Kraft‘s shares have dropped about 22% in the last year. They are flat over 2 years. They are down around 25% for three years, and down 35% from their peak in 2002. Recent profit announcements affirmed that Kraft is currently making 13.5% less than it made in the same quarter a year ago.
Company CEO Deromedi explained away the poor performance with "We don’t want to repeat mistakes we made in early 2003 when we raised prices and had significant share declines." So, 3 years into a restructuring the CEO says investors can hope for either sales at low profits, or less sales? (see full Chicago Tribune story)
When was the last time your boss said you could spend 3 years trying to get your job right with no performance improvement? The CEO certainly has high expectations for investor patience, doesn’t he?
Kraft is completely stuck in the Swamp, as it moves toward the Whirlpool. The company never disrupted its worn out Success Formula, and keeps trying to regain the glory years when "America Spelled Cheese K-R-A-F-T" (remember that ad slogan?) Yes, it is launching a new South Beach Diet line, but because it’s still using its old, poorly performing Success Formula that line is not moving the company toward a bright (and more profitable future.) The head of new products left in June. And in the last year they’ve sold businesses to both Wrigley and Kellogg in an effort to shore up the P&L.
Kraft’s leadership needs to create some White Space and find a new future – instead of trying to resurrect Velveeta-land.