Kraft 2004 Annual Report Download - page 7

Latin America & Asia Pacific
Snacks: Oreo, Chips Ahoy!, Ritz, Terrabusi, Club Social, Cerealitas,
Trakinas and Lucky biscuits; and Milka, Lacta and Gallito
chocolate confectionery products.
Beverages: Maxwell House and Maxim coffee; Tang, Clight, Kool-Aid, Royal,
Verao, Fresh, Frisco, Q-Refres-Ko and Ki-Suco powdered bever-
ages; Maguary juice concentrate and ready-to-drink beverages;
and Capri Sun (under license) aseptic juice drinks.
Cheese & Dairy: Kraft and Eden process cheeses; Philadelphia cream cheese; and
Cheez Whiz process cheese spread.
Grocery: Royal dry packaged desserts; Kraft spoonable and pourable
salad dressings; Kraft and ETA peanut butters; and Vegemite
yeast spread.
Convenient Meals: Kraft macaroni & cheese dinners.
Distribution, Competition and Raw Materials
Kraft North America Commercial’s products are generally sold to supermarket chains, wholesalers,
supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations,
drug stores, value stores and other retail food outlets. In general, the retail trade for food products is
consolidating. Food products are distributed through distribution centers, satellite warehouses,
company-operated and public cold-storage facilities, depots and other facilities. Most distribution in
North America is in the form of warehouse delivery, but biscuits and frozen pizza are distributed through
two direct-store delivery systems. The Company supports its selling efforts through three principal sets
of activities: consumer advertising in broadcast, print and outdoor media; consumer promotions such as
coupons and contests; and trade promotions to support price features, displays and other
merchandising of our products by our customers. Subsidiaries and affiliates of Kraft International
Commercial sell their food products primarily in the same manner and also engage the services of
independent sales offices and agents.
Kraft North America Commercial and Kraft International Commercial are subject to competitive
conditions in all aspects of their business. Competitors include large national and international
companies and numerous local and regional companies. Some competitors may have different profit
objectives and some international competitors may be more or less susceptible to currency exchange
rates. In addition, certain international competitors benefit from government subsidies. Products of Kraft
North America Commercial and Kraft International Commercial also compete with generic products and
private-label products of food retailers, wholesalers and cooperatives. Kraft North America Commercial,
Kraft International Commercial and their subsidiaries compete primarily on the basis of product quality,
brand recognition, brand loyalty, service, marketing, advertising and price. Substantial advertising and
promotional expenditures are required to maintain or improve a brand’s market position or to introduce a
new product.
Kraft North America Commercial and Kraft International Commercial are major purchasers of milk,
cheese, nuts, green coffee beans, cocoa, corn products, wheat, rice, pork, poultry, beef, vegetable oil,
and sugar and other sweeteners. They also use significant quantities of glass, plastic and cardboard to
package their products. They continuously monitor worldwide supply and cost trends of these
commodities to enable them to take appropriate action to obtain ingredients and packaging needed for
production. Kraft North America Commercial and Kraft International Commercial purchase a substantial
portion of their dairy raw material requirements, including milk and cheese, from independent third
parties such as agricultural cooperatives and independent processors. The prices for milk and other
6