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Kraft "Quick Meals" Slow to Catch On
Kraft Continues to Be Plagued With Market Share Losses Despite New "Quick Meal" Products
NEW YORK (AP) -- Kraft Foods has introduced a new products in a bid to turn around its slumping sales, but early results indicate consumers have so far been slow to bite.
Analysts say even though the products -- which range from all-in-one sandwich kits to gourmet frozen pizas -- are tasty, consumers aren't buying.
Stephen Sibert, senior vice president at industry group Grocery Manufacturers/Food Products Association, tried the products -- such as sandwich kits made with Oscar Meyer meat, Kraft cheese and salad dressings -- when they debuted at a consumer food conference in February. He said they hit the right spot when it comes to taste.
And, he said, as with many new products that come into the market, shoppers aren't immediately rushing to stock up.
"They were sensational from a taste standpoint," he said. But "trial is always an issue."
AC Nielsen data shows total sales at the foodmaker have dipped 0.3 percent over the 12-week period ended July 14. Its top three food categories -- cheese, crackers and cookies -- have all posted declining sales, while market share fell in seven of Kraft's top ten food categories during the second quarter.
D.A. Davidson analyst Timothy S. Ramey said although consumers are clamoring for more convenient meals and more quick-meal options at stores, Kraft may not have found the right formula yet to entice people to look to their grocery store rather than the nearest restaurant for a quick meal.
"In general, they're providing some interesting innovation," he said of Kraft's new products. "Consumers want them, but it's also a category that competes with restaurants and eating away from home."
The new products are part of a restructuring plan engineered by new Chief Executive Irene Rosenfeld. When the products were announced at the February Consumer Analyst Group of New York conference, Rosenfeld said Kraft had lost its "edge" and had spent too much time apologizing for the performance of its products rather than reinventing them. The company posted a 0.3 percent rise in sales for its 2006 year.
As part of the new strategy, Rosenfeld said Kraft would offer more quick meals for busy parents looking for high-quality, fast dinner options. The strategy was a nod to a trend food industry experts say is with us to stay -- consumers want good food fast.
In a 2007 study on shopping trends at grocery stores, the Food Marketing Institute found that 51 percent of shoppers were very or somewhat interested in freshly prepared, ready-to-eat food to take home.
"People are very responsive to these kinds of products," said Tim Hammonds, president and chief executive of the research group. "Having prepared foods in the store gives them ideas for things that are quick and easy."
But Kraft may not get the turnaround it needs soon enough for investors, who have now been joined by several well-known billionaire activists like Warren Buffet and Nelson Peltz. Both have bought small stakes in the company in recent weeks.
Kraft has also been mentioned repeatedly as a possible takeover target ever since it was spun off from its parent company, cigarette maker Altria Group Inc. at the end of March.
The first test of how well the products have helped overall sales will come Wednesday when the company reports its second-quarter financial results. But Wachovia Securities analyst Jonathan P. Feeney said investors shouldn't get their hopes up -- at least not yet.
"While these items may be too small to immediately move the sales or earnings needle, we think they offer solid prospects for tangible returns in the near future," he said in a note to investors.
Kraft spokeswoman Lisa Gibbons declined to comment, saying it is premature to discuss the information before its financial results have been released for the quarter.
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