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Biscuits, chocolate and developing markets drive growth for Kraft in Q1

By Oliver Nieburg , 04-May-2012
Last updated on 04-May-2012 at 13:08 GMT

Kraft Foods is off to a solid start to 2012 in its first quarter (Q1) results driven by sales growth in global biscuits and chocolate and strong performance in emerging markets.

The company also delivered encouraging results in Europe, but its gum and candy segment grew below expectations ahead of the firm’s split into a North American grocery firm and global snacks business (Mondelez).

Results roundup

Overall sales were up 4.1% on the same period last year to $13.1bn, while profits grew around 7% to $1.7bn.

The company oversaw its strongest sales gains in developing markets with a 8.5% increase driven by biscuit growth in China and chocolate sales in Latin America.

Europe also performed strongly with a 4.5% sales gain, benefiting from chocolate growth and the Easter season.

North American sales were slower than the rest,up just 1% mainly due to product pruning in the region.

Biscuits grow 8%

Kraft’s global biscuits were advanced 8% with developing markets growing in the high teens. China led the way, skyrocketing 40% last year with Oreo sales up 60%

Other biscuits brands, such as Tuc and Club Social excelled in developing markets; while the company’s new Choco-Bakery business also helped Kraft grow in this category.

Chocolate up 10%

Big gains in Latin American countries helped Kraft’s global chocolate to increase 10%.

The category was aided by the Easter season and 38% sales growth in Brazil. European chocolate sales were also high, with power brands and new launches such as Crispello and Cadbury Bubbly aerated chocolate performing well.

The company’s small bites platform and increased marketing behind Cadbury Dairy Milk and Milka also drove growth.

Gum lags

“Our sole disappointment remains gum and candy,” said Kraft CEO Irene Rosenfeld.

“Frankly it has taken us longer to change gum’s trajectory than we had anticipated, largely due to sluggishness of the macroenvironment. “

She said that Southern Europe had hindered growth in the category and expected the situation to continue until the European economic environment recovers.

However, the company remains committed to the category and plans to launch a new gum later this year, details of which have yet to be announced.

Outlook

The company expects to achieve full-year sales growth of 5% and profit growth of around 9%.

Last month, the rating agency Standard and Poor’s (S&P) said that it expected Kraft to achieve mid-single digit sales growth in the coming year by capitalising on emerging markets.

However, it warned that risks remained ahead of Kraft’s split mainly due to its  exposure to volatile commodity costs.

Kraft plans to split its operations before the end of the year.

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