Kraft's quest: more profits, more responsibility

Food & Drug Packaging, July, 2005 by Pan Demetrakakes

Since its spinoff from parent Philip Morris (now Altria Group) in 2001, Kraft Foods, one of the largest and most diverse food companies in the world, has been able to drive sates steadily upward. Total company sales increased from $28.7 billion in 2001 to $32.2 billion in 2004. (The food portion of the 2004 figure is $25.7 billion.)

But net earnings have fluctuated, falling from a post-spinoff peak of $3.4 billion in 2001 to $2.7 billion in 2004. That situation may have contributed to the June departure of Betsy Holden, who had been co-CEO with Roger Deromedi in an unusual arrangement that ended with her demotion about 19 months ago.

At April's annual shareholder meeting, Deromedi outlined several initiatives that Kraft will take in the near future, including: More products that will bear the seal of the South Beach low-carb diet; a continued marketing drive for its Tassimo home-coffee-brewing system; and continued development of proprietary technologies for milk-based products, especially in markets like China where refrigeration is not commonly available.

Deromedi also outlined several corporate-responsibility initiatives, including a continuation of the Health & Wellness initiative begun in 2003. These include: reduction or elimination of trans fats in various products; a halt to advertising of certain products, such as Chips Ahoy! cookies and Lunchables lunch kits, on children's TV shows; and the use of 13 million pounds of so-called "sustainable coffee," purchased at a price that allows growers to make a decent living.

Kraft's responsibility initiatives come in part because, as a leading packager of foods like cheese and processed meat, the company is a lightning rod for criticism of the food industry. To cite one example, Kraft, along with the Dannon Co. and General Mills, is a defendant in a recent lawsuit filed by the Physician's Committee for Responsible Medicine over nutritional claims about dairy products. The suit seeks damages over industry claims that consumption of dairy products can help with weight loss.

Kraft has moved to divest itself of various products that it no longer considers part of its core. In April, the company agreed to sell its Nabisco fruit snacks business to Kellogg Co. And in July, Kraft completed the sale of Altoids mints and Life Savers candy to Wm. Wrigley Jr. Co.

Notable recent packages for Kraft products include:

* A microwaveable version of DiGiorno pizza that is the first such product to rise and bake in the microwave. DiGiorno Rising Crust Pizza uses an elaborate system of susceptors that brown the crust via a combination of metallized tray surface and a metallized ring placed atop the pizza.

* A squared-oval polyethylene terephthalate jar for mayonnaise, with an opening in the lid for easy access. The wide jar makes for easy storage and handling.

* An enhanced nutrition panel on packages of snacks, such as Ritz Chips and Nabisco cookies, that contain two to four servings. The panel now includes nutritional information for the package as a whole, not just individual servings (the minimum regulatory standard).