Kraft Foods’ (NYSE:KFT) market share in the global chocolate and candy markets has traditionally trended in the range of 5-6%. The firm’s market share rose sharply in 2010, to 15%, driven by its acquisition of Cadbury for a whopping $19.5 billion. This acquisition strengthens Kraft’s presence in the global chocolate and candy market, particularly in emerging markets like India where Cadbury has maintained operations for many years.
Kraft Foods primarily competes with Nestle, Kellogg Company (NYSE:K) and General Mills (NYSE:GIS) in the confectionery market. While we anticipate that Kraft’s global chocolate and candy market share will rise to 17% by the end our forecast period, Trefis members expect this share to reach 18%, implying upside to our price estimate for KFT stock.
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We currently maintain a price estimate of $35.64 for Kraft Foods’s stock, a premium to the market price.
Cadbury Expands Kraft’s Product Portfolio
Pre-Cadbury acquisition, Kraft’s broad range of product offerings (led by the billion dollar Milka brand) sustained a 7.8% market share in the global chocolate market. With Cadbury, Kraft’s portfolio has expanded beyond 40 confectionery brands, each with annual sales of more than $100 million.  Kraft has now become the biggest player in the global chocolate industry with popular brands like Dairy Milk, Creme Egg, Flake, and Green & Black’s.
In the candy market, Kraft’s market share was below 1% prior to the acquisition of Cadbury. Now, through Cadbury, Kraft owns popular candy brands such as Halls, Eclairs, Maynards, and Kent. Notably, Halls is the largest candy brand in the world and accounts for one-third of Cadbury’s candy revenues.
Wider Presence in Emerging Markets
Emerging markets have seen double-digit annual growth in chocolate sales and should play a promising role in driving further chocolate sales in the future. Cadbury has a strong presence in these markets, generating one-third of its total revenue from these regions. In 2008, 60% of Cadbury’s business growth came from emerging markets, indicating greater penetration in these markets for Cadbury vs. its peers.
Kraft has indicated that its profits in the Asia-Pacific region have recorded double-digit growth since 2008, although the company does not provide a break-out of these figures. Kraft CEO, Irene Rosenfeld, said last year that the company would be spending heavily in developing nations, particularly in India and China, with the anticipation that certain countries could generate $1 billion in annual revenues. 
Beyond merely increasing the number of brands in its portfolio, Kraft can leverage Cadbury’s market dominance and existing infrastructure to drive sales for its own brands, thereby lifting market share.
Trefis Community Forecast
Trefis community members forecast that Kraft’s global market share in chocolate & candy will increase from around 15% in 2010 to 18% by the end of our forecast period, compared to the baseline Trefis estimate of an increase to 17% during the same forecast period. The member estimates imply a small upside to our $35.64 price estimate for Kraft Foods’ stock.Notes: