Kraft 2014 Annual Report Download - page 9

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 the 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 MondelƝz International
licenses to use some of our patents, and we also license certain patents from MondelƝz International.
Research and Development
Our research and development focuses on achieving the following four objectives:
Our research and development specialists have historically focused on both major product innovation and more modestly-scaled
line extensions, such as the introduction of new flavors, colors, or package designs for established products. We have
approximately 600 food scientists, chemists, and engineers, with teams dedicated to particular brands and products.
We maintain three key technology centers, each equipped with pilot plants and state-of-the-art instruments. Research and
development expense was approximately $149 million in 2014, $142 million in 2013, and $143 million in 2012. The amounts
disclosed in prior periods have been revised to conform with the current year presentation.
Seasonality
Overall sales of our products are fairly balanced throughout the year, although demand for certain products may be influenced by
holidays, changes in seasons, or other annual events.
Employees
We have approximately 22,100 employees, of whom approximately 20,100 are located in the United States and approximately
2,000 are located in Canada. Approximately one-third of our hourly employees are represented under contracts primarily with the
United Food and Commercial Workers International Union and the International Brotherhood of Teamsters. These contracts expire
at various times throughout the next several years. We believe that our relationships with employees and their representative
organizations are generally good.
Regulation
Our U.S. food and beverage products and packaging materials are primarily regulated by the U.S. Food and Drug Administration or,
for products containing meat and poultry, the U.S. Food Safety and Inspection Service of the U.S. Department of Agriculture. Our
Canadian food products and packaging materials are primarily regulated by the Canadian Food Inspection Agency and Health
Canada. These agencies enact and enforce regulations relating to the manufacturing, distribution, and labeling of food products.
The U.S. Food Safety Modernization Act and the Safe Food for Canadians Act, both of which became laws in 2011, provide
additional food safety authority to the applicable regulatory agency. We do not expect the cost of complying with these laws, and
the implementing regulations expected to result from these laws, to be material.
In addition, various U.S. states and Canadian provinces regulate our operations by licensing plants, enforcing standards for
selected food products, grading food products, inspecting plants and warehouses, regulating trade practices related to the sale of
dairy products, and imposing their own labeling requirements on food products. Many of the food commodities we use in our
operations are subject to governmental agricultural programs. These
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• growth through product improvements and renovations, new products, and line extensions,
• uncompromising product safety and quality,
• superior customer satisfaction, and
• cost reduction.