Kraft Foods has just outlined its new global development strategy and expects to deliver organic revenue growth of 5% or more, margins in the mid- to high-teens and earnings per share (EPS) growth of 9% to 11%. Following its $18.4b acquisition of Cadbury earlier this year, Kraft Foods became the undisputed world leader in snacks, a high-growth, high-margin category that now accounts for more than half of the group’s total revenue.

The enlarged Kraft Foods has an exceptional portfolio of global snacks power brands – led by Milka and Cadbury chocolates, Oreo and LU biscuits and Trident gum – with leading market shares in every major region, a full pipeline of innovation and a clear opportunity to grow its presence in what Kraft describes as the point-of-purchase ‘hot zone’.

Complementing the US-based food giant’s snacks portfolio are well-loved iconic regional and local brands in the beverage, grocery, cheese and convenient meals categories. Roughly 80% of these ‘heritage’ brands hold number one or number two positions in their respective categories and are household names among consumers who tend to be extremely brand-loyal. They also carry high margins and generate strong cash flow.

Irene Rosenfeld, chairman and chief executive of Kraft Foods.

“Today’s Kraft Foods is a global snacks powerhouse with an unrivaled portfolio of leading regional and local brands,” points out Irene Rosenfeld, chairman and chief executive of Kraft Foods. “This unique and complementary combination, together with our significant presence in high-growth developing markets, will deliver consistent growth in the top tier of our peer group.”

The combination of Kraft Foods and Cadbury provides the scale necessary to grow sales and distribution in new and existing markets, delivering a projected $1b in incremental revenue synergies. Kraft also expects to realise $750m of cost savings from integrating Cadbury by 2013.

More than half of Kraft Foods’ revenue now comes from markets outside of North America, such as Brazil, China, India and Mexico, where GDP and demand growth are strongest. Accordingly, by 2013, the proportion of business in developing markets will increase from a quarter of total revenue to roughly one-third.

Additional savings over the next three years from procurement, manufacturing and logistics will drive productivity gains in excess of 4% of cost of goods sold, according to Kraft Foods. These productivity gains, combined with flat overhead growth and pricing to offset input costs, will contribute to the expansion of gross margin.

“At Kraft Foods, we’re hitting our sweet spot,” she adds. “We’ve built a solid foundation for growth. By leveraging our scale, making strategic investments in marketing, sales and innovation and establishing a world-class cost structure, we will take our performance to the next level.”

2009 was not a good year for multinational spirits companies. Euromonitor International’s ‘2010 Millionaires’ ranking saw total volumes of international brands on the list fall by 5% while domestic/local brands saw growth of 6%, selling over 400 million 9-litre cases. The Millionaires supplement is a ranking of spirits with sales of over one million 9-litre cases across all retail channels. Now in its third year, the 2010 list includes a record breaking 162 brands.

The 2010 listing continues to gain new breadth and depth with 17 new brand entries, including brands from Colombia, Turkey and most notably the soju producers of South Korea. It also shows the strength and power of spirits consumption in Asia-Pacific as domestic/local brands on the list, which are almost entirely sold in the region, accounted for over 40% of total brand volumes.

Suffering International Brands

As predicted in last year’s supplement, international brands performed poorly in 2009. Due to the effects of the recession, consumers’ trading down and the decline of on-trade consumption, total volume sales of international brands on the list has fallen. Pernod Ricard remains the company with the most brands on the Millionaires list despite losing two from the 2009 list – Presidente brandy and, more surprisingly, Luksusowa vodka.

However, two of its stand-out brands were Indian whiskies which continued to benefit from a rapidly growing category and a booming Indian economy. Second-placed United Spirits increased the number of brands on the list up two to 19 with its Bagpiper Indian whisky becoming the leading whisky brand in the world.

Diageo sits in an increasingly distant third place with 14 brands (down one) with only two of its rum brands benefiting from strong growth in its core markets (North America for Captain Morgan, Venezuela for Cacique) along with Bells in the UK. Bacardi continued to suffer from its over-reliance on a limited number of major markets, specifically in the US and Spain, with only two of its brands, Eristoff vodka and William Lawson blended scotch, recording growth.

A More Positive Future

While the picture painted in volume terms in 2009 was relatively bleak for international brands, 2010 is likely to be far more positive, due to the emerging markets of Latin America, Asia-Pacific and Eastern Europe. “Signs of economic recovery in the first half of 2010 will undoubtedly help international brands bounce back,” says Euromonitor International senior alcoholic drinks analyst, Jeremy Cunnington. “However, many core markets for these brands, especially in Western Europe, could still hold back growth as governments and consumers continue to restrict spending to reduce their high levels of debt.”