Kraft 2014 Annual Report Download - page 8

However, we do not fully hedge against changes in commodity prices, and our hedging strategies may not protect us from
increases in specific raw material costs. We actively monitor any changes to commodity costs so that we can seek to mitigate the
effect through pricing and other operational measures.
Manufacturing and Processing
We manufacture our products in our network of manufacturing and processing facilities located throughout North America. As of
December 27, 2014, we operated 36 manufacturing and processing facilities, 34 in the United States and two in Canada. We own
all 36 of these facilities.
While some of our plants are dedicated to the production of specific products or brands, other plants can accommodate multiple
product lines. We manufacture our Cheese products in 12 locations, our Refrigerated Meals products in nine locations, our
Beverages products in eight locations, our Meals & Desserts products in 11 locations, and our Enhancers & Snack Nuts products in
eight locations. We maintain all of our manufacturing and processing facilities in good condition and believe they are suitable and
adequate for our present needs. We also enter into co-manufacturing arrangements with third parties if we determine it is
advantageous to outsource the production of any of our products.
Distribution
As of December 27, 2014, we distributed our products through 36 distribution centers, of which 33 are in the United States and
three are in Canada. We own four and lease 32 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 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 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 to our customers. We maintain all of our distribution facilities in good condition and believe they have sufficient
capacity to meet our expected 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, the introduction of new products and the effectiveness of our advertising campaigns and marketing
programs, 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
A
.1. , Baker’s, Cheez Whiz , Cool Whip, Country Time, Cracker Barrel , Crystal Light , Grey Poupon , 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 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. From time to
time, we grant third parties licenses to use one or more of our trademarks in particular locations. Similarly, as of December 27,
2014, we sell some products under brands we license from third parties, including:
In connection with the Spin-Off, we granted MondelƝz International licenses to use some of our trademarks in particular locations
outside of the United States and Canada and we also may sell some products under brands we license from MondelƝz
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
4
• Capri Sun packaged drink pouches for sale in the United States;
• McCafé ground, whole bean and on-demand single cup coffees; and
• Taco Bell Home Originals Mexican-style food products for sale in U.S. grocery stores.