Kraft’s Third-Quarter Profit Rises

REUTERS
November 7, 2012

(Reuters) – Kraft Foods Group Inc stood by its full-year outlook on Wednesday as it works to better tailor its product portfolio to a weak economy in North America, the only region the newly independent company now operates in.

Kraft was spun off last month from the maker of Cadbury chocolates and Oreo cookies, which goes by the name of Mondelez International. Unlike Mondelez, which gets some 45 percent of its sales from developing markets, Kraft is focused on slower-growing North America.

U.S. consumers face stubbornly high unemployment and slow economic growth. In the weakened economy, Kraft said it must drive sales volume with more advertising and a greater range of products and prices, in what it calls a “good, better, best” strategy.

“You have to be able to offer price points and innovation in all segments,” said Kraft Chief Executive Tony Vernon on a conference call. He said specific areas needing improvement were Maxwell House coffee, Planters nuts and Jell-O.

“The economic environment has not improved and that creates a burning platform for Kraft, our customers and our industry,” Vernon said.

Kraft shares were down 22 cents, or 0.5 percent, at $44.48 in late morning trade. The broader market, as measured by the S&P 500 index, was down more than 2 percent, a day after the re-election of President Barack Obama. Comments by European Central Bank President Mario Draghi weighed on sentiment.

Kraft said net income rose to $470 million, or 79 cents per share, from $417 million, or 70 cents per share, a year earlier.

Revenue increased 3 percent to $4.61 billion. Most of the increase came from volume gains and selling a more expensive mix of products, with a smaller contribution from price increases.

The company affirmed its 2013 outlook, calling for earnings of $2.60 per share and revenue growth in line with the rest of the North American food and beverage market.
Kraft said revenue in the current fourth quarter would be flat to down due to a comparison with the year-earlier period when retailers increased orders in advance of a price increase.

In addition, Kraft will lose sales from some products that it pruned from its portfolio.

(Reporting by Martinne Geller in New York; Editing by Jeffrey Benkoe and Grant McCool)