New Products Fueling Kraft’s Top Line Growth
Kraft Foods (NYSE:KFT), which announced its full year earnings on February 21, witnessed impressive revenue growth of 11%. For 2011, revenues generated due to new product introductions stood at 10% of the total revenues, compared to 9% a year ago. In absolute terms that is about $5.5 billion, up from $4.4 billion a year ago. That is an incremental sales of $1.1 billion. The company plans to sustain the top line growth with a slew of product launches planned in 2012. Kraft competes with players like PepsiCo (NYSE:PEP), General Mills (NYSE:GIS) and Kellogg (NYSE:K). We currently estimate a $34.68 price for Kraft Foods, which is about 8% below the current market price.
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New Products Lined Up for 2012
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The company aims to leverage the success of MiO by introducing a new, caffeinated version of the drink named MiO Energy to enter the energy drink segment. MiO liquid water enhancer was introduced in 2011 and the sales of the product reached a whopping $100 million within first nine months of its launch. For the full year, beverage revenues were up 10% at $9.7 billion.
Kraft also forged a partnership with SodaStream in January which will see the company introducing 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 consumers’ predilection for products considered healthy.
Furthermore, Kraft plans to spend £17 million ($27 million) on R&D alone in its Bournville plant in the U.K. The money will be spent to develop new products for many of its chocolate brands such as Milka and Toblerone.
Barely 2 months into the year, Kraft has already launched 3 major products in 2012, namely, MilkBite, belVita and Philadelphia Indulgence. Although the official sales figures for the products are not available, the initial response to all three of the products has been positive.
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