Store Brands Stifle Kraft Growth Across Core Categories

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October 27, 2009

While pizza is a key sales and market driver for Kraft Foods, private brand are winning market share in other core categories such as nuts, cookies, crackers and cheese according to a Chicago Tribune report.

Although Kraft pizza sales have increased by double-digits over the past seven consecutive quarters, several analysts are pegging Kraft as a low-growth company. "For all its success in pizza or with thriving classic brands like Oreo, Kraft still struggles with weak or no growth in key areas, and Planters nuts serves as a prime example," the report said, adding that important brands such as Planters are losing market share to private-label products.

Acquiring Cadbury, focused on the fast-growing confectionery business, would improve the second-largest packaged food company's growth prospects, but the fundamental problem is that Kraft is a "sprawling giant. Its very diversity helps make it more exposed to mature, slow-growing food categories that, unlike candy, are prone to heavy private-label competition," the report said.

If Kraft successfully acquires Cadbury, "It's still going to be a big, diversified company and with that comes some slow-growth categories and some categories that are growing faster," said Matt Arnold, an analyst at Edward Jones.

Pizza is one category where Kraft's innovation shines as the maker of DiGiorno, the country's most popular frozen pizza, as well as other top brands such as Tombstone, Jack's and the grocery store versions of California Pizza Kitchen.

While Kraft's market share is slipping in many other core categories, its leading frozen pizza market share is 39.1 percent for the 52 weeks ending Oct. 4, up from 37.7 percent the prior year, according to Information Resources Inc.

Private-label pizza brands are gaining ground and tallying large sales gains, but so far Kraft is holding its own.

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