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Higher prices, better ads lift Kraft sales

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Higher prices, better ads lift Kraft sales Empty Higher prices, better ads lift Kraft sales

Post  Magdalene Thu Nov 03, 2011 2:18 am

Kraft Foods Inc. reported higher third-quarter sales and earnings Thursday, citing price hikes and strong sales of new products, particularly in North America.

Sales for the three months ended Sept. 30 grew 11.5 percent, to $13.23 billion, and net earnings grew 22 percent, to $922 million, or 52 cents per share. Operating income grew 12 percent, to $1.7 billion, or 58 cents per share.

Because of cheap jerseys from chinathe strong quarter, the Northfield-based food company raised its full-year sales growth guidance to 6 percent from 5 percent, and its earnings-per-share guidance to $2.27 from $2.25.

During a call with analysts, Kraft CEO Irene Rosenfeld said the company passed through significant price increases in response to soaring ingredients costs.

"Consumers are responding favorably to our investments in new products and in better, more effective advertising," she said. "This has been a powerful combination," and allowed the company to charge more for its products.

In a later interview, Rosenfeld underscored that commodities prices have been particularly volatile in areas where the company is most competitive, like coffee and cheese. At one point, she noted, coffee prices soared 30 percent.

During the call, Kraft Chief Financial Officer David Brearton said that the company has been hit with $1.7 billion in commodity cost increases this year to date. He said Kraft expects prices to keep increasing, though not as much, through the first half of 2012.

In North America, the company pointed to a particularly strong performance for Velveeta Cheesy Skillets meals; record sales of Lunchables, now with fruit; and MiO, the water-flavoring product launched in February. Kraft said MiO's first year of sales is expected to surpass $100 million, a critical benchmark for new products.

Kraft's organic net revenues, meaning sales excluding currency impact and other factors, grew 6 percent in North America during the quarwholesale jerseys free shippingter, despite a 3 percent drag due to the loss of the Starbucks coffee business, a long-term distribution deal that ended this year. That revenue increase and more was entirely attributable to price increases, as sales volume declined nearly 1 percent, Brearton said.

Kraft plans to introduce Gevalia coffee in North American grocery stores in January to replace Starbucks coffee.

The food company is preparing to divide itself into a $16 billion North American grocery business and a $32 billion global snacks business late next year.

Rosenfeld said that the company has madeCheap NFL Jerseys progress on the split since announcing its intention to do so in August. Most notably, she said the North American grocery business will be called Kraft Foods.

"The Kraft name commands strong consumer recognition and brand equity in the United States and Canada," Rosenfeld said.

The name for the global snacking business, which has not been revealed by the company, will be up to a shareholder vote next year.

Kraft shares edged up slightly Wednesday to close at $34.64.


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