Kraft Foods Analysis

Nik Jain

Nxj111330@utdallas.edu

Strategic Management

06/19/2013

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 Introduction

Kraft Foods Group Inc. is a manufacturing and operating food chain vendor based in The

United Sates. Kraft Foods Group Inc.’s main center of operations is located in Northfield,

Illinois. This public company was founded in 1903 by J.L. Kraft. It all began when J.L. Kraft

started a wholesale cheese business in Chicago. In the published article “The History of Kraft

Foods Inc.,” it states “In 1914, J.L. Kraft and his brothers purchased their first cheese factory in

Stockton, Illinois. In 1915, they began producing processed cheese in 3-1/2 and 7-3/4 ounce tins.

J.L. Kraft’s method of producing processed cheese was so revolutionary, in 1916 he obtained a

patent for it and in 1917 the company started supplying cheese in tins to the U.S. Government for

the armed forces in World War I. He used innovative advertising to promote his products and

was a pioneer in the sponsorship of television and radio shows” (“Kraft”, Page 1). Kraft Foods

continued to function as an unconstrained subsidiary of the National Dairy Products Corporation

for a profuse amount of years. In the course of time, Kraft Foods was consumed into the

operating form of the parent company. Ultimately, Kraft Foods changed its name to Kraftco

Corporation in 1969 and again to Kraft, Inc. in 1976. Kraft Corporation today is the outcome of

significant alliances with in the food products industry. This alliance joined some of the key food

product companies of the 19th and 20th centuries.

Threat of New Entrants

With Kraft Foods Group, Inc. being such a diverse brand there are few obstacles in the

way for this mega-company to obtain competitive advantage. Any barriers to entry protect Kraft

Foods Group, Inc., because it is already an affluent corporation. In general, the threat of new

entrants in the food industry is low. Kraft Foods Group Inc. has a market share that completely

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dominates any other competitors. When the stock market fell in 2008 and 2009, Kraft Foods

Group Inc. never dropped below 5%. There is one possible threat that could slightly affect the

food industry, including Kraft Foods Group, Inc. This threat is online grocery shopping. The

growing amount consumers place on accessibility and availability has actualized a strong online

grocery industry. Online grocery shopping is approximated to grow by 9.5% annually. It is on

the path to become a $9.4 billion dollar industry by 2017. Online grocery shopping will change

consumers buying habits; by making their essential demand for food products “value” in terms of

both price and perceived quality. Major food chains such as Kraft Foods Group, Inc. dominate

grocery stores all over the world. This does not mean that they would dominate online grocery

shopping. Online grocery shopping could negatively affect the revenue of all major food chains

including Kraft Foods Group, Inc.

Bargaining Power of Buyers

Kraft Foods Group Inc. has become one of the largest globally known food brands ever.

However, there is still a medium/high bargaining power of consumers. The consumers of Kraft

Foods Group, Inc. are all around the world. This makes the consumers of Kraft Foods Group,

Inc., very diverse in their likes and needs. Obesity, diabetes, or other health concerns

subsequently mean that those customers are in demand of healthier alternatives for food.

Individuals with poor economic conditions will look for cheaper alternatives. The Baby boomers,

the millennia’s, and the technologically educated consumers can use apps on their smart phones

to find similar products that Kraft Foods Group, Inc. retails at cheaper prices.

Bargaining Power of Suppliers

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 Kraft Foods Group, Inc. is devoted to having an increasingly diverse supplier core. This

diversity demonstrates the composition of their consumers. The services and products of the

suppliers of Kraft Foods, Inc. are as diverse as their consumers. Kraft Foods Group, Inc. has a

“supplier portfolio management process” that influences to help reinforce Kraft's imperative

business goals. To assist with the growth of suppliers business with Kraft Food Group, Inc., they

have constructed "structured ideation" to contest supplier capacity with current business

essentials and priorities. Brakebush is one supplier that supplies Kraft Food Group, Inc. with

ready-to-eat meat/poultry. Another supplier large supplier to Kraft Foods Group, Inc. is the Gulf

Trading and Refrigerating Co. The bargaining power of suppliers of Kraft Foods Group, Inc. is

medium/high. This is because of the U.S. drought in 2011-2012. This drought caused substantial

loss of animals and crops. This calamity caused less supply for suppliers which resulted in much

higher price demands.

Threat of Substitutes

There is always a threat of substitute products with any given business. As for Kraft

Foods Group Inc. that applies to them as well. However, Kraft Foods Group is a brand loyal

corporation by many consumers across the globe. Therefore, threats of substitute products do not

have a significant implication towards their total revenue. Overall, the availability of substitutes

is low. Eating out at restaurants is one substitute over Kraft Foods Group, Inc. Another substitute

would be if consumer grew their own fruits and vegetables. Lastly, another substitute would be

buying unprocessed foods and not the processed foods that Kraft Foods Group, Inc. sells.

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 Intensity of Rivalry of Competitors in the Industry

The food chain market is very large. There are a handful of manufactures that are strong

competitors to Kraft Foods Group, Inc. The degree of rivalry among competitors is very high.

Some competitors of Kraft Foods Group, Inc. includes; Kellogg, General Mills, Hershey, Nestle,

and PepsiCo. Kraft Foods Group, Inc. has become one of the most successful and brand loyal

manufactures in the world. This has made it one of the top competitors in the food chain

industry. Kraft Foods Group, Inc. has continued to advance and alter to meet the always

changing needs of their consumer. The deep-rooted history of Kraft Foods Group, Inc.’s popular

brands has promoted its advancements in the food industry. The company is continually

inventing new products such as fat-free and low-fat products in an array of divisions, to better

suit the needs of their consumers.

External General Environment

The external general environment at Kraft Food Group, Inc. is political, economic, social,

technological, and environmental. There is a political environment within the company. Kraft

Food Groups, Inc. has been advocating candidates who acknowledge all the public policies that

affect the company’s revenue, employees, and brand. Kraft Food Groups, Inc. has even created a

political action committee named Kraftpac. Kraftpac is dedicated to backing any state political

parties, U.S. Federal, and candidates and committees they permit. There is an economic

environment within their company. Kraft Food Group, Inc. is forever investing in their brands to

ensure that they give substantial products to all of their consumers. Kraft Food Group, Inc.

distributes large earning to its shareholders. Kraft Food Groups, Inc. is constantly engaged in its

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Corporate Social Responsibility. Kraft Foods Group, Inc. has delegated its self to stress the

importance of policies, products, and partnerships that achieve paramount revolution of the

health of their consumers and the viability of their products. An example of their social efforts is

that they decreased greenhouse gas emissions by 18 percent since 2005. Kraft Food Group, Inc.

successfully implements creative and innovative ideas every day. These innovative ideas and

actions keeps their consumer’s wants and needs in mind. Kraft Food Groups, Inc. has a focal led

team that focuses on systems, strategies, and the networks and metrics within the company.

Economically, Kraft Food Group, Inc. has set precedent in the global industry. They are steadfast

to decrease the residual consequences of their activity on the environment. The ultimately want

to decrease their “carbon footprint.” One way they have successfully reduced their footprint is by

establishing packaging with fewer materials. These packages in return, reduce the negative

collision on landfills and the environment.

Financial Graphs

Industry: Food Consumer Products

500 Revenues
RankCompany rank ($ millions)
1 PepsiCo 41 66,504.0
2 Kraft Foods 50 54,365.0
3 General Mills 181 14,880.2
4 Kellogg 205 13,198.0
5 Dean Foods 207 13,055.5
6 Land O'Lakes 210 12,849.3
7 ConAgra Foods 215 12,395.5
8 Sara Lee 220 12,103.0
9 H.J. Heinz 244 10,706.6

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10 Hormel Foods 327 7,895.1
11 Campbell Soup 334 7,719.0
12 Dole Food 349 7,223.8
13 Hershey 404 6,080.8
14 J.M. Smucker 495 4,825.7

Kraft Food Group, Inc.’s Quarterly Earnings

Kraft Food Group, Inc.’s. Annual Earnings

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Value Chain at Kraft Food Group, Inc.

Financial/ Value Chain Analysis

Kraft Food Group, Inc. has been profitable for the last eight quarters. It ranks 2nd in
overall revenue for food products. Revenue is projected to increase by 7.4%. For the year,
revenue is projected to be $54.33 billion. Since this last quarter, the stock price at Kraft Food
Group, Inc. has increased to $38.39 from $34.50.

The Value Chain at Kraft Food Group, Inc. is simple. First is the design of the product,
then the procurement of raw materials, then the conversion of the production process, the
distribution of the product, and then goes to the customer who ultimately consumes the product.
Kraft Food Group, Inc. is always developing and procuring new ways to keep their consumers
happy and in return their Value Chain smooth.

Conclusion

Kraft Food Group, Inc. has become one of the most successful and dominant players in
the food industry. They always aim to please their consumers. This in return has made them a
leading brand loyal corporation. With their innovative products and ideas, there is no doubt that
this successful corporation will stay that way.

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 References

"The History of Kraft Foods, Inc." Http://web.mit.edu/allanmc/www/kraftfoods.pdf. N.p., n.d.

Web. 12 June 2013.

"Kraft Foods Inc.: Income Statment." Stock Analysis on Net. N.p., n.d. Web. 11 July 2013.