Kraft Foods Inc. had a very solid third quarter, showing a net revenue gain of 19.4% (to $10.5 billion), organic revenue gain of 7.1% and operating income gain of 17.1%. Diluted EPS for the period more than doubled, to $0.93. The CPG giant raised its full-year 2008 guidance on organic revenue growth from 6% to 7%, and confirmed EPS full-year guidance (excluding items) of at least $1.88. "Kraft had a strong quarter in a difficult environment," said chairman/CEO Irene Rosenfeld. "Our operating momentum continued, with solid top- and bottom-line contributions from all geographies. I am especially pleased that our volumes in the third quarter held up better than expected, despite significant cost-driven price increases and an unsettled economic environment. As family budgets are squeezed, our ongoing programs to add value to our products through investments in quality, marketing and innovation are paying off." Kraft reported that its acquisition of Groupe Danone's global biscuits business contributed 9.3 percentage points to net revenue growth, partially offset by a 0.9 percentage-point impact from divestitures. Currency added 3.9 percentage points. Like other F&B companies, Kraft has been challenged by dramatic rises in the costs of energy and input/commodities--particularly in this year's first half--and has raised consumer prices substantially to cover those. This has resulted in sales volume decreases in many product categories, although Kraft is positioned well because many of its core products/brands are value-oriented, points out Christopher Shanahan, research analyst, chemicals, materials and food, Frost Sullivan, a marketing research firm. "Kraft had solid revenue growth, and although much of that was due to price increases, they are a strong brand with strong core products that do well in hard times," such as Kraft Macaroni & Cheese and Kool-Aid, he says. Kraft's prices rose 6.7% overall, against an average overall volume decline of just 0.6%, points out Shanahan. Noting that Kraft sold Post Cereals, Shanahan adds that he expects Kraft and other CPGs to continue to sell off less profitable brands in this calendar year's third quarter, and also expects that declines in energy costs and moderation of increases in commodities prices (although these are still at record levels) will also be beneficial to CPG's third-quarter performance. Here's a rundown of Kraft's performance by category and geography:
McDonald's is putting a focus on its food and a more whimsical personality through new packaging that global Chief Marketing Officer Mary Dillon calls "the biggest new packaging initiative in the history of our brand." The new packaging, which features photographs of the food and kitchen utensils as well as big print typography, will begin rolling out in November in the United States, United Kingdom and Ireland. It was introduced at a media event in Chicago on Wednesday. The packaging--in brown, purple, red and blue hues--replaces the red-and-white packaging that featured images of customers that the company has been using for five years. That packaging showed customers actively enjoying themselves and was launched on the heels of McDonald's "I'm lovin' it" push, which was intended to place the company's focus on the customer. "We're expressing the quality of the brand in a different way," said Pierre Woreczek, chief brand and strategy officer for McDonald's Europe. "We're moving from lifestyle packaging to one that expresses our passion for food quality while keeping our brand tonality." The tonality is expressed through whimsical phrasings on the boxes and wrappers. One clamshell cardboard box for a Big Mac boldly exclaims: "There is only one Big Mac." One for a fish sandwich proclaims: "Full Steam ahead. Enjoy your Fillet O' Fish." Elsewhere on the boxes, there are photos of ingredients, such as lettuce, onions, and in the case of the Big Mac, a locked jar of secret sauce. The boxes also contain nutritional information and a promise of ingredient freshness. The packages will be translated into 21 languages to accommodate McDonald's global markets. Both the new packaging and the previous "I'm lovin' it" themed packaging were created by Boxer, a unit of The Marketing Store Worldwide, based in Birmingham, England. The new packaging is intended to put the company's "passion" for its food in directly in the hands of its 56 million daily customers. "[It] reflects the essence of who we are. We're a restaurant company," Dillon said. "It will help reintroduce our products and our quality, fresh ingredients." In addition to its new packaging, McDonald's in November will also begin rolling out a global promotional tie-in with the upcoming Dreamworks movie "Madagascar 2, Back 2 Africa." Like its "Shrek 3" promotion last year, the tie-in will emphasize the healthier alternatives on the kids' menu, such as apple slices and low-fat milk, Dillon said. In addition, the company will launch a "One Minute to Move It" initiative, encouraging kids to spend at least one minute a day doing something active or creative. Promotional messaging includes phrases such as "dance it," "create it," "write it," and "jump it" after the phrase "One minute to ..." Ads for the promotion use the movie's mischievous penguins playing the movie's hit song, "Move it, Move it," to make a family dance in an attempt to steal a Happy Meal. In addition to the ads, there will be an online component where kids can track the minutes they use to move for create and extensive in-store promotional efforts, Dillon said. "A kid like you is doing something really cool right now. What will you do with your minute," read one promotional phrase. "It lets kids take control of their own well-being," Dillon said. "Once kids get started, they'll take many more minutes to do what they're doing."
Nissan is launching the next version of its Nissan Z sports car virtually. While the flesh-and-blood 2009 370Z will be unveiled on the L.A. Auto Show stage, the gaming masses will see it in Electronic Arts' "The Need for Speed: Undercover." The game, which goes on sale in the U.S. and Europe next month, has players engaging in street and freeway battles and evading the fuzz. It's for Xbox 360, PlayStation, Wii and Nintendo. Robert Brown, senior manager marketing communications, says the idea to put Z in a game before it hits real streets "came up during the process; basically it's desirable for both parties [Nissan and EA] to have our performance cars in the game," he says. "When we started talking about maybe blowing out this partnership it became clear it would work out." He says Nissan will launch its own co-branded digital campaign to promote the new car and the new game. According to Brown, the gaming audience is "exactly right" for the Z. "They have the right mindset; they love sports cars, the latest technology, and they like to push the limit." He says that when Nissan marketers matched the Z target with the driving gamer, there were similarities. "We saw predominantly male, 30- to-35-year-old singles," he says, adding that 50% of driving gamers are 25 and older, and 20% are 35 and older. Brown says that for many buyers, the Z is primary transportation. "There is a bi-modal target: younger guys without families and older guys who have finished those responsibilities." He says for the 30- to-35-year-old target, the Z would likely be a primary vehicle, and for older buyers, a second car. The two-seat specialty-car and four-seat sports coupe segments of the market have been hit hard by the economy. Sales of the current-model Z were off 56.3% last month versus the month last year and 41.8% in the first nine months. Sales of Mazda's Miata sporty car were off 39.2% last month and 21.4% for the year through September. Sales of Mazda's RX-8 were off by over 40% in the first nine months. If one includes four-seat coupes like Mustang and Infiniti's G35, things are not improved. Sales of Mustang, off 52% last month, have dropped 28% year-to-date; Infiniti's G coupe saw sales drop 55% last month and 35% through September. But Brown is bullish on Z's position in the segment. "The sports car segment is not immune to today's conditions--but the Z, with its heritage, is a category killer, and we will maintain share and do great things," he says.
Between corporate crackdowns on business travel and consumers canceling vacations, hotel companies have plenty of reasons to cry in their beer. But for Holiday Inn Express, the current slowdown means it's time to push its brand identity one step further, in edgy spots that feature a marketing executive with mad rapping skills and a baby smart enough to cut her own umbilical cord. "We'd all like to be having better numbers and better performance right now," says Steve Ekdahl, director of brand marketing for Holiday Inn Express, based in Atlanta. "But our brand has always been all about smart value, and so our messaging resonates even more in difficult times. We want to make sure we're out there in the media." The new ads are part of same campaign the hotel chain has been running since 1998, positioning it as an affordable alternative for smart people. "They're everyday heroes," he says. "In terms of demographics, we're aimed at frequent business travelers, from 25 to 54, and it skews male. But we really think of them in terms of psychographics--they're the kind of travelers who say: 'Why should I pay for business meeting space I'm not going to use?' or 'Why should I have to tip someone $2 to move my roll-y bag six feet?' We have people staying with us who could afford to stay anywhere, but like that we're a bargain. And we have travelers who aren't making much money yet and wish they were staying at a W, but are pragmatic and rational about their budgets right now. These ads target anyone with that value mindset, in what we hope is a refreshing and unexpected way." One ad, for example, features a fan fainting at a Cal Ripken Jr. book signing. A bystander--a doctor--offers to help and is rebuffed. Instead, the security guard demands someone smarter: "Did anyone stay in a Holiday Inn Express last night?" In another, astonished parents watch a newborn cut her own umbilical cord and then recall--"We did stay in a Holiday Inn Express," the dad says. "About nine months ago," chimes in mom. (Fallon, Minneapolis is the agency.) It's true that the ads stand out because they resonate with Generation Next, the younger consumer that so many hotels are trying to woo, says David Brudney, a hospitality consultant in Carlsbad, Calif. "I don't see any other chains playing off the hip-hop generation. But they also appeal to the kind of Baby Boomers who consider themselves on the edge," he says--a good spot to be in with so many consumers trading down in hotel brands. Brudney expects that trading-down trend to continue, as more corporate travel departments confront what he calls the "AIG Factor." During the recent AIG bailout furor, it didn't help the troubled insurer's image much that top executives were photographed at a corporate retreat in a super-swanky resort. "That's going to continue to hurt upscale properties," he says. The rapidly growing Holiday Inn Express--opening about two hotels a week with more than 1,600 so far in the Americas--is owned by the Intercontinental Hotel Group, which through its Holiday Inn, InterContinetal, Crowne Plaza and other brands is the world's largest hotel company, ranked by number of rooms.
General Motors set records in Latin America, Africa and the Middle East and Asia-Pacific regions during the third quarter. Yet Toyota has increased its lead in global sales, cementing its new position as a larger carmaker. In reporting results on Wednesday, GM said it sold 6.7 million vehicles in the first nine months this year. Toyota posted worldwide sales of over 7 million units during that period. General Motors said it sold more than 2.1 million vehicles during the third quarter this year--11.4% less than the period last year because of poor sales in the U.S. and Europe, where GM reports its sales dropped 18.9% and 12.3%, respectively. Sales of GM vehicles worldwide were down 5.8% versus the first nine months last year, although sales outside the U.S. increased by 164,000 vehicles, per the company. "The recent challenges in the global financial markets, including credit tightening and the drop in commodity prices, have negatively impacted market demand. However, our sales performance shows that we are continuing to take advantage of new emerging market opportunities and are meeting customer needs with fuel-efficient products that offer compelling design and great value," said Jonathan Browning, vice president, global sales, service and marketing, in a release. While Chevrolet sales were down 16.6% in North American in the third quarter, the company said the division is strong elsewhere. The division posted a 5.3% gain in Asia-Pacific--with Chevy getting a 4.3% gain in China and 4.9% improvement in India versus the quarter last year. The company says the Chevrolet brand had a 3.4% increase in sales in Latin America, Africa and the Middle East, with Chevy accounting for 90% of GM sales in those regions. Chevrolet had a 2.7% increase in sales in Europe, with a 6.2% increase for the first nine months in Russia versus the period in 2007. General Motors says Cadillac sales grew 10.7% in the third quarter because of Latin America, Africa, the Middle East and Asia-Pacific. Cadillac sales in Europe and North America were down 9.3% and 28%, respectively, in the third quarter.
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