Kraft Foods Inc Local and Global Operations - Research Paper Example

Kraft Foods Inc. Local and Global Operations Kraft Foods is the largest food and beverage manufacturing company in North America (ORourke 75). KraftFoods, then known as General Foods introduced and marketed Tang in late 1950s (Hartel & Hartel 153). Kraft does not only have presence in the United States but has a very strong international presence. The company has famous brands like Oreo, Kraft Cheese, Tang and Jell-O in their product portfolio that have become household names. In fact, the top selling seven brands of the company alone are responsible for USD 1 billion worth of revenue (IBM Client Reference). Kraft Foods manufactures and markets packaged foods, biscuits, confectionery items, hot and cold beverages, cheeses, ready-to-eat meals and other grocery items. Kraft food provides these products to approximately 170 countries world-wide (Kraft Foods Inc. Annual Report). Furthermore, the Annual Report states that Kraft Foods generated as high a 57% of their net revenues outside of their home country (8). Performance of Tang Locally and Globally Kraft Food Inc. is a company that produces Tang. Tang is a non-carbonated soft drink that comes in liquid and powdered form. Tang has recently been added at the twelfth position to the list of billion dollars brands owned by Kraft Foods, which includes brands like Oreo, Oscar Mayer, Cadbury and Maxwell House (Schultz & Zmuda). However, according to Schultz, international sales promotions and other marketing efforts in countries like Brazil, Argentina, Mexico and Philippines have accounted for a major chunk of revenues of Tang. Sales Promotion Sales promotion is a type of marketing activity. According to Lamb et al, the main purpose of sales promotion is to facilitate purchase by providing short-term incentive to consumers or retailers in the form of discounts or added value. The sales promotion directed at consumers is called consumer sales promotion and the one directed at members of the supply-chain is referred to as trade sales promotion (537). Sales promotion have become more common than ever before, this is because of higher degree of completion as well as a larger array of media choices which provide information to the consumers. Tang has had to face a lot of challenges both locally and internationally in terms of sales promotion. According to the Kraft Foods Inc Annual Report (8), they concentrate their marketing efforts in three key areas: the first is targeted at the consumer in the form of mass-media, out-door, print and digital media, the second is offering consumer incentives like coupons and contests and lastly they engage in trade promotions to facilitate their price features and merchandising to consumers. There is intense competition in the food industry, and since the brand preference depends entirely on consumer preferences and tastes, even smaller brands can provide tough competition to larger ones. Kraft Foods provide good quality consumer goods at affordable prices, however staying competitive in pricing is not easy because it becomes difficult to raise prices once the customer expects lower prices and competition can also give a tough time with price-matching. However according to the Kraft Foods Inc Annual report, they aggressively aim to maintain their brand loyalty and image through investment in marketing activities such as advertising, sales promotion and product innovation (11). Trade Sales Promotions in United States In order to facilitate buying from a specific retailer, Kraft Foods offers coupons that can be used at specific retail chains like Target. The savings done in this case can be as high as $50 on Kraft products. An offer for rebate was launched 2009 in the United States, aiming at retailers and distributors. This offer is called “Food Service On-the-Go Rebate” which enables retailers and distributors to save up to 5 USD per case (www.syscoindy.com). The offer includes Kraft Brands like Tang Energy, Tang Sport, Crystal Light and Koo Aid. The offer requires for them to redeem on their purchases after filling out forms, these forms also contribute towards building a buyer database. Trade Sales Promotions Globally Kraft foods consider large super store chains and other food distributors as their retailers. Both in the United States as well as European markets there is an emergence of retailer consolidation, this entails powerful retailers who have sophisticated customers so they reject price increases and seek higher amounts of sales promotion for appropriate projection of Kraft’s brands (Kraft Foods Corp. Annual Report 11). Furthermore they have efficient supply chains which enable them to keep costs low and then introduce their own retail brands which can give manufacturers like Kraft significant competition in terms of pricing. In this form of competition, Kraft has to prove it to their consumers that they are providing superior quality. Globally, on the other hand Kraft maintains good relationships with their distributors and retailers too. They offer rebates and volume related discounts to them in exchange for better shelf space. For example according to the Report of the Competition Commission in Mauritius, Kraft has an agreement with their retailers called TSP which provides incentive to them to give better shelf space and visibility to Tang (28). Consumer Sales promotion in United States In order to boost sales of powdered Tang, Kraft offered coupons on 10-pack boxes that would provide the consumers with a free 6-quart canister; this offer also included the chance to win free mini-ball illuminators (Thompson 4). So this sales promotion provided premiums to reinforce purchase decision. For avid tea drinkers, Tang offered flavors in tea. One such flavor is the Wild Berry Tea, this flavor offered sales promotions in the form of premiums too because they offered Disney Channel’s Tune Twister (Thompson 4). On the internet Kraft Foods offers printable coupons to their consumers on their official website. These coupons enable consumers to avail discounts from retailers when they purchase Tang or any other Kraft products. Consumer Sales Promotion Globally In terms of marketing the brand internationally exceptional efforts were made to suit the taste and preferences of the international target audience. For instance, the popularity of the Tang orange flavor is sill the highest but Kraft introduced flavors like Mango for Philippines, passion fruit for Brazil and pineapple in the Middle East (Schultz & Zmuda). In order to create hype for these new flavors, Kraft distributed 27 million free samples to the consumers. This facilitated in establishing a relationship with the consumers and boosting sales up to 42% in Latin America and 25% in Asia (Metzger). The Tang designing team also developed new package that enabled them to offer a newly introduced flavor as free sample alongside their regular Tang purchase. In Mexico alone, 75 million of such samples were distributed (Gibbons).This strategy enabled them to offer a brand new product to loyal consumers, who are responsible for major revenues of a brand. Furthermore, the consumption patterns in the international markets also vary significantly. In the United States the Tang brand is mostly available in large super markets and the consumer follows a weekly shopping pattern due to their busy lifestyles. However, internationally, the consumers demanded smaller and convenient packages; this led to the introduction of 2 liter packs and even single serving packs. According to Metzger in China the consumer prefer single-glass servings instead of the whole jug, packages were designed for their consumption patterns specifically. In terms of contests and sweepstakes, Tang is offering their consumers in Bahrain an exciting consumer promotion which would enable them to win a home makeover (kraftfoodsarabia. com). According to Walters from Gleaner Company another such example is Jamaica where consumer promotion called “Flavor your Fortune”, is a contest with a chance to win a 2 bedroom home in the prestigious community of Stonebrook Vista. Aside from marketing efforts, Tang has used extensive market research to appeal to the consumers. In China for instance, Tang observed that drinking six glasses of water was considered healthy for children. But when mothers tried to make the children drink it, they found it “boring”. This is what led to the creative tagline, “Tang makes water more exciting.” (Sanford) A Comparison of Sales Promotions In terms of trade sales promotion, a similar approach is observed. Both locally and globally Kraft Foods is attempting to establish a cordial relationship with their retailers and distributors that is mutually beneficial. This is accomplished by means of offering them incentives in the form of trade discounts and rebates for bulk purchases. In both the markets we observe that the retailer’s own brands are also giving tough competition to Tang in terms of pricing. For consumer sales promotion, a different trend is observed. According to statistics, Kraft Foods has managed to generate a bulk of their profits from international markets. Furthermore, they have noticed that by offering various flavors and versions of Tang they have managed to boost demand. They have been spending significantly in marketing costs in their international counterparts too. Thus the sales promotion is although present in both global and local markets, their magnitude s different. In United States, they are more focused on offering coupons and holding contests to promote their corporate social responsibilities. Globally their approach has been more focused towards offering contests; sweepstakes and monetary incentives for facilitate purchase decision. Works Cited Food Service- On the Go Rebate. Web. Viewed on March 22, 2012 from www.syscoindy.com/documents/kraft-kool-aid-tang-cl-otg.pdf Hartel, Richard W. & Hartel, Anna K. Food Bites.  Springer-Verlag New York Edition 1 IBL Consumer Sales Contracts with Retail Stores Investigation. 23 June 2010. Web. Viewed on March 22, 2012 from http://www.gov.mu Kraft Foods Inc (KFT) 10-K. Annual report pursuant to section 13 and 15(d). 28 February 2010. Viewed on March 22, 2012 from http://www-05.ibm.com/pl/gbs/pdf/Kraft_Foods.pdf. Web Metzger, Brian. Three Simple Marketing Steps to Grow Your Business in New Markets. Web. Viewed on March 22, 2012 from http://ezinearticles.com O’ Rourke, James. The Business Communication Casebook: A Notre Dame Collection . Cengage Learning. Edition 2. January 2007. 74-75 Print Schultz, E. J. & Zmuda, Natalie. To The Moon And Back: How Krafts Tang Became A Billion-Dollar Brand.Advertising Age 82.25 (2011): 3-28. Academic Search Complete. Web. 22 Mar. 2012. Web September 2009. Print Stanford. D. Bloomberg Business week. Tang Gets a Second Act Far from Its U.S. Roots. April 22, 2010. Web. Viewed on March 15, 2012 from http://www.businessweek.com/magazine/content/10_18/b4176032916770.htm Tangs repackaging exercise set to capture increased market share. Web. Viewed on March 22, 2012 from http://www.ar.kraftfoodsarabia.com Thompson, Stephanie. "Krafts Tang Revival Continues With TRD." Brandweek 39.41 (1998): 4. Academic Search Complete. Web. 22 Mar. 2012. Walters, Sacha. Flavour Your Fortune. Sunday September 5, 2010. The Gleaner. Print Read More