Kraft Foods’ net revenues rose 4.6% to $8.2 billion for the second quarter, even though volume was up only 3.6%. Kraft raised cheese prices 5% to 15% to half compensate for higher commodity costs, especially in dairy.
Kraft boosted marketing spending about $170 million for the fiscal quarter ended June 30. Eighty percent of the added marketing dollars were spent in North America. The brands that increased marketing spending by at least 10% saw combined revenue rise 7% and combined volume sales rise 4%. (That includes cheese, coffee, lunch combinations, meat, salad dressing and snack nuts.)
Kraft expects to spend an additional $500 million to $600 million on consumer marketing and price adjustments (“price gap management”) this year, in part to offset higher commodity costs.
Northfield, IL-based Kraft expects to incur a total of $650 million to $700 million in higher commodity costs this year. But price hikes and trade-spending adjustments will only cover part of that.
“Significantly higher costs for our key commodities, especially dairy, drove the earnings decline in the quarter,” said CEO Roger Deromedi in a statement. “The highest priority of our Sustainable Growth Plan [remains] to reinvest in our brands, including the management of price gaps in certain businesses.”
The Kraft North America Commercial division saw overall volume sales rise nearly 5%. Growth in strong categories (cheese, coffee, cold cuts, salted snacks) was offset by “significant declines” in cereal and candy, due in part to low-carb dieting. North America net revenues rose 3.7% to $5.7 billion.
The Kraft International Commercial division reported a volume increase of 1.1%.
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