Kraft's Crash Diet

BusinessWeek has a short article on Kraft's 'crash diet.' The packaged food producer is huge, with 2004 expected sales of US$32.3 billion. It's accomplished this with the huge investments it has made in purchasing big name brands and bringing them into the fold. Its strategy however is starting to backfire. Competition from private label brands are take a big bite out of Kraft's earnings and its ability to charge premium prices. Kraft is partly to blame for oversaturating store shelves with variations of the same product -- I remember reading elsewhere that there are about 20 different types of Oreo cookies. The biggest problem for Kraft however, is Wal-Mart. Wal-Mart is commoditizing packaged food. They're reducing varieties by only stocking the products with the greatest turns. Wal-Mart makes its money by moving volumes, not moving low quantities of niche products. So Kraft is retooling its brand strategy and selling off the low performers, deciding to stick with the giant brands that it intends to dominate with. This is a direct opposite move from the latest in marketing trends, which seeks to mass-customize products for consumers. Interesting.