Irene Rosenfeld, chairman and chief executive, Kraft Foods Inc, remembers stopping by the gates of Cadbury House in Mumbai during her first visit to India in 2009 and taking a few photographs. Accompanying her was Sanjay Khosla, president - developing markets, Kraft Foods. “There was a lot of tight security. I have a picture of the guard chasing me,” says Rosenfeld.
This was just before Kraft bought the global businesses of British confectioner Cadbury Plc for $19.5 billion — a move legendary investor Warren Buffet had called “a bad deal” and “dumb.”
Rosenfeld, who was in Mumbai as part of her first official visit to the country, told reporters on Tuesday that India is one of the group’s fastest growing businesses, along with Brazil, Russia and China, together contributing more than 40% of its snacking business revenues. In fact, Kraft’s developing markets business is worth $13.6 billion and growing at a compounded 14% a year, nearly double the global figure.
Rosenfeld, who has an experience of nearly 30 years in the food and beverage industry, including stints at General Foods (that later became a part of Kraft Foods) and Frito-Lay, became the global chief executive of Kraft Foods in 2006 and soon initiated an overhaul exercise, strengthening the company’s presence across developing markets and newer product categories like biscuits and chocolates.
Besides interacting with Cadbury India’s top talent, visiting retail outlets and meeting consumers, Rosenfeld found time to meet Ratan Tata, an alumnus from Cornell University, and India’s retail king Kishore Biyani. Edited excerpts from the media interaction:
On ambition in India
We see India as a core part of the global snacking company. It will be a critical focus area and a very significant contributor to our overall growth. Our ambition is to be one of the top five food and beverage companies here.
Since we acquired Cadbury India, we have already increased investments in a number of key areas by almost 70% — in R&D, capex, advertising, point of buying and merchandising. We will continue to invest in India aggressively. We see the opportunity in a number of our core categories.
We see continued growth in chocolates. We see the opportunity in biscuits and we feel quite comfortable that over time candy can be a big opportunity for us here as well. In India, we have witnessed exceptional growth. Year to date, we are up almost 40% in this country.
And the growth rate we have seen since the acquisition are well in excess of the legacy of Cadbury, primarily because we have chosen to invest in a number of critical areas, be it sales, marketing, point of sale, point of buying... And it is all coming as a result of what we have been able to do as we transformed the company over the last couple of years. The success we are having in India is indicative of the power of the combination of legacy Kraft and legacy Cadbury. We have been able to accelerate our growth in key markets around the world as a result of the investments that we have made. In this country, we have been able to launch two new categories —- Oreo and Tang. We accelerated the growth of brands like Dairy Milk and we are very proud of that performance.
Most importantly, we have been able to export 25 Indian colleagues to other parts of Kraft where they are able to share their learning and experience with our other colleagues around the world.
On revenue synergies from Kraft-Cadbury integration
The integration on a global basis is more than meeting our expectations. We have a target of $750 million of cost saving from the integration and we are on track and should achieve over 70% of those savings by end 2011. We had suggested that there would be about $1 billion revenue synergies and we are just beginning to experience those benefits. They come from two major sources —- one is the opportunity to take existing brands that are sold elsewhere and put them through the infrastructure of either Kraft or Cadbury. An example would be taking a brand like Oreo through the Cadbury Dairy Milk infrastructure.
In Russia we are able to take Cadbury brands and put them through Kraft infrastructure. The other is the expansion of our global platform. We have a series of ideas under each of our trademarks, within five of our core categories that we are taking from market to market.
These steps will bring us a couple of hundred million dollars in the next two years. We see an opportunity over time to expand the local R&D. We will make significant investments in R&D, in operations as well as in marketing over the coming years. We are still open to acquisitions in any of our key markets. I feel quite comfortable with the portfolio that we have today. And I feel very good about our footprint in Brazil, Russia, India, China and Indonesia. Our focus will be on those categories in which we compete today and we will continue to look for opportunities in those categories. But the opportunities for organic growth are so attractive.
Ingredients of a global snacking powerhouse
We are a much different company than we were four years ago both in terms of the face of the company and in terms of the footprint of the company. When we began our transformation four years ago, the company was quite fragmented; we were in many categories around the world with no particular focus on any geography. Geographically, we were largely a North American business. Almost 60% of our revenue at that time came from US and Canada. We had only minimal exposure to a high-growth, instant-consumption channel. We just didn’t have the portfolio that went itself well to those channels. As result of the actions that we have taken over the last couple of years, we are today a global snacking powerhouse. We have a very strong presence in snacking around the world, and in the course of that time we took a couple of actions to strengthen our business.
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