Punch line: CEO Tony Vernon sets lofty goals for the new North American standalone business.
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Excerpted from adage.com’s, “Kraft’s New Grocery Company Plans Marketing Boost in Search of Renaissance.”
Tony Vernon, the CEO of Kraft Foods’ new standalone North American grocery business set lofty goals for the company, pledging to pour more advertising behind top “power” brands while slashing overhead to create a more nimble corporate culture.
Vernon said his goals are “nothing short of creating a renaissance in North American food and beverage.” He added:
“We will create a new Kraft, one with the spirit of a startup and the soul of a powerhouse.”
Mr. Vernon gave the most detailed look yet at his strategy for the $19 billion company.
In a plan put in place last year, these grocery brands are being split from Kraft’s global snacking and candy products such as Trident and Oreo, which will become part of a company called Mondelez International.
Kraft is betting that the split will bring more focus to brands while creating two distinct investment choices for Wall Street.
Mondelez is positioned as a high-growth company with penetration in developing markets, such as Brazil and India, while Kraft Foods Group is full of category-dominant meat and cheese brands, which act as cash cows that will generate consistent dividends for investors.
The trick for Kraft Foods Group will be to differentiate its grocery brands in categories that risk becoming commoditized.
Vernon suggested that Kraft would spend more with marketing to catch up to peers.
Kraft Foods Group brand spent 2.9% of its net revenue on advertising in the latest fiscal year, compared to the 4.5% average spent by competitors, including 8.6% by Kellogg Co., 6.4% by Campbell Soup. Co. and 5.5% by General Mills.
As it puts more money in marketing, Kraft Foods Group will continue the strategy already underway in which top power brands, will get the lion’s share.
Those brands include Lunchables, Planters, Velveeta Shells & Cheese, Capri Sun, Jell-O, Philadelphia, Kraft Macaroni & Cheese, Kool-Aid, Miracle Whip, MiO and Gevalia.
Key non-power brands, such as A1, Athenos and Cool Whip, will be supported with more “entrepreneurial” methods,
Mr. Vernon said, including with digital advertising such as YouTube videos. Among the ads Mr. Vernon showed off to analysts is this YouTube spot for Cool Whip, featuring characters from TV show “Family Guy.”
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