Kraft To Launch Cadbury Popcorn With Growing Popularity for Chocolate Bags

by Trefis Team
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Kraft Foods (NYSE:KFT) is introducing Cadbury Popcorn to cash in on the growing popularity for chocolate bags in the U.K. The company launched Cadbury Bitsa Wispa in March this year, and the product is said to have generated sales of £4.2 million (~$6.5 million) in the first six weeks since the launch. [1] It has become imperative for major food and beverage companies to keep introducing new products/variants in order to appeal to changing consumer demands.

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

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The company plans to launch Cadbury Popcorn this summer, and the product will join Cadbury’s two other products in the chocolate bags category: Twirl Bites and Cadbury Dairy Milk Caramel Nibbles. The chocolate bags category is growing annually at 5.7% and is estimated to be worth £324 million (or $500 million) in the U.K. [2]

Kraft’s acquisition of Cadbury has benefited the overall company beyond the obvious expansion of the portfolio. The two companies have been able to use each others distribution and supply chain networks to expand into regions where they do not have a strong presence independently. For example, Oreo cookies are now priced in India at a low Rs 5 (10 cents). The bigger pack, which costs Rs 20 (40 cents) now, was priced at Rs 50 ($1) before the acquisition.

Similarly, Kraft was able to make Cadbury products available in more than 75,000 retail outlets in Ukraine.

New Products Remain the Focus

The company also plans to spend £17 million ($27 million) on R&D alone in its Bournville plant in the U.K. It will focus on developing new products for its chocolate brands such as Milka and Toblerone. [3]

Earlier in the year, Kraft forged a partnership with Israel’s SodaStream, which will see the company introduce the carbonated version of its popular beverages Crystal Light and Country Time. The company is cautious enough to introduce only ‘diet’ and ‘natural’ beverages due to the consumers’ preference for healthier products.

For 2011, Kraft’s revenues from new product introductions climbed to 10% of total revenues, compared to 9% in 2010. In absolute terms that means $5.5 billion of sales, up from $4.4 billion a year ago. Kraft has already launched three major products in 2012, namely, MilkBite, belVita and Philadelphia Indulgence.

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Notes:
  1. Cadbury takes second stab at popcorn market, marketingweek.co.uk, May 28, 2012 []
  2. Kraft Foods to launch Cadbury popcorn, talkingretail.com, May 28, 2012 []
  3. Kraft Foods invests £17m in R&D at Cadbury’s Bournville site, birminghampost.net, March 1, 2012 []
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