кейси для індивідуальної роботи 2014 н.р. / KRAFT FOODS INC IN PACKAGED FOOD

CONFECTIONERY OPPORTUNITIES

Market consolidation redraws competitive landscape

CONFECTIONERY OPPORTUNITIES

Acquisition-led strategies drive strong growth in confectionery

Companies posting CAGRs in excess of 10% are all the results of intense acquisition policies, with the integration of large-scale new assets, e.g. Kraft/Cadbury, Mars/Wrigley.

Arcor‟s advantageous market positioning in the Argentinian confectionery market strongly contributed to its recent advances in the global market. In its domestic market the company posted a 21% CAGR over 20062010, while the market also expanded at a similarly high rate. The company is also present in other dynamic Latin American markets, such as Brazil.

Up until the onset of the economic downturn, on a global scale, the driving force in confectionery was the premiumisation trend. Both Lindt‟s and Ferrero‟s premium brand portfolios have benefited from this trend in recent years, but their rapid growth slowed down in 2009. Lindt‟s y-o-y growth in constant value terms was 8% in 2008, falling to 6% in 2009, and Ferrero‟s 2008 y-o-y growth of 5% slipped to 4% in 2009. Both companies were negatively hit by the weaker consumer spending power in the recessionary core markets.

CONFECTIONERY OPPORTUNITIES

Higher exposure to emerging markets in confectionery

The acquisition of Cadbury gave Kraft‟s confectionery operations a better balanced geographic mix between developed and developing markets, although the combined share of North America and Western Europe retail value sales remained at 51%. However, its proportion of confectionery sales has decreased in Western Europe from 51% to 39%, while it increased from 2% to 11% in North America. Competition in both developed regions is fierce from well-established, domestic confectionery conglomerates, such as Mars/Wrigley and Hershey in

North America, and Nestlé and Ferrero in Western Europe.

Kraft‟s Asia Pacific confectionery sales in 2009 were US$171 million, but with the integration of Cadbury, it approaches US$2 billion. However, over 50% of this retail value is generated in just two national markets: Japan and India. China, the region‟s most attractive confectionery market, accounts for around 7% of Kraft‟s Asia Pacific confectionery revenues. The next step in Kraft‟s strategy should be to focus on strengthening its position in the Chinese market, potentially with further acquisitions/partnerships to gain a larger slice of this dynamic market. Nestlé has directed investments into the Chinese confectionery market with the acquisition of

BVI Hsu-Fu-Chi Holdings, as a result it became the second largest player after Mars. Growing presence of multinationals in the market could raise stronger competitive barriers for Kraft‟s future expansion.

Kraft Foods: Confectionery Presence and Growth Prospects by Region 2011-2016

Bubble size shows company share of region in 2010, range displayed: 6.5-31.9%

CONFECTIONERY OPPORTUNITIES

Kraft‟s largest national confectionery markets

CONFECTIONERY OPPORTUNITIES

Balanced market presence across all confectionery segments

Kraft„s indigenous confectionery portfolio was composed almost entirely of chocolate confectionery, which accounted for about 98% of its confectionery revenues. Tablets was its main revenue source, with countlines and boxed assortments its secondary streams. Its portfolio was led by Milka, Toblerone, Terry‟s and Côte d‟Or, giving it an upscale, mass-market position.

The acquisition of Cadbury has balanced out the portfolio to 56%, 15% and 29% across chocolate, sugar confectionery and gum, respectively. Chocolate confectionery generates the highest proportion of confectionery revenues, very much in line with the global market, where chocolate accounts for some 55% of overall confectionery retail value sales.

Kraft‟s most relevant category enhancement was in gum and sugar confectionery. The newly acquired Cadbury gum portfolio contains the world‟s second largest gum label, Trident. The category is also expected to post the most dynamic growth rates within confectionery as it is benefiting from various health trends. Although overall global sugar confectionery is expected to grow moderately, Cadbury‟s good position in the functionally-enhanced, higher-margin medicated confectionery segments gives Kraft a strong competitive edge in the category, represented by brands such as Halls or Bassett's.

Kraft Foods: Confectionery Presence and Growth Prospects by Category 2011-2016

Market size 2010 (US$ mn rsp)

Bubble size shows company share of category in 2010, range displayed: 7.3-30.7%

BISCUIT OPPORTUNITIES

Well positioned to exploit emerging markets‟ growth opportunities

Following the acquisition of Danone‟s biscuits business, bakery – with biscuits accounting for about 95% of its retail value sales in the category - was Kraft Foods„s largest packaged food category until the integration of Cadbury, which then made confectionery the company‟s largest food operation, accounting for around 41% of retail value sales.

Kraft„s domestic North America market offers rather limited potential in biscuits, with sales set to be affected by a continued rise in consumer health awareness, and a resultant trend towards healthier snacks, and market maturity, with fierce competition a major factor. The category is expected to perform similarly in Western Europe, although the overall size of the market still makes it attractive. Mulino Bianco by Barilla has been a rapidly growing second largest regional brand, due to the number of wellness-led brand extensions the company introduced, such as the fibre-rich Gemme di Grano.

Emerging markets are set to drive biscuits growth, with Asia Pacific and Middle East and Africa topping the

fastest-growth rankings. The size of the Asia Pacific market suggests the prospect of greater return on investment in comparison with others, although the company has the standing across the board to exploit

growth.

Kraft Foods: Biscuits Presence and Growth Prospects by Region 2011-2016

Bubble size shows company share of region in 2010, range displayed: 5.8-42.0%

BISCUIT OPPORTUNITIES

Broad portfolio exploits wide range of growth opportunities

In Kraft‟s portfolio, sweet biscuits represents almost two thirds of its biscuits sales, with plain biscuits and sandwich biscuits the main focus, both generating around 30% of sales. Taken together, cookies and chocolate coated biscuits further contribute more than 25%.

Despite the moderate growth forecast for plain biscuits, given its large current market size, the category holds good potential for Kraft, with a strong market presence in the category in all regions, led by its Nabisco and LU labels.

Kraft leads the global savoury biscuits and crackers category, with a 23% value share in 2010, well positioned to benefit from the positive growth predicted for the category. Six out of the top 10 global savoury biscuits and crackers brands are owned by Kraft, with Ritz and Nabisco occupying the top two positions.

For cookies, filled biscuits and chocolate coated biscuits, although small sizes, low growth rates are expected over the 2011-2016 period. Kraft is the strong global number one in all three, providing the advantageous position to exploit any given growth opportunities in the categories.

Bubble size shows company share of category in 2010, range displayed: 8.7-27.0%

BISCUIT OPPORTUNITIES

Kraft Foods‟s well-established top spot in global biscuits