Kraft Betting on New Products: Caffeinated Energy Drink, Breakfast Bars

by Trefis Team
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Kraft Foods
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Riding high on the success of MiO water enhancer, Kraft Foods (NYSE:KFT) is all set to launch products in the energy drink and breakfast food sector. [1] In the energy drink sector,  Kraft will be directly competing against 5 Hour energy, Red Bull, PepsiCo (NYSE:PEP) and Coca Cola Co (NYSE:KO) whereas in the breakfast food category, it will be up against Kellogg (NYSE:K) and General Mills (NYSE:GIS). [2]

We estimate a $35 price for Kraft Foods, which is in line with the market price.

See our complete analysis for Kraft Foods here

Kraft will be foraying into the energy drink sector through its caffeinated version of MiO. The U.S. energy drinks sector represents about $6 billion in annual sales, so a slight market share might still generate significant revenues. However, we believe that beverages represent only 15 % of the stock price so the move should not have a significant impact on the stock price. MiO, a zero calorie water enhancer drink, was launched in March this year and is poised to generate revenues of $100 million this year. Kraft enjoys a healthy EBITDA margin of 15% in Beverages, so there could be a slight upswing in the stock price if the move is successful.

US Rollout of belVita

Kraft will also rollout its belVita biscuits in the U.S. in February 2012. Kraft has sold the biscuits in Europe for the past decade and the biscuits currently have a revenue of $100 million. The US rollout will put the company again into grain-based products, the category it left when it sold Post Cereals back in 2008. The biscuit will be sold at more than 90,000 retail spaces. The product is whole grain based with higher fiber and vitamins content and is a shift from the traditional American buttery biscuits.

The American market currently lacks whole grain biscuits with high fiber and vitamin content. But the paucity of players might also suggest the consumer’s lack of preference for such products. Kraft plans to portray belVita as a healthy breakfast option, especially for people who don’t have sufficient time in the morning. With people trying to switch to a healthier lifestyle, that might just work in favor of Kraft.

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Notes:
  1. Kraft enters energy drinks sector, FT, November 6th, 2011 []
  2. Kraft to introduce belVita in US []
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