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12/01/2012

Krafting a New Focus on Grocery Innovation

Photography by Vito Palmisano
With a renewed focus on its portfolio of iconic brands, Kraft Foods Group has pinned its future on a targeted strategy that focuses on its people, platform innovation, collaboration and execution with excellence.

Retail Leader sat down for an exclusive interview with Tom Corley, executive vice president and president of U.S. sales, shortly after Kraft Foods Inc. became Mondelez International and spun off its North American grocery business into Kraft Foods Group in October 2012. He revealed his thoughts on the future in store for this "$19 billion startup."

"We want to be the best consumer food products company in North America," explains Corley. "We want to provide the best food and beverage products and solutions to our customers and to our consumers."

How Kraft intends to go about doing this has been clearly articulated in what Corley refers to as its four pillars of success. First is the new company's emphasis on not only the collective performance of its 25,000 employees, but also on a philosophy of allowing them the autonomy they need to run their businesses.

"Number two is we have to execute with excellence. If we don't execute in the marketplace, whether you're in a marketing function, a sales function or finance, we are going to suboptimize our results. So there is a relentless focus on execution," Corley says. For the first nine months of 2012, Kraft Foods Group reported net income of $1.54 billion, up 7 percent from a year ago, while revenues climbed 2 percent to $13.85 billion.

Kraft's brands, some of which claim a 109-year-old heritage, are the company's third pillar. With 10 brands that boasted $500 million in sales apiece last year, Kraft looks to continue to innovate and extend its portfolio so the company has a sustainable platform of growth. "That is absolutely of colossal importance to our future," says Corley.

"And then lastly, I would tell you that like any good company, we have to find 'effective efficiencies'–not only in our own network but collaboratively with retailers." Toward that end, no process or operation is sacred, and Kraft is scrutinizing everything from its business units to its supply chain to its operations group to ensure that the company is identifying efficiencies against each of the brands it brings to market.

Staying relevant

It's clear in speaking with Corley and touring Kraft Foods' Northfield, Ill. -based headquarters that the CPG company recognizes its robust portfolio of brands holds the key to its future success. One need only listen to a brief roll call to begin to understand the tradition and history in its portfolio: Oscar Mayer, Philadelphia, Planters, Maxwell House, Velveeta, Jell-O, Kool-Aid and Kraft Macaroni & Cheese are among the household names.

"Our success is dependent on how we treat these brands, how we market these brands and how we continually make them relevant," says Corley. "It's extremely important to our consumers and to the shoppers that walk into any outlet of any retail store that we maintain the high quality of those brands and that we market them so that they are effectively relevant to today's consumer."

But complacency is not on the menu for Corley and his team. Not content to simply sustain the current performance level, Kraft Foods aims to "turbo-charge" its iconic brands, creating new opportunities for consumers to use them and moving the needle for retailers in their respective categories.

"As I mentioned, we have 10 $500 million brands, we have 17 $100 million brands, and in 80 percent of the categories in which we participate, we're either in the No. 1 or No. 2 share position," says Corley. "We have very large brands who contribute significantly to categories. Our retailers count on those base businesses for their top line and bottom line. In addition to that, they are staples in our consumers' homes."

Keeping that core business healthy is clearly critical, Corley says, but equally important is Kraft's future ability to innovate–to take existing brand equities and extend them.

"Our brands are trusted by consumers each and every day. If we can utilize the path we've been on with consumers and take that innovation opportunity to answer what they may need, and bring new items and actually bring new categories to the store, the retailer wins. Importantly, the consumer wins, and Kraft is providing value to the network all the way through," says Corley.

Focus on innovation

The new Kraft Foods Group considers innovation, both item- and platform-based, to be its lifeblood for the future. CEO Tony Vernon initiated that direction and revamped Kraft's internal structure so that business units can move from ideation to commercialization more quickly than ever before. Pair that with autonomous teams empowered to be creative and accountable, and the company is seeing a real culture shift.

"Kraft has gone, quite frankly, to being one of the best at bringing new item and platform innovation to the marketplace," says Corley. "The reason we're able to do that is because we're working more effectively horizontally through our company. We've been given the opportunity to create our own future. We have the opportunity to make our own decisions."

Kraft's MiO liquid water enhancer, launched last year and currently a $140 million-plus brand, is the result of this new culture of innovation and a classic example of how a single product can create an entirely new category. The new brand, the result of tapping sophisticated consumer insights, has paved the way for extensions of Kraft's Crystal Light and Kool-Aid brands into the same format.

"Are we going to be 100 percent successful with all of these items? We are not. And that's OK, as long as we are bringing more new items and platforms to the marketplace that are accretive to the category, that expand categories, that meet consumer needs, and that satisfy our retailers."

"It's right on track with where consumers are as far as convenience, portion control, added variety–all of those attributes are represented in this bottle of MiO," says Corley. "Are we going to be 100 percent successful with all of these items? We are not. And that's OK, as long as we are bringing more new items and platforms to the marketplace that are accretive to the category, that expand categories, that meet consumer needs, and that satisfy our retailers."

It's all about the shopper

Leveraging consumer insights into a successful new product launch or brand extension is by no means unique to the MiO project. In fact, Kraft recognizes that the better it understands its consumer, the better equipped it is to deliver relevant products that resonate with its customers and have an impact on retailer's category sales.

"We have to ensure that we're bringing new and exciting innovation that's accretive to their categories, like Oscar Mayer Selects. We have to be able to talk about where the growth of categories is going and where there are deficiencies in categories. That's not just zeroing in on one category; that's working with the retailer to ensure we understand adjacencies, growth and opportunities for improvement across the entire store. Understanding their shopper, doing the research and having those insights is of colossal importance," says Corley.

Corley explains that Kraft mines the rich data it has about consumers: how they shop, where they shop, how they use products in-home, when they eat, how portable product has to be and what their packaging expectations are. Kraft then overlays these insights onto the retailer's data: What are they promising consumers, what is the primary reason the shopper has chosen that particular retailer and what are their expectations when they enter that store?

"The bull's-eye for us is to ensure that we utilize the rich data with our retailers, combine that with consumer insights, so that we can commercialize successfully together," Corley says. "It is of the utmost importance for us to collaborate successfully with our retailers to bring insights and brands to life in a successful fashion for their shopper and our consumer."

"The bull's-eye for us is to ensure that we utilize the rich data with our retailers, combine that with consumer insights, so that we can commercialize successfully together."

The road ahead

As Corley stated in no uncertain terms at the start of our conversation, Kraft Foods Group wants to be the best food and beverage company in North America. It's clear that the newly reconfigured organization has a defined strategy to reach its ambitious goals.

With a focus on maintaining the excellence of its portfolio and a dedication to core innovation, Kraft enters the next chapter in its 109-year-old history firing on all cylinders.

"Ultimately what we want to do is satisfy our retailers, delight our consumers and provide a very sustainable and consistent platform for growth and return on investment for our shareholders," Corley says. "If we can do that as a CPG company, we can continue to work effectively together with our retail partners to ensure that we're meeting their needs, we're driving the success of their categories, and we're working together for the long term."

Jennifer Acevedo is the Editor-in-Chief of Retail Leader. Pierce Hollingsworth is a vice president at Stagnito Media.