Kraft Goes Couponing For Market Share

Feb 13, 2004
George Anderson

By George Anderson

The Reuters article sums its up: Kraft plans to “buy its way into more shopping carts by pouring more cash into promotions.”

The food manufacturer has been stung by a dive in cookie sales, courtesy of devotees of Dr. Atkins, plus a drop-off in other categories where private label is growing. Kraft
is looking to gain some traction by increasing its promotion budget by $500- to $600-million on top of what was previously budgeted for 2004.

Morgan Stanley analyst David Adelman said Kraft’s promotional push may have unintended although, perhaps, not unwelcome consequences. “Their key objective is to fight back against
private label. A branded competitor could get caught in the crosswinds of Kraft’s response.”

Ken Harris, a partner with Cannondale Associates, agrees. “Kraft has some formidable marketing skills they’re going to bring to bear,” he said. “In many respects … they’re
going to outshout the competition and gain the attention of the consumer.”

Moderator’s Comment: What do you believe will be the short and longer-term consequences
of Kraft’s promotional strategy on its brands and those of its national and private label competitors?

Short-term: Kraft drives sales.

Longer-term: We hope we’re wrong, but Kraft devalues its own brands (and perhaps entire categories) by resetting the “real” price in the minds of consumers.
Anderson – Moderator

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