the restructuring program and asset impairment charges and $0.04 per share in gains on the sales of businesses). The company noted that category weakness due to higher retail prices and uncertainties in commodity costs continue to pose risks to this guidance.

Kraft Foods markets many of the world's leading food brands, including Kraft cheese, Maxwell House and Jacobs coffees, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, Post cereals and Milka chocolates, in more than 155 countries.

For more information on Kraft Foods, please visit our website at www.kraft.com.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements. One can identify these forward-looking statements by use of words such as "strategy," "expects," "plans," "anticipates," "believes," "will," "continues," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. The Company cannot guarantee that any forward-looking statement will be realized, although it believes that it has been prudent in its plans and assumptions. Achievement of future results is subject to risks, uncertainties, and the possibility of inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated, or projected. Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in the Company's securities. In connection with the ''safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995, the Company is hereby identifying important factors that could cause actual results and outcomes to differ materially from those contained in any forward-looking statement made by or on behalf of the Company; any such statement is qualified by reference to the following cautionary statements. It is not possible to predict or identify all risk factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The Company does not undertake to update any forward-looking statement that it may make from time to time.

Each of the Company's segments is subject to intense competition, changes in consumer preferences and demand for its products, including diet trends, the effects of changing prices for its raw materials and local economic and market conditions. Their results are dependent upon their continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets, to broaden brand portfolios and to improve productivity. The Company's results are dependent upon its ability to address competitive challenges effectively, including price gaps with competitors' products, increasing price consciousness of consumers, trends toward increasing consolidation in the retail trade and consequent pricing pressure and inventory reductions, and the growing presence of hard discount retailers, primarily in Europe, with an emphasis on private-label products. The Company's results are also dependent on its ability to consummate and successfully integrate acquisitions and to realize the cost savings and improved asset utilization contemplated by its restructuring program. The Company may, from time to time, divest businesses that are less of a strategic fit within its portfolio, and its results may be impacted by either the gains or losses, or lost operating income, from the sales of those businesses. In addition, the Company is subject to the effects of foreign economies, changes in tax requirements, currency movements, fluctuations in levels of customer inventories and credit and other business risks related to its customers operating in a challenging economic and competitive environment. The Company's results are affected by its access to credit markets, borrowing costs and credit ratings, which may in turn be influenced by the credit ratings of Altria Group, Inc. The Company's benefit expense is subject to the investment performance of pension plan assets, interest rates and cost increases for medical benefits offered to employees and retirees. The Company's assessment of the fair value of its operations for purposes of assessing impairment of goodwill and intangibles is based on discounting projections of future cash flows and is affected by the interest rate market and general economic and market conditions. The food industry continues to be subject to recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products. The food industry is also subject to concerns and/or regulations regarding genetically modified organisms and the health implications of obesity and trans-fatty acids. Increased government regulation of the food industry could result in increased costs to the Company.