Kraft Changes Marketing Strategy for Philadelphia Cream Cheese

Kraft Foods (NYSE:KFT) has revived the growth of it’s Philadelphia Cream Cheese brand by marketing as a recipe ingredient. The 131-year old brand with $1.7 billion in global sales has clocked an annual growth of 15% this year, double of what it was last year. ^[1] The company launched marketing campaigns in Europe focusing on how Philly could be used as a cooking ingredient, in addition to being used as a spread. Recent surveys show that the percentage of consumers using Philly as a recipe ingredient in U.K has doubled to more than 37% now. ^[1] The company now hopes to emulate its European success here in U.S. Kraft currently competes with players like PepsiCo (NYSE:PEP), General Mills (NYSE:GIS) and Kellogg (NYSE:K).

We currently estimate a $34.60 price for Kraft Foods, which is 5% below the current market price.

See our full analysis for Kraft here

Philly Indulgence is Here

The company will launch Philly Indulgence, a concoction of cream cheese and chocolate, in US in January next year. A similar product was launched in Europe last year and the sales blew past expectations. The product now threatens to topple the market leader, Nutella, in Europe. ^[1]

As per our estimates, the cheese segment contributes a little more than 13% to the overall stock price. We expect Kraft’s share in the global cheese market to increase from the level of 9% to around 10% by the end of year 2014 which is quite significant given that the global cheese market size will increase from $82 billion currently to $90 billion by 2014.

Kraft will also split the company into Global Snacks division and the North American Grocery division but it is still not clear as to which division would get the Philadelphia Cream Cheese.

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1. Philly Cream Cheese’s Spreading Appeal, Business Week, December 8, 2011 [↩] [↩] [↩]