Kraft Foods Announces Innovations in Health and Wellness, and Convenience; Reaffirms Guidance

NORTHFIELD, Ill., Feb 18, 2004 (BUSINESS WIRE) -- In a presentation to the financial community today, Kraft Foods Inc. (NYSE:KFT), a global leader in branded foods and beverages, reviewed its recently announced Sustainable Growth Plan; previewed a number of new products in the key consumer growth areas of health and wellness, and convenience; and reaffirmed the company's earnings guidance communicated in January.

Roger K. Deromedi, Kraft's Chief Executive Officer, along with Lance Friedmann, Senior Vice President, Global Health & Wellness, and Doug Burns, Senior Vice President, Global Beverages Sector, presented the information at the annual Consumer Analyst Group of New York (CAGNY) Conference, held in Scottsdale, AZ.

In his remarks, Deromedi provided a brief overview of Kraft's Sustainable Growth Plan and its four components: reinvesting in brand value, transforming the portfolio, expanding global scale, and driving out costs and assets. Today's presentation focused primarily on the company's plans to transform its portfolio, including initiatives to meet consumers' increasing needs for health and wellness, and convenience products.

"The growing importance of health and wellness has significantly altered consumption and buying behaviors," Deromedi said. "Low-carb diets, concerns about trans fat and obesity, and greater demand for organic and natural products are requiring a shift in what we market and how we market it."

Deromedi added, "The consumer need for convenience has always been a driving factor in the food industry. But as the pace of life quickens, consumer expectations continue to rise, whether it's for ease of preparation, greater portability or the convenience of single-serve packages."

Health and Wellness Strategies and Opportunities

"One of Kraft's strengths is a portfolio that delivers against a broad range of consumer choices," said Lance Friedmann. "And, we will continue to use consumer insights as the primary drivers to develop more products and programs to address the growing interest in health and wellness."

As part of its health and wellness strategies, Kraft is focusing on four key opportunity areas that meet consumer needs: Weight Management, Nutrient Delivery, Performance Nutrition, and Natural and Organic. In the first half of the year, the company is introducing a number of products in each of those areas. Examples include:

-- Nabisco 100-calorie packs, a four-item line featuring the
Wheat Thins, Chips Ahoy!, Cheese Nips and Oreo brands. These
portion-control, single-serve products are thin, crisp snacks
that are formulated to have three grams or less of fat, zero
grams of trans fat and no cholesterol.

-- Triscuit crackers with zero grams trans fat, the first in a
series of biscuit products that will be reformulated to have
zero grams or reduced levels of trans fat.

-- Kraft CarbWell salad dressings and barbecue sauce, the first
items in a new line of products for consumers interested in
limiting their carbohydrate intake.

-- Kool-Aid Jammers 10, made with real fruit juice, containing
100% of the daily value of vitamin C and only 10 calories per

-- Creme Savers Smoothies, a dairy beverage that combines unique
flavor and calcium fortification technologies, is 98% fat free
and has 25% of the daily value of calcium.

-- Capri Sun Fruit Waves, 100% fruit juice drinks.

-- Balance GoMix, a mix of snacking ingredients with 11 essential
vitamins and minerals with twice the protein and one-third
less fat than leading trail mixes.

-- Back to Nature expansion into new categories in the natural
and organic channels. Beyond the current offerings in cereal
and granola, the company will add cookies, crackers, macaroni
and cheese, and organic cheeses.

Coffee Convenience Growth Opportunities

Following Friedmann, Doug Burns discussed consumers' need for convenience, specifically in the context of Kraft's large global coffee business. "By combining quality coffee brands with new levels of convenience in markets around the world, we've developed a strong, $4 billion coffee business with outstanding growth prospects," Burns said.

In addition to a number of recent flavor and packaging innovations in Kraft's coffee business, Burns announced a new, breakthrough on-demand, roast coffee system for use in the home that is unmatched in its combination of consumer choice, convenience and quality.

Later this year in France, the company will launch Tassimo, a proprietary hot beverage system that offers consumers a broad range of coffeehouse-quality beverages, including filter coffee, cafe crema, espresso, cappuccino, hot chocolate and tea, all at the touch of a button. Tassimo will leverage strong local brands, and in the lead market in France, the brands will be Carte Noire coffees, Suchard hot chocolate and Twinings tea.

Several elements of the Tassimo system make it unique. The combination of a product-specific Tassimo disc (T-Disc) and an integrated bar code reader in the Tassimo machine ensures that each drink is produced using the optimal water temperature and brewing conditions. Tassimo also uses a liquid milk disc that transforms a base espresso into a frothy cappuccino without the use of a steam wand. Finally, the T-Disc is engineered to accommodate the different drink sizes consumers demand around the world.

Kraft has numerous patents pending on this innovative system and developed the system together with experts in the field of small domestic appliances and coffee machines. The Tassimo machines will be manufactured by Saeco, the leading global manufacturer of espresso machines, and sold, distributed, serviced and promoted in close collaboration with Braun, a division of The Gillette Company and a worldwide leader in innovative, high-quality domestic appliances.


During the presentation, Deromedi reaffirmed the company's 2004 full-year and first-quarter guidance and long-term outlook. Kraft's 2004 worldwide revenues are expected to grow around 3% on volume growth of 2%-3%. Fully diluted earnings per share are projected at $1.63-$1.70 in 2004, including about $0.30 per share for the charges associated with the company's recently announced restructuring program. The company is projecting discretionary cash flow (net cash provided by operating activities less capital expenditures) of $2.8 billion for the year.

Deromedi also reaffirmed the company's long-term outlook of constant currency revenue growth - including tack-on acquisitions and excluding divestitures - in the 3% range, volume growth of 2%-3%, and EPS growth of 6%-9% per year.

Kraft Foods markets many of the world's leading food brands, including Kraft cheeses, Maxwell House and Jacobs coffees, Nabisco cookies and crackers, Oscar Mayer meats, Philadelphia cream cheese, Post cereals and Milka chocolates, in more than 150 countries.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements.

The Company is subject to unfavorable currency movements, intense competition, changes in consumer preferences and demand for its products, including consumer concerns regarding genetically modified organisms and the health implications of obesity and trans fatty acids, changing prices for raw materials, fluctuations in levels of customer inventories and the effects of foreign economies and local economic and market conditions. 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 results are dependent upon its continued ability to promote brand equity successfully; to anticipate and respond to new consumer trends; to develop new products and markets and to broaden brand portfolios; to compete effectively with lower-priced products in a consolidating environment at the retail and manufacturing levels; to improve productivity; to realize the cost savings and improved asset utilization contemplated by its restructuring program; to consummate and successfully integrate acquisitions; and other risks detailed from time to time in the Company's publicly filed documents. The Company's results are also dependent upon its access to credit markets, its borrowing costs and its credit ratings, which may in turn be influenced by the credit ratings of Altria Group, Inc. The Company cautions that the foregoing list of important factors is not exclusive, any forward-looking statement included in this press release is made as of the date of this press release, and the Company does not undertake to update any forward-looking statement.

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