Kraft Snack Its Way To $40 With Focus On Middle East And China

by Trefis Team
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Kraft Foods (NYSE:KFT) is hoping to capitalize on the increasing opportunities offered by the Middle East and China to boost the sales of its snacks division, which consists of Oreo cookies, Nabisco Planters nuts, Ritz crackers and LU biscuits. The company has announced the expansion of its Nabisco Arabia biscuit plant in Saudi Arabia to double production capacity. [1] In China, the company plans to introduce new products, step up marketing and widen its distribution channels. [2]

We currently estimate a $40 price for Kraft Foods, which is slightly above the current market price.

See our full analysis for Kraft here

Doubling the Capacity

The Nabisco Arabia plant, which produces Oreo cookies, Ritz crackers and belVita biscuits, is a joint venture between Kraft Foods and Saudi Arabia’s Olayan Group and has been operational for more than a decade. Following the expansion, the plant has a capital investment of around SR60 million or$16 million.

Oreo cookies continue to lure customers around the world. The global revenues of the product exceeded $2 billion for the first time a couple of weeks ago.

Earlier in the year, Kraft launched Barni in the Middle East to target children’s snack segment.

Focus on China

Kraft is molding its portfolio to introduce products/flavors that are more likely to appeal to Chinese tastes. The company recently launched birthday-cake flavored Oreos. This is not the first time that Kraft has experimented with cookies to appeal to local tastes. Already present in the country are flavors like green tea, ice cream, mango and mandarin orange.

The company will soon launch Ritz in new flavors named ‘fantastic beef stew’ and ‘very spicy chicken’. Even the packaging of Ritz crackers and Chips Ahoy cookies will be redesigned to resemble ramen-noodle containers. Currently, Kraft doesn’t even feature in the list of top 10 snacks companies in China, which are mainly dominated by Chinese companies. [2]

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Notes:
  1. Kraft Foods and The Olayan Group expand Nabisco Arabia plant in Dammam, ameinfo.com, May 30, 2012 []
  2. Kraft Craves More of China’s Snacks Market, wsj.com, May29, 2012 [] []
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  • commented 2 years ago
  • tags: KO KFT PEP
  • I am wonering how much did Kraft/Nabisco take from Olayan to enter such a joint venture?