Kraft Is Betting Big On The Global Cookie Business’ Future

Kraft Foods (NYSE:KFT), which is splitting into two independent companies on October 1, hopes to consolidate its cookie business through a combination of local acquisitions and leveraging its strong brand name to introduce new variants and flavors. In Morocco, Kraft is paying $151 million to acquire full ownership of the country’s top cookie maker Bimo. Kraft earlier had a 50% stake in the company. Bimo has a 13% share of Morocco’s cookie market but, in the recent past, its market share has eroded due to the country’s free trade agreements with the EU and Turkey, and because this competition has become more fierce. ^[1]

Earlier in the year, the company also announced the expansion of its Nabisco Arabia biscuit plant in Saudi Arabia to double production capacity. The Nabisco Arabia plant produces Oreo cookies, Ritz crackers and belVita biscuits. And, in March, it launched Barni to target the children’s snacks segment. The Middle East and North Africa region is important for Kraft Foods with Dubai set to become a key hub after the company’s split next week. ^[2]

India and China

In India, the company introduced a new chocolate cream variant of its Oreo cookies 18 months after it launched the original Oreo cookies. With the help of Cadbury’s distribution and supply chain networks, Kraft has been able to competitively price its products in the country. Cadbury was already present in India for more than half a century prior to its acquisition by Kraft. With an expanded portfolio of products, the company plans to consolidate its market share in the $2.2 billion Indian cookie market. ^[3]

Similarly, in China, Kraft is molding its portfolio to introduce products/flavors that are likely to appeal to Chinese consumers. Kraft introduced birthday-cake flavored Oreos at the start of the year. And this is not the first time that Kraft is experimenting with cookie brand to appeal to local tastes. Already present in the country are flavors like green tea, ice cream, mango and mandarin orange.

We currently have a $43 price estimate for Kraft Foods, which is about 5% ahead of the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Kraft to buy out Morocco cookie maker, September 11, 2012, reuters.com [↩]
2. Kraft finds Dubai much to its taste, September 23, 2012, thenational.ae [↩]
3. With new Oreo, Kraft set to take a bigger bite of biscuit market, September 19, 2012 [↩]