Kraft 2012 Annual Report Download - page 7

Distribution
We distribute our products through our network of 42 owned and leased distribution centers. As of December 29, 2012, we
distributed via 39 distribution centers in the United States and three in Canada. We own four and lease 38 of these
distribution centers. In addition, third-party logistics providers perform storage and distribution services for us to support
our distribution network.
We rely on common carriers and our private fleet to transport our products from our manufacturing and processing
facilities to our distribution facilities and on to our customers. Our distribution facilities generally accommodate all of our
product lines from each of our segments and have the capacity to store refrigerated, dry, and frozen goods. We assemble
customer orders for multiple products at the distribution facilities and deliver them by common carrier or our private fleet to
our customers’ warehouses. We maintain all of our distribution facilities in good condition and believe they have sufficient
capacity to meet our present distribution needs.
Competition
We face competition in all aspects of our business. Competitors include large national and international companies and
numerous local and regional companies. We also compete with generic products and retailer brands, wholesalers, and
cooperatives. We compete primarily on the basis of product quality and innovation, brand recognition and loyalty, service,
the ability to identify and satisfy consumer preferences, and price. Improving our market position or introducing a new
product requires substantial advertising and promotional expenditures.
Trademarks and Intellectual Property
Our trademarks are material to our business and are among our most valuable assets. Some of our significant trademarks
include Baker’s, Cheez Whiz,Cool Whip, Cracker Barrel,Crystal Light,Jell-O, Kool-Aid,Kraft,Lunchables,MiO,Miracle
Whip,Oscar Mayer,Planters,Shake ‘N Bake,Stove Top, and Velveeta. We own the rights to these trademarks in the
United States, Canada, and many other countries throughout the world. In addition, we own the trademark rights to
Philadelphia in the United States, Canada, and the Caribbean, and to Gevalia and Maxwell House throughout North
America and Latin America. We protect our trademarks by registration or otherwise in the United States, Canada, and
other markets. Trademark protection continues in some countries for as long as the mark is used and in other countries for
as long as it is registered. Registrations generally are for renewable, fixed terms. From time to time, we grant third parties
licenses to use one or more of our trademarks in particular locations. Similarly, as of December 29, 2012, we sell some
products under brands we license from third parties, including:
•Capri Sun packaged juice drinks for sale in the United States; and
•Taco Bell Home Originals Mexican-style food products for sale in U.S. grocery stores.
In connection with the Spin-Off, we granted Mondele¯ z International licenses to use some of our trademarks in particular
locations outside of the United States and Canada and we will sell some products under brands we license from Mondele¯z
International.
Additionally, we own numerous patents worldwide. We consider our portfolio of patents, patent applications, patent
licenses under patents owned by third parties, proprietary trade secrets, technology, know-how processes, and related
intellectual property rights to be material to our operations. While our patent portfolio is material to our business, the loss of
one patent or a group of related patents would not have a material adverse effect on our business. We either have been
issued patents or have patent applications pending that relate to a number of current and potential products, including
products licensed to others. Patents, issued or applied for, cover inventions ranging from basic packaging techniques to
processes relating to specific products and to the products themselves.
Our issued patents extend for varying periods according to the date of patent application filing or grant and the legal term
of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent, which
can vary from country to country, depends upon the type of patent, the scope of its coverage as determined by the patent
office or courts in the country, and the availability of legal remedies in the country. In connection with the Spin-Off, we
granted Mondele¯ z International licenses to use some of our patents, and we also license certain patents from Mondele¯z
International.
5