But since 2006, when she landed the top job at Kraft after its spinoff from Altria Group Inc., CEO Irene Rosenfeld, 55, has struggled to reinvigorate a giant that was losing market share at a time of rising costs, reported USA Today.
One of just six female CEOs [image-nocss] at the top 500 corporations, the 27-year food-industry veteran made innovation a top priority. She introduced products including Bagel-fuls (a frozen bagel prefilled with cream cheese) and Oreo Cakesters (a soft version of the classic cookie), while selling sleepier lines including Post cereals.
Her moves impressed legendary investor Warren Buffett, who became Northfield, Ill.-based Kraft's biggest shareholder in late 2007 when he bought 8.6% of its stock. This year, Kraft shares have fallen 18%, but that is less than half the 39% drop in the benchmark Standard & Poor's 500 index.
Now, the USA's largest food company, expected to generate more than $40 billion in revenue this year, is grappling with a weak economy.
Rosenfeld shared her thoughts about her company, the economy and leadership with USA Today's David Lieberman at the ninth USA Today CEO Forum in conjunction with Duke University's Fuqua School of Business:
The Economy
Q: It's now official: We've been in a recession for a year. What does your crystal ball tell you about 2009?
A: We see more of the same. We [in the U.S.] are at the forefront of some of the economic challenges that we're seeing elsewhere in the world. Europe is starting to be affected. We're seeing even developing markets, where our growth rates are still quite robust, they're slowing down relative to where they had been. The great news is that as the economy has softened around the world, we're seeing people eating more at home. And as they come home, they're coming home to Kraft. So we are battening down our hatches and preparing to continue to compete in a difficult environment.
Q: What particular products are doing well?
A: We're certainly seeing [strength in] products that provide obvious value: powdered beverages like Kool-Aid and Crystal Light, for example, in comparison to ready-to-drink alternatives. We're finding that people are eating grilled cheese a lot more. We're seeing products like DiGiorno pizza, in contrast to pizzeria pizza or restaurant pizza, are performing quite well. Even products like Oscar Mayer meats are having a resurgence. People are eating hot dogs more for dinner.
Innovation
Q: Can you take us through the thinking behind two of your new products: Oreo Cakesters and Bagel-fuls?
A: We have an incredible powerhouse trademark, called Oreo, which competes in a very defined segment in the U.S.: the sandwich-cookie segment. Cakesters was an opportunity for us to compete in a whole new segment of the snack market, soft moist cakes, which is about a $1.5 billion segment. We have an original version, we have a vanilla version, which we called Golden Oreo, and we're about to introduce a peanut butter version which will be our Nutter Butter version of it. Bagel-fuls was another opportunity for us to make one of our crown jewel, iconic trademarks, Philadelphia Cream Cheese, more convenient. For those of you who aren't familiar with it, it's essentially a bagel with cream cheese in it that's easily microwaved in the morning.
Q: How can you distinguish between an opportunity and a fad? For example, a few years ago everyone was making low-carb products, and most have died.
A: Sometimes it's hard to tell. There's no question, we see products come and go. The more that their foundation is based on good scientific knowledge, we find, they're more sustainable.
Q: How did you handle the situation? You now offer similar products for the South Beach Diet.
A: We had products that offered low-carb benefits. But we were very careful to make sure we weren't inventing new brands to do it, that we were managing our inventories, because it wasn't clear whether it would be a long-term phenomenon. I think South Beach has turned out to be a terrific platform for us, because it provides proven weight-management benefits, and that's why it's endured.
Marketing
Q: Will you continue to spend money on advertising, which may require you to keep prices up, or would it be better for you to discount?
A: We have never looked at pricing as a means of affording our advertising. Our prices will go up and down as the cost of our ingredients goes up and down. But that will not preclude our investment in our brands.
Q: Are you changing the branding messages?
A: We've definitely shifted to more of a value story. So far, it's serving us quite well.
Competition
Q: Consumers looking for value may prefer less-expensive store brands. Is that an issue for you?
A: There's no question that consumers are looking for value today. Our obligation is to ensure that the products that we are providing offer them adequate value, and so we have spent the last couple of years investing in the quality of our brands, the marketing of our brands and our innovation pipeline.
Q: Will this continue to be a threat?
A: Private label has been a pretty significant phenomenon in many markets outside the U.S. for a number of years. In markets like Europe and Canada, for example, the market share of private label is upward of 30%. For too long we in the U.S., and I would say, quite frankly, we at Kraft, did not take seriously the private-label threat. We are working with our customers to create win-win economic propositions so their private labels can thrive at the same time that our branded products can thrive. The good news is, in many cases, our products will still drive category demand, and the investments we're making in marketing and new product development have everything to do with the growth of those categories. That's what will continue to keep us healthy over time.
Kids
Q: The Federal Trade Commission reported in July that one-third of kids are overweight, and the food and beverage industry spent $1.6 billion in 2006 marketing to 17-year-olds and younger. Should Washington limit marketing to kids?
A: We do not market to children under 6. Our products for 6- to 12-year-olds meet certain criteria that are consistent with the food pyramid. We will continue to assure that we are acting in a socially responsible fashion. I am delighted that so many of our peer companies have gotten on board, because we were actually one of the early pioneers in that policy and, quite frankly, suffered some share loss as a result.
Strategy
Q: About a year ago, you described four growth areas: snacking, quick meals, health and wellness, and premium products. Has the change in the economy forced you to change that emphasis?
A: Premium, the phenomenon of consumers trading up, is going to be less relevant than the mainstream products. We're focusing our efforts on the other three areas: snacks, on quick meals and on health and wellness.
Q: How far along are you in your turnaround plans?
A: The biggest problem I faced as I came back to the company was that the cost focus had overtaken so much of our decision-making. Our reaction was to centralize more of our functions, to take quality out of our products and to cut into overhead, like sales, because they were viewed as costs rather than capabilities. And so probably the most important thing I did as I came back was to try to get a better balance. Costs will continue to be a critically important focus area for us, particularly in the face of the challenging economic environment. But we need to be as focused on effectiveness as we are on efficiency. So we invested over $400 million over the last two years in product quality, in our marketing efforts and in our innovation pipeline. We have invested heavily in our sales infrastructure, because I do believe it can be a source of competitive advantage. And probably one of the most significant things we've done in the last two years is to decentralize our organization so our local managers have far more authority to be able to make the decisions affecting their local markets.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.