Kraft Foods

Abstract

The purpose of this study is to expand the boundaries of the author's knowledge by exploring some relevant facts related to Kraft Foods. The main focus of the research is on business environment analysis of Kraft Foods. The research also analyzes many aspects of financial performance such as analysis of financial statements, financial ratio, industry average, standard costing, and Net present value and tries to gauge its effect on the financial and non-financial performance of Kraft Foods.

Table of Contents

Section I4

Kraft Foods: Company Overview4

Section II6

Benefits of evaluating financial statements, financial ratios, and industry averages6

Section III10

Benefits of Standard Costing10

Section IV15

Benefits of analyzing future projects in terms of net present value15

Section V17

Recommendation & Conclusion17

References19

Kraft Foods

Section I

Kraft Foods: Company Overview

Kraft is the largest packaged foods company in North America and the second largest in the world, behind Nestle. In Europe, the company is the number one player in chocolates, biscuits, gums and candies, coffee, and cheese and groceries product categories. The company has established its dominance in the European market based on its 15 power brands, including Cadbury, Oreo, Halls, Jacobs, and Philadelphia. In Latin America, the company holds four of the top five confectionary brands in the region, led by Trident (11.4% market share as compared to 4.8% market share of Nestlé's Garoto). Overall, the company holds 31.2% market share in the Latin American confectionary market, compared to Nestle/Garoto's 19.4% market share. In addition to these, the company extended its leadership in Asia through the acquisition of Cadbury. Strong market position in several regions imparts distinct competitive advantage and favorable market dynamics for Kraft, which facilitates its revenue and business expansion growth prospects (www.kraftfoodscompany.com).

The company's 70 brands generate more than $100 million in annual revenues. Apart from broad product portfolio and a strong brand image, the company is also well-diversified in terms of revenues. For instance, in FY2010, the company generated 19% of revenues from biscuits, 17% from chocolates, 14% from cheese, 11% from coffee, and 10% from gums and candy, and rest from others. An extensive range of products enables the company to cater to wide range of customers, which in turn helps it to stabilize its revenue growth. Moreover, it provides multiple avenues of revenue, thereby, reducing the dependence on particular product segment (www.kraftfoodscompany.com).

Kraft Foods began its operations in 1903, when James L. Kraft opened a wholesale cheese business in Chicago, Illinois. In 1969, National Dairy changed its name to Kraftco before assuming the Kraft name in 1976. In 1980, the company was merged with Dart Industries but again continued to operate as a separate company before being de-merged in 1986. Two years later, Kraft was acquired by Philip Morris Companies. Philip Morris merged Kraft with its food products division, General Foods in 1989, forming Kraft General Foods. During the 1990s, Kraft undertook a series of acquisitions and expanded into new markets in Central and Eastern Europe. Acquisitions during the first half of the 1990s included Jacobs Suchard, Freia Marabou, Terry's of York etc. During 1995, Kraft acquired a number of ...