Kraft 2007 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2007 Kraft annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

Discussion and Analysis
Growth Strategy
At the Consumer Analyst Group of New York (“CAGNY”) Conference in February 2008, we presented the progress we made
in 2007 on our long-term growth strategy and our plans for the second year of our three-year plan to return Kraft to reliable
growth. Our four growth strategies and 2007 developments are summarized below.
Rewire the organization for growth - We made significant changes to our incentive systems, senior management team and
organizational structure. Our annual bonuses and long-term incentive plans are now tied to measures that our people can control
and that will increase shareholder value such as operating income growth. We also complemented our veteran Kraft
management team by adding new talent. In February 2008, we announced the implementation of our new operating structure
built on three core elements: business units now have full P&L accountability and are staffed accordingly; shared services that
leverage the scale of our global portfolio; and a streamlined corporate staff.
Reframe our categories - We are utilizing the concept of the “Growth Diamond” to focus on four key consumer trends driving
category growth: Snacking; Quick Meals; Health and Wellness; and Premium.
We also reframed our portfolio through acquisitions and divestitures. In 2007, we divested our flavored water and juice brand
assets and related trademarks, including Veryfine and Fruit2O, and acquired the Danone Biscuit business. These changes will
result in increased revenues being derived from Kraft International. We also announced the planned merger of the Post Business
into Ralcorp, which we anticipate will be completed in mid-2008.
Exploit our sales capabilities - We are using our large scale as a competitive advantage as we better leverage our portfolio. Our
“Wall-to-Wall” initiative for Kraft North America combined the executional benefits of direct store delivery used in our Biscuit
business unit with the economics of our warehouse delivery to drive faster growth. Wall-to-Wall will increase the frequency of
our retail visits and build stronger, ongoing relationships with store management allowing us to: reduce out-of-stocks; get new
items to the shelves more quickly; and increase the number and quality of displays. We plan to complete the full rollout in North
America by mid-2008.
We plan to build profitable scale by expanding our distribution reach in countries with rapidly growing demand. The acquisition
of Danone Biscuit is part of our efforts to expand our reach in developing markets.
Drive down costs without compromising quality - We plan to contain administrative overhead costs while investing in quality,
R&D, marketing, sales and other capabilities that support growth. We are incrementally investing $100 million into quality
upgrades in 2008. Additionally, we anticipate completing our Restructuring Program in 2008 with total annualized savings
reaching $1.2 billion by the end of 2009.
19