KRAFT INCORPORATEDSome of America’s best known brand names in food products are produced by Kraft. These include Kraft, Velveeta, Parkay, Miracle Whip, Philadelphia, Cracker Barrel, Sealtest, Light n’ Lively, Breyers and Breakstone’s. The company’s products are sold to stores and restaurants in 130 countries by over 5000 salespeople. Kraft ranks second only to General Foods in the food processing industry. The company is truly an industry giant that grew from very humble beginnings.Even as Kraft has changed, so has the food processing industry. In the 1980s, Kraft and its competitors have realized that the recent and projected slow population growth in the United States means that most future gains in the market share must come at the expense of one another. As a result, the industry is being restructured through mergers and acquisitions as the major firms seek to strengthen their competitive positions. In order to remain at the top of the industry, Kraft’s top managers must make correct strategic decisions regarding the company’s product mix and the manner in which to structure the organization in order to best compete in the changing industry environment.HISTORY OF THE COMPANYJames L. Kraft came to Chicago from Canada in 1903 and began wholesaling cheese from a rented, horsedrawn wagon. His four brothers -Fred, Charles, Norman, and John-joined the prospering business. By 1914, they were selling 31 varieties of cheese under the brand names Kraft and Elkhorn.Kraft merged with a rival company, Phenix Cheese, in 1928. Kraft-Phenix accounted for 40 percent of U.S. cheese production and also had operations in Canada, Australia, Britain, and Germany. The company was acquired in 1930 by National Dairy. The new company ranked as one of America’s largest, with annual sales of $375 million. For the next four decades, Kraft functioned as a separate entity in Chicago, while National Dairy functioned primarily as a holding company from its headquarters in New York City.James L. Kraft died in 1953 at the age of 78. In 1969, the National Dairy company name was changed to Krfatco. Corporate headquarters was moved from New York City to the Chicago suburb of Glenview in 1972. In 1976, the company name was changed to its current title, Kraft, Incorporated.OPERATIONS AT KRAFT INC.Michael a. Miles was President and Chief Operating Officer of Kraft, Inc. in 1985. Kraft’s mission statement from that year is presented in Exhibit 2. Mr. Miles had publicly identified five strengths and three weaknesses of Kraft. The Five strengths and supporting reasons for them were as follows:1. Huge mass and resources -Kraft is one of the four largest food business in the world, and second only to General Foods in the United States.DC: ACD01-F0042. Growth markets and growth categories - from 1979 to 1983, per capita consumption of cheese in the United States increased 23 percent, pourable dressings 14 percent, and premium ice cream 18 percent.3. Extremely strong brand names and market share positions - Kraft is either the leader or a strong contender in virtually all of the major categories in which it operates.4. Excellent customer relations - research indicates Kraft has the best reputation for quality in the food industry and that only Procter and Gamble compares with Kraft in sales-force skill and effectiveness.5. Worldwide infrastructure - the human and financial resources are in place to support new business initiatives anywhere in the world.Mr. Miles also reported the following weaknesses:1. No recent track record of success in developing significant new products2. Too conservative; need more challenges3. Increasing competition.Exhibit 2: Kraft, Inc. MissionMission SummaryKraft’s mission is to become the leading food company in the world, based on achieving superiority versus competition in the balance of these factors: Outstanding overall quality of people, products, and businessIn addition, Mr. Miles outlined five broad strategies Kraft was currently pursuing:1. To protect and build the existing business - for branded products, increased spending on advertising -competitive pricing and more emphasis on advertisable product improvement -for commodity products, being the lowest-cost producer2. To gradually weight the businesses mix toward branded, value-added products and away from commoditExhibit 3: Key performers during 1985-1986GROUP AND DIVISION PRINCIPAL PRODUCTSa. From an intellectual perspective, discuss Kraft’s mission statement b. Drawing inspiration from Igor Ansoff’s Product-Market Expansion Grid, what expansion strategies would you recommend for Kraft and why? c. Do you support the branding drive of Kraft “to gradually weight the businesses mix toward branded, value-added products and away from commodities?” Justify your answer d. What possible challenges lye ahead of Kraft company with the changing consumer preference and consumption patterns being witnessed in the dairy industry?
KRAFT INCORPORATED
Some of America’s best known brand names in food products are produced by Kraft. These include Kraft,
Velveeta, Parkay, Miracle Whip, Philadelphia, Cracker Barrel, Sealtest, Light n’ Lively, Breyers and
Breakstone’s. The company’s products are sold to stores and restaurants in 130 countries by over 5000
salespeople. Kraft ranks second only to General Foods in the food processing industry. The company is truly
an industry giant that grew from very humble beginnings.
Even as Kraft has changed, so has the food processing industry. In the 1980s, Kraft and its competitors have
realized that the recent and projected slow population growth in the United States means that most future
gains in the market share must come at the expense of one another. As a result, the industry is being
restructured through mergers and acquisitions as the major firms seek to strengthen their competitive
positions. In order to remain at the top of the industry, Kraft’s top managers must make correct strategic
decisions regarding the company’s product mix and the manner in which to structure the organization in order
to best compete in the changing industry environment.
HISTORY OF THE COMPANY
James L. Kraft came to Chicago from Canada in 1903 and began wholesaling cheese from a rented, horsedrawn wagon. His four brothers -Fred, Charles, Norman, and John-joined the prospering business. By 1914,
they were selling 31 varieties of cheese under the brand names Kraft and Elkhorn.
Kraft merged with a rival company, Phenix Cheese, in 1928. Kraft-Phenix accounted for 40 percent of U.S.
cheese production and also had operations in Canada, Australia, Britain, and Germany. The company was
acquired in 1930 by National Dairy. The new company ranked as one of America’s largest, with annual sales
of $375 million. For the next four decades, Kraft functioned as a separate entity in Chicago, while National
Dairy functioned primarily as a holding company from its headquarters in New York City.
James L. Kraft died in 1953 at the age of 78. In 1969, the National Dairy company name was changed to
Krfatco. Corporate headquarters was moved from New York City to the Chicago suburb of Glenview in 1972.
In 1976, the company name was changed to its current title, Kraft, Incorporated.
OPERATIONS AT KRAFT INC.
Michael a. Miles was President and Chief Operating Officer of Kraft, Inc. in 1985. Kraft’s mission statement
from that year is presented in Exhibit 2. Mr. Miles had publicly identified five strengths and three weaknesses
of Kraft. The Five strengths and supporting reasons for them were as follows:
1. Huge mass and resources -Kraft is one of the four largest food business in the world, and second
only to General Foods in the United States.
DC: ACD01-F004
2. Growth markets and growth categories - from 1979 to 1983, per capita consumption of cheese in
the United States increased 23 percent, pourable dressings 14 percent, and premium ice cream 18
percent.
3. Extremely strong brand names and market share positions - Kraft is either the leader or a strong
contender in virtually all of the major categories in which it operates.
4. Excellent customer relations - research indicates Kraft has the best reputation for quality in the food
industry and that only Procter and Gamble compares with Kraft in sales-force skill and effectiveness.
5. Worldwide infrastructure - the human and financial resources are in place to support new business
initiatives anywhere in the world.
Mr. Miles also reported the following weaknesses:
1. No recent track record of success in developing significant new products
2. Too conservative; need more challenges
3. Increasing competition.
Exhibit 2: Kraft, Inc. Mission
Mission Summary
Kraft’s mission is to become the leading food company in the world, based on achieving superiority versus
competition in the balance of these factors:
Outstanding overall quality of people, products, and business
In addition, Mr. Miles outlined five broad strategies Kraft was currently pursuing:
1. To protect and build the existing business - for branded products, increased spending on advertising -
competitive pricing and more emphasis on advertisable product improvement -for commodity
products, being the lowest-cost producer
2. To gradually weight the businesses mix toward branded, value-added products and away from
commodit
Exhibit 3: Key performers during 1985-1986
GROUP AND DIVISION PRINCIPAL PRODUCTS
a. From an intellectual perspective, discuss Kraft’s mission statement
b. Drawing inspiration from Igor Ansoff’s Product-Market Expansion Grid, what expansion strategies
would you recommend for Kraft and why?
c. Do you support the branding drive of Kraft “to gradually weight the businesses mix toward branded,
value-added products and away from commodities?” Justify your answer
d. What possible challenges lye ahead of Kraft company with the changing consumer preference and
consumption patterns being witnessed in the dairy industry?
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