Kraft Foods, Inc. (NYSE: KFT) is currently North America’s largest food and beverage supplier. Kraft, which was formed in 1923, is headquartered in Northfield, Illinois and trades for $38.30 with a market capitalization of $67.67 billion as of January 31st, 2012. The company has been on an upswing since this time last year: since January 31st, 2011, the company has gained approximately $8 a share while paying a $1.16 (3.00%) dividend. Suffice to say, Kraft’s growth this past year is a positive sign for the company, and it should greatly benefit its investors in the near and long-term future.
According to the company’s third quarter 2011 results on November 2nd, 2011, the company grew its operating income at a double-digit rate (http://seekingalpha.com/article/304737-kraft-foods-ceo-discusses-q3-2011-results-earnings-call-transcript). In the company’s Global Snacks portfolio, Developing Markets are up 20% this quarter; furthermore, China and Russia are making significant progress with Biscuits, with each country seeing growth over 40% in that department. Additionally, the company’s Global Chocolate is up 8% overall with 50% growth in India and strong growth in Brazil, Argentina, Russia, and Ukraine this quarter. Led by Halls and Eclairs, candy is up double-digits, and CEO Irene Rosenfeld cites strong performance in China, Turkey, and India. Kraft has also seen impressive success with its Gum endeavors. In Brazil, Trident experienced 15% in growth this quarter, while Gum was stable in the United States. Additionally, Stride and Clorets contributed to double-digit growth in Japan.
As far as profits go, David A. Brearton, CFO, explained that Kraft’s underlying operating income was up 12% for the quarter. Kraft “delivered growth in every geography” according to Brearton: Europe saw and 18% increase, Developing Markets saw a 45% increase, and even North America saw a 4% increase. However, in terms of profit margin, Brearton was disappointed to relay the fact that the company’s underlying operating income margin only rose 10 basis points to 13.7%, but, despite this disappointment, the company still shows signs of progress. Furthermore, the company’s earnings per share rose to $0.58 in the third quarter, rising more than 23% from $0.47 in the past year’s third quarter, showing a favorable trend in terms of earnings for the company.
Brearton also referenced Kraft’s new products as having a truly positive effect on the company during 2011. The new MiO liquid beverage mixes were, as of November 2nd, 2011, rapidly approaching the $100 million mark in their first year of existence, helping to drive sales of new products alongside Oscar Mayer Lunchables with Fruit. Therefore, Kraft’s innovations are helping it grow, and these new products can be counted on to provide more income for the company over the next year. Of course, this also means that the company’s future success could largely depend on the critical response to Kraft’s upcoming innovations.
As mentioned earlier, the company saw significant growth in Developing Markets in the third quarter: Power Brand grew more than 17% thanks to 50% growth from Oreo, Tuc and Club Social biscuits; the underlying operating income margin grew to 15.3%, and underlying operating income grew 45%. Brearton told investors that the company is continuing to support the prosperous growth in Developing Markets.