kaft foods final
TRANSCRIPT
Kraft Foods
Wu-Tang ClanStrategic Analysis
Jessica BargmanCaitlin CaseyShane Fitzgerald
Bryanna GeisbushPat Jewell
Jerry Wroten
Organizational Chart
Market in almost 160 countriesOwns 70+ brands that earn $100 million annuallyCore Business:
Beverage, cheese & dairy, snack foods, confectionary, convenience foods & cereal.
Marketed in more than 26 Countries
MexicoBrazilFranceIrelandRussiaUkraineArgentinaBrazilColombiaDominican RepublicEcuadorParaguayPeru
UruguayVenezuela BelgiumCanadaGermanyItalyMiddle EastNetherlandsUnited KingdomUnited StatesDenmarkFinlandSweden
Weaknesses(W)
Opportunities(O)
Threats(T)
1. Hard to grow-slow2. Poor monopolistic image3. Reaction time is very slow4. Current and slope with
revenuea. Low stock prices last
few quarters5. Cadbury’s poor financial
situation6. Cadbury States that Kraft
has internal management weaknesses
1. Expand more internationally
2. New food categoriesa. Organic/Health
3. Acquiring competitors4. Online marketing5. Vertical integration
1. Competitors 2. DEAN-more dairy3. GM-food conglomerate4. Health Trends-non
organic company5. Economy6. US $ vs. other
currencies
Strengths(S)
Strengths to Weaknesses Strategies (S/W)
Strengths to Opportunities Strategies (S/O)
Strengths to Threats Strategies (S/T)
1. Diverse Product Portfolio
2. Acquisitions of other companies
3. Brand Power4. International
Influence5. Marketing Power6. Social Responsibility7. Financial Freedom8. Diverse Market
Segments
1. Brand Power vs. Hard to Grow
2. International Influence vs. Bad image with Cadbury
3. Social responsibility
1. Using marketing and brand power to acquire competitors for company success
2. Using brand power and diverse market segments to develop new E-Marketing for a competitive advantage
1. Wide variety of product helps with new healthy trends
2. Competitors (Dean& GM)
a. Merger with companies
b. Brand power c. Social
responsibility 3. International influence
w/ US currency
Kraft TOWS Analysis
Strategic Actions
StrengthDiverse Product Portfolio, awareness of social responsibility, room for financial spending and Brand Power.Success in past merged companies and room for financial spending.Marketing Power, room for financial spending, international relations and brand recognition.
StrategyPurchase a farm in order to expand vertically and create a more sustainable companyBuying out Folgers coffee companyIncrease and improve current E-Marketing
Financial Information
Kraft is in the process of acquiring Cadbury
$19 billion deal
Information based off of 2008/2009 yearly financial statementsAll the strategic actions are based off this information
Kraft Foods Inc.Income Statement Sales
$42,201,000 Net Profit After Taxes Net Profit Margin Cost of Goods Sold $1,817,000 4.31%
$28,186,000 Return on Total Assets Operating Expenses 2.88%
$10,198,000 Interest Expense Total Asset Turn Over
$1,272,000 0.67 Return on EquityTaxes 8.18%
$728,000 Balance Sheet Current Assets
$11,366,000 Net Fixed Assets Total Assets
$51,712,000 $63,078,000
Current Liabilities Financial Leverage Multiplier $11,044,000 Total Liabilities 2.84
Long Term Debt $18,589,000 $29,633,000
Total Stockholder Equity $22,200,000 *$ numbers in 1000's*
DuPont
Kraft Foods Inc.
Net Profit Margin
4.31%
Return on Total Assets
2.88%
Total Asset Turn Over
0.67 Return on Equity
8.18%
Financial Leverage Multiplier
2.84
DuPont General Mills Inc.Net Profit Margin
8.25%
Return on Total Assets
6.78%
Total Asset Turn Over
0.82 Return on Equity
23.43%
Financial Leverage Multiplier
3.45
Dean Foods Co.Net Profit Margin
1.49% Return on Total Assets 2.64% Total Asset Turn Over
1.77 Return on Equity 33.28% Financial Leverage Multiplier 12.61
General Mills has high Return on Total AssetsDean Foods has high Financial Leverage MultiplierKraft is a lot higher is sales than both companies
Pro Forma AnalysisKraft Pro Forma Analysis
DATA 2008 Next YearSales $ 42,201,000 $ 40,511,183 Net profit 1,817,000 1,744,243 Balance sheet % of sales Assets: Current assets 11,366,000 27% 10,910,881 Net fixed assets Equipment 9,917,000 9,917,000 Goodwill 27,581,000 65% 26,476,599 Intangible Assets 12,926,000 31% 12,408,416 Other Assets 1,288,000 3% 1,236,426 Total Assets 63,078,000 60,949,321 Liabilities:
Total Current Liabilities 11,044,000 26% 10,601,775
Total Long Term Liabilities 29,834,000 29,834,000 Total liabilities 40,878,000 40,435,775 Owner's Equity: Treasury Stock (8,714,000) (8,714,000) Capital Surplus 23,563,000 23,563,000 Retained Earnings 13,345,000 4% 15,089,243
Other Stockholder Equity (5,994,000) (5,994,000)Total Owner's Equity 22,200,000 23,944,243 Total L & OE 63,078,000 64,380,018 Financing Needs = (3,430,697)
*numbers in 1000's
Sustainability Perceptions Perceived Actual
Brand Perceived Actual8 Stonyfield Farm 44 81
12 Unilever 32 795 The Coca-Cola Co. 64 66
11 Group Danone 33 644 Nestle 71 637 PepsiCo 55 623 Kraft Foods 79 589 Anheuser-Busch InBev 37 541 General Mills 82 49
13 Molson Coors Brewing 24 4414 SABMiller 14 44
2 Kellogg 81 426 Sara Lee 59 33
10 ConAgra Foods 36 31
Brand Perceived Actual1 General Mills 82 492 Kellogg 81 423 Kraft Foods 79 584 Nestle 71 635 The Coca-Cola Co. 64 666 Sara Lee 59 337 PepsiCo 55 628 Stonyfield Farm 44 819 Anheuser-Busch InBev 37 54
10 ConAgra Foods 36 3111 Group Danone 33 6412 Unilever 32 7913 Molson Coors Brewing 24 4414 SABMiller 14 44
Strategy 1: Vertical Integration Strength: Diverse Product Portfolio, awareness of social responsibility, room for financial spending and Brand Power. Opportunity: Sustainable agriculture, real-estate Spending plan: approximately $5 Billion Purchase dairy farms in United States
Preferably in Wisconsin, but any available farms to be purchased Idaho, California
Purchasing Dairies 2007 Kraft purchased $3.5 Billion
worth of raw milk Purchase of dairies would allow Kraft
to control entire product supply from creation to distribution
Organic/Natural, control of milk quality
Milk market is very fluctuating Dairy farm prices change with milk
price
USDA Averages Average Farm Size 418 acres Average Farm Price approx $2050 Approx Farm cost: $856,900 Will be more miscellaneous expense depending
on barns, parlors, equipment 2008 Wisconsin Cattle production cow/per year
19,546lbs 1.25 Million Cows
Threats
Availability of dairy farmsStaff
Requires high amount of experience
Fluctuating Market
Return
Money spent on one year of raw milk could purchase enough farms and cattle to supply their demand.Min. 1000+ Cow FarmProvide alternative power sources
Methane
Dairies would be self-sustaining
Strategy 2: Acquisition of Folgers
Strength: brand power and marketing power Threat: outside competitors Kraft currently owns 8 coffee brands
Ex. Maxwell House
U.S. main competitor Folgers is currently owned by Smuckers
Folgers Background
Similar brand qualities as Maxwell HousePurchased by Smuckers in 2008 for $2.65 billionCurrent success with SmuckersOur bid would have to more then the worth
Location of Coffee Sales
Home brewed coffee sales increasingRecession creates potential sales numbers
70%
18%
4%
7% 1%
Sales
HomeWorkEating PlaceTravelingOther
Competitive U.S. Companies
Folgers leading the wayPotential for market majority Trend of sales
Ex. Pepsi and Coke30%
19%11
%9%
8%
7%
6% 6
%4%
Sales
Folgers Maxwell House
Eight O' Clock Coffee
Gevalia
Kona Chock Full O' Nuts
Green Mountain
Jamaican Bule Mountain
Other
Can we afford it?
$3.4 billion spending planWould Smuckers sell?
Overpayment possibility
Possible failureKraft past acquisition success
Ex. Nabisco: oreo
Strengths: Brand Power and diverse market segments Opportunities: Newer online marketing available, and new competitive advantages being developed
Pull MarketingInitiative rests with the online shoppers who request informationEx: advertising and e-coupons
Push Marketing Promotes product/service information to online shoppers or web browsers that do not ask for information
Strategy 3: Increase E-Marketing
Online Coupons Create manufacturer coupons directly posted on Kraft website all the time
Kraftfoods.com alone achieves 1.3 M unique visitors per month
Online searches for coupons and offers have increased by 58% over the past yearProperly executed e-mail campaigns can be an effective way of disbursing coupons to the right people
Creating an account, joining a mailing list, etc
Online Commercials Companies sell commercial space for ads to accompany the airing of a TV show or Movie With online commercials typically there are only 1-2 commercials so viewers don’t feel the need to click away It is easy to target markets specifically by the genres of the online videos
Social Media Sites
• Time spent online by people ages 18-25– ~30% entertainment– ~30% Social Media
• Create ads/banners on social media sites
• Develop promotional contests directed towards our demographic (18-25)
Recap
Main strengths focusOur strategies
Vertical ExpansionAcquisition of FolgersIncrease E-Marketing
EFNFinancial situation in correlation with strategies
Qualitative Data
Compare and contrastFeasibility of eachPost potential negative analysis resultsRating
Increase E-MarketingVertical IntegrationAcquisition of Folgers
Strategic Actions
StrengthDiverse Product Portfolio, awareness of social responsibility, room for financial spending and Brand Power.Success in past merged companies and room for financial spending.Marketing Power, room for financial spending, international relations and brand recognition.
StrategyPurchase a farm in order to expand vertically and create a more sustainable companyBuying out Folgers coffee companyIncrease and improve current E-Marketing
Questions?