How Kraft Changed the Oreo and Its Global Marketing Strategy for Success in China
Gale Business Insights: Global Case Study Collection
Learning Objectives
After analyzing this case study, students should be able to do the following:
Explain at least three benefits of market research in product development for international and emerging markets
Identify traditional and nontraditional strategies for increasing revenue through entering new global markets
Appreciate the effect of cultural norms and tastes for firms expanding to new markets
Discuss how firms can focus products to local tastes while increasing brand value globally
Introduction
One of the more popular strategies for firms to increase profits in the 21st century
…show more content…
Sales had been flat for the first five years of the 2000s and were in decline. "In 2007, Kraft Foods China was an unprofitable, $100 million business that was not growing," noted Sanjay Khosla, Kraft Foods’ president of developing markets, in an interview published by the Boston Consulting Group. Kraft was even thinking of pulling the product out of the Chinese market completely, due to poor sales.
The company as a whole was performing poorly. This led to a shake-up of executive management in 2006, with Irene B. Rosenfeld installed as chief executive officer (CEO). Rosenfeld had previously worked at Kraft for 22 years before leaving in 2003 to head Frito-Lay North America. In early 2007, Rosenfeld outlined a strategy to turn the company around that included product quality, research and development (R&D), and acquisitions as critical to the future growth of the company. Rosenfeld hired cutting-edge business leaders such as Khosla to help create the strategy that would change the way Kraft Foods Inc. does business.
Fewer, but Larger Bets: Growth Through Focus and the 5-10-10 Strategy at Kraft Foods
When Sanjay Khosla left Fonterra Group in 2007 to spearhead Kraft Foods’ business in developing countries, he was tasked with discovering a way to realize the potential for growth in developing markets that had eluded Kraft and so many other large, successful
Kraft Heinz Company is currently the fifth largest food and beverage company in the world and the third largest in North America. It operates globally in producing high quality foods and beverages for consumers in more than 200 countries (Kraft Heinz Company, 2017). With its co-headquarter in Pittsburgh and Chicago, USA, the company has divided 4 big regions under the global team, which are AMEA (Asia, Middle East, Australia and New Zealand), NA (North America), LATAM (Latin America), and Europe. As it operates in the packing food industry, the company has a characteristic of having low profit margin with high volume.
Kraft Foods Group produces annual revenues of about $18 billion or more. CEO, John T. Cahillore ensures that “with the spirit of a startup and the soul of a powerhouse, we are on a mission to be the best food and beverage company in North America.” Kraft exists around that statement and every decision made for the business should reflect being a powerhouse in food and beverages. So far, this company’s strategies have made that statement true.
This research should lead the company to its target markets and the product to present to that market. With a deadline of three years to double sales, the idea of developing new markets within that time frame and making them profitable seems unlikely, especially in a foreign country. There are so many factors which would have the potential to disrupt this time line it does not seem like a viable solution for this company objective, however it could certainly have long term benefits for the company at another time. While the
Kraft Foods has several strategies for long-term success: building superior brand value, transforming their portfolio, expanding the global scale of the business, and driving out cost and assets. More product benefits means innovative packaging, consistent high quality, wide availability, and strong brand images. This way they can shift their product portfolio accordingly. In terms of global expansion, Kraft Foods is developing business in many international markets while concentrating especially on the fastest growing developing market around the world.
M2: Explain the limitations of marketing research used to contribute to the development of a
The Kraft Foods company is an organization that through acquisitions has added a variety of companies with not only a mix of products, but also an amazing knowledge base. Kraft products are found and manufactured all over the world. As of 2009, the company had 9 brands that exceeded over $1 billion in revenue annually and more than 50 brands with over $100 million (Company Spotlight, 2009). Kraft North America is home to more than 303 distribution centers and there are 13 distribution centers around the world (Company Spotlight, 2009). In 2009 Kraft employed over 98,000 people, of those “2,400 are food scientists, chemists and engineers” (Company Spotlight, 2009, pg. 96).
In a market with such competitors as The Hershey Business, Kellogg as well as General Mills, it is believed that Kraft will certainly continue to gain from its cost conserving campaigns and also will continue to be a strong investment opportunity for shareholders. In a claim at the 2013 Citi Global Customer seminar, Irene Rosenfeld stated that Kraft lately "worked with as
Kraft Foods is an American food and beverage multinational company. It produces and markets many brands to more than 170 countries, and 12 of its brands earn more than $1 billion worldwide annually (“Kraft Foods”, 2011). Most of the food products which we consume everyday belongs to this company. For instance, some of well-known brands are Jacobs and Maxwell, Milka and Toblerone, Tang and Cipso. It is the successful and popular leading food companies of the world. So, Kraft Foods will be reviewed in terms of values and promises that it communicates with consumers and employees, communication and job satisfaction respectively.
Marketing research before entering into the global market is good decision for companies. However, some companies will overlook and flat out ignore this process which will lead to missed benefits of marketing research such helping the company communicate better, assist in identifying opportunities, minimizing risk and creating benchmarks to assist in the measure progress. Johansson states that “As in purely domestic marketing, to better understand the local customer requires marketing research” (Johansson, pg215). Not all marketing research is successful when trying to understand the local buyers. Companies encounter various difficulties when conducting market research on local buyers in the global market. For example focus groups are a great form of market research however the problem with focus groups in the foreign market as stated by Johansson “they can also constitute an unrepresentative sample because typical screening criteria are incorrect in the new environment or are not implemented correctly and moderators—and the research firms—are usually specialized in certain products and customers, and may be less than ideal for other consumer groups” (Johansson, pg 217). There is also explanatory marketing research. This is when the marketing research provides and attitude and preference of the buyer on a certain product. The goal of this research is to identify if the if price
these three founders were a huge part of the foundation of this business. Through this long history, Kraft has acquired “more than 70 major brands” (The History of, n.d., pg. 5). Kraft Foods Incorporated is now the “world’s second largest food company with annual revenues of $49.2 billion” (Kraft Foods, 2010, pg. 3). They are obviously a force to be reckoned with in the food industry, so how did they make such a big mistake, and how did it affect them in the long run?
Research truly is essential to the success of any marketing campaign or process and can greatly contribute to the success of a product, service or brand in the marketplace. Market research can help to determine risks and opportunities within the market, and can provide a greater depth of understanding of consumers and the target audience. Market research helps to define and solve research ‘problems’ and this is extremely beneficial to any business or organisation (Burns & Bush, 2003). By having consumer insight because of market research, marketers are able to promote a product to the true relevant target market, rather than wasting time and money promoting to the whole marketplace. There are two main methods of market research, being qualitative research and quantitative research. Both of these methods have benefits and can be used in conjunction, but for the best results one method of data collection is often used. Quantitative data focuses on a numerical approach to data collection via the use of statistics and information taken from surveys and census data. Qualitative data however focuses on gathering information and exploratory research through observations and interviews. The main approaches to collecting this type of data are experience or expert surveys, focus groups, and in-depth interviews (Diekroger, 2014).
Structure - Kraft operates a diversified product portfolio with five core divisions: snacks, beverages cheeses, groceries and convenience prepared meals. The company is global in operations and has nine brands that exceed $1 billion in revenue. Kraft has over 223 manufacturing and processing plants worldwide, and 236 distribution plants. Conservative values of property and plant equipment top $14 billion. Kraft has just under 130,000 employees globally. As of December 31, 2010, Kraft held total assets of $95 billion dollars worldwide, with $5 billion tied up in inventories. The company has $28 billion in debt, making their actual assets at about $71 billion. Most of Kraft's growth, in fact comes from the developing world and new, emerging markets. (Annual Report).
Kraft Foods Inc. (KFT) is the world’s largest food processing company with revenues of $40 billion (fiscal year 2009) which sells its products in more than 150 countries. We are familiar with many of its global brands – Oreo, Philadelphia Cream Cheese, Trident, Nabisco,
Kraft Foods INC. is a United States corporation founded in 1923. Prior to the acquisition of Cadbury, Kraft was the second largest food company in the world and had a presence in over 150 countries. A large proportion of Kraft’s worldwide revenues came from just 11, well-known, well-established brands – each brand drawing in over 1 billion US dollars in revenue each year. Most of these revenues came from developed markets in North America (USA and
To determine the best way in terms of getting the products onto the marketplace and made successful, the most effective marketing and marketing research need to be