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Kraft highlights ‘robust development pipeline’ as bosses prepare to split firm in two

By Elaine Watson , 06-Jun-2012
Last updated on 06-Jun-2012 at 15:31 GMT

Jean Spence: Kraft delivered a higher rate of revenue from new products last year than at any time in recent memory'
Jean Spence: Kraft delivered a higher rate of revenue from new products last year than at any time in recent memory'

Kraft Foods delivered a “higher rate of revenue from new products last year than at any time in recent memory” revealed bosses as they reassured stakeholders that both businesses will have “world-class innovation organizations on day one” after it breaks into two.

Kraft - which like Sara Lee believes the sum of its parts is worth more than the whole - is preparing to split into two publicly traded companies (global snacks and North American grocery) before the year-end.

In an update on its R&D activities ahead of the split, executive vice president, research, development & quality, Jean Spence said new products generated 10.5% of net revenues in 2011, up from 7.4% in 2009.

Unique baking technology

The most significant innovations included its MiO liquid water enhancer, Philadelphia cooking crème and MilkBite milk & granola bars, which had created completely new grocery categories, she claimed.

However, Kraft had also pushed the boundaries with its belVita breakfast biscuits “using a unique baking technology to better deliver sustained energy from its ingredients” and its Oscar Mayer Selects meats that “use natural ingredients such as celery juice in place of artificial preservatives”, she said.

The R&D team has “a robust development pipeline that's already delivered more than 70 new products in the past year”, she added.

"Research and development is the fuel for our growth engine. We're blending sharp consumer insights with advanced technologies to develop dozens of innovative new products that people want. 

“This is the recipe that delivered a higher rate of revenue from new products last year than at any time in recent memory."

Oreo green tea, wholegrain biscuits, Lacta chocolate

Kraft, which recently launched a new open innovation website at kfcollaborationkitchen.com , employs more than 3,300 food scientists, chemists and engineers at 15 R&D centers in Asia, Europe and North and South America with an R&D expenditure of $700m+ in 2011. 

Kraft’s R&D center in Curitiba, Brazil now houses 100 staff - twice as many as when it opened in 2005 - and has been working closely with teams in Bournville, UK, to find more efficient ways to produce Lacta, the country’s most popular chocolate brand.

In China, Kraft’s Suzhou R&D center team has created more than 60 new products since it opened in spring 2009, including Oreo green tea and Pacific biscuits, the first 100% wholegrain biscuit of its kind in China.

In Mexico City, Kraft recently completed a $50m investment in an innovation center that will bring new technologies to the marketplace more efficiently, while in Singapore, staff recently developed Cadbury Dairy Milk Eclairs with liquid chocolate centers and Cadbury Rich Brownie, a premium chocolate for Indian consumers that sells for less than two rupees, said Spence.

Our ‘sole disappointment remains gum and candy’

Speaking on an earnings call last month to discuss Kraft’s first quarter results, chief executive Irene Rosenfeld said the firm had got off to a “terrific start”.

She added: “Our sharpened focus on power brands, successful new product innovation and advertising investments have all continued to pay off. This has enabled us to implement the necessary pricing and still deliver positive volume/mix gains and solid market shares.”

Global sales of biscuits were up 8% on a constant currency basis, and chocolate up 10%, she said. Overall North America sales were up 1.3%, reflecting higher prices, although volumes were down 2.8%.  European sales were up 4.5% and developing market sales were up 8.5%.

“Our sole disappointment remains gum & candy, which was up only 1%”, said Rosenfeld.

“Frankly, it's taken us longer to change gum's trajectory than we had anticipated, largely due to the sluggishness of the macro-environment.”

‘Exciting gum innovation’

However, bosses were planning an “exciting gum innovation in the second half, supported by a very creative marketing plan”, she revealed.

As for commodity prices, while coffee, cocoa, grains and some vegetable oil prices had come down; nuts, heating oil, diesel, transportation and packaging were up, she said.

 

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