Striving to keep familiar brands fresh
Kraft CEO Irene Rosenfeld.
Who: Kraft chairman and CEO Irene Rosenfeld
Education: She holds a bachelor of arts in psychology, a master of science in business administration, and a PhD in marketing and statistics -- all from Cornell University.
What you may not know: She enjoys playing the piano and rollerblading.
Kai Ryssdal: Irene Rosenfeld, good to have you with us.
Irene Rosenfeld: Glad to be here.
Ryssdal: Notwithstanding the fact that people have to eat no matter what the economy, is this a good time to be in the food business?
Rosenfeld: Oh, I'll tell you I think it's a fabulous time to be in the food business. As you say, people have to eat and I think that certainly helps our industry in general but I think it's a particularly good time to be a Kraft. We make a number of the foods that people love. What we're seeing in response to the difficult economic environment, we are seeing a lot more people that are eating at home. And when they eat at home, they come home to Kraft. I think that's been very helpful to our business and I think it will serve us well as we continue into 2009.
Ryssdal: How do you continue that though when the economy is most likely not getting any better any time soon and people are really going to have to watch what they are spending on?
Rosenfeld: Well I think we have a variety of offerings that play well in the current economic environment. We have products like DiGiorno frozen pizza — Oscar Mayer Deli Creations for example, that are very viable substitutes for some of the foods that they might have bought at quick serve restaurants — and then we have a number of value oriented products like Kraft Macaroni and Cheese, Kool-Aid, Jell-O that offer a great value in the current economic environments. I think that net net, we are well positioned to continue to grow in this very difficult environment.
Ryssdal: How do you — not restructure — but how do you reframe this company to make it more attractive when people are really watching their pocketbooks?
Rosenfeld: I think the biggest thing we have done is to ensure that the message about our iconic brands is focused on the value that they offer. So we talk for example in Kool-Aid, we talk about offering more smiles per gallon. The fact that you can get five times as many pitchers of Kool-Aid as you can get with a two liter bottle of soda pop. We talk about the fact that our macaroni and cheese costs 40 cents a serving. Those are very strong value messages — the fact that when you eat some of our cheese and crackers, it's less than a dollar a serving. And so we are trying hard to help consumers understand the value of the products that we are offering and we're shifting a lot of spending this year to that kind of messaging.
Ryssdal: Let me ask you about that — that messaging — or marketing is another phrase. Do you find it to be a cost effective thing to get all that advertising out there when there's first of all, a lot of value messaging out there from other companies, but also consumers really watching what they spend?
Rosenfeld: Very much so. There's no question that we have well recognized, beloved brands and to the extent that we can tell those brands' stories in a way that is relevant to consumers in the current environment, I think that we will be successful. So we are finding that the value of investing in those kinds of messages today is more important than ever.
Ryssdal: You say beloved brands, others would say, "oldish". I mean, Kraft cheese, Oreo's — I mean they're not the most sparkling brand new kids on the block.
Rosenfeld: I feel awfully proud of what our team has accomplished as they have reframed these beloved, age-old brands to be increasingly relevant to consumers in the current environment. So if you look at the packaging that you see for a number of our products, I think that you see much more of a contemporary feel. I think if you look at what we've done to the ingredients — salad dressing for example, we've taken out the preservatives; we've added fiber to a number of our biscuit products — across the board we are working very hard to ensure that we are upgrading these age-old products that consumers grew up with and love that we are upgrading these products to address contemporary consumer needs.
Ryssdal: Let me pick up on that for a second. My kids for some reason, and maybe this is because of my wife and I, I don't know — but I grew up with Kraft Singles, I mean that was just a staple around my house. But my kids have just sort of discovered them. How do you get something as iconic as Kraft Singles out into the marketplace so more consumers do it? What do you do as a marketer?
Rosenfeld: What you do is you pick up on the fact that it is the number one cheese used in making grilled cheese, which is one of America's favorite foods. And so we are finding again, in this difficult economic environment, there is nothing more exciting to a consumer than grilled cheese and a bowl of soup. And so we are able to benefit greatly from people's desire to return to economical, delicious alternatives.
Ryssdal: I understand marketing but, nothing more exciting than grilled cheese and a bowl of soup?
Rosenfeld: What are you going to have for lunch? If I told you I could serve you grilled cheese and a bowl of soup, wouldn't you be happy?
Ryssdal: I love a good grilled cheese sandwich and a bowl of soup but if I'm packing lunch for the kids in the morning, it's really tough to pack a grilled cheese sandwich for lunch for kids seven hours later.
Rosenfeld: No, it works just fine. You stick it right in the microwave and it tastes just delicious.
Ryssdal: Tell me about Chinese Oreo's.
Rosenfeld: Oreo's in China, you mean.
Ryssdal: Oreo's in China, right and that's sort of the root of the question, I mean you guys have this iconic brand. Oreo's — and amazing success story in this country, a billion dollar brand for you. You try to grow it internationally, you take it overseas and it doesn't really work out. So you reinvent them into something that, in this country anyway wouldn't be recognizable as an Oreo cookie. Tell us the story of how you went to China and said, "listen, we've got to get 1.3 billion Chinese eating Oreo's".
Rosenfeld: Well it starts with the fact that we began by giving the responsibility of making some of those decisions back to our local managers. In the past, we would have mandated what an Oreo looked like around the world from Northfield, Illinois. And that wasn't necessarily consistent with what consumers in the local markets were eating. So what we found was sandwich cookies as a format is just not appealing to Chinese consumers but wafer formats are what they are eating. And so all we did was take the flavoring and the strong cocoa taste of our Oreo together with some of the fabulous marketing that we've done around the world and brought it to the Chinese consumer. And we are pleased to see that it is the fastest growing biscuit in China right now.
Ryssdal: Where do you see this company growing? One of the great statistics that I read about this company is that your products are in 199 of every 200 American homes, and I can't even figure out that percentage but obviously we're approaching saturation here. So where do you go to grow?
Rosenfeld: Well as a company we are going to each of our geographies around the world. So you start with the fact that if you start with North America, the categories in which we participate are growing at very healthy rates. So if you think about our pizza products, our coffee products, our cheese products, our powdered beverage products, our salad dressings — all of those categories are growing at quite healthy rates, and we've done an excellent job over the last couple of years as we've reinvested in our quality in marketing efforts behind these iconic brands and in our new product pipeline. We've done a terrific job of fueling that growth and so North America has delivered the strongest growth we've seen actually since we've gone public. As we look elsewhere in the world, in Europe we had a terrific performance this past year by focusing on the brands that are most important to us and the countries that are most important to us. We've stopped planting flags and we are now focused on those categories, those brands and those geographies that make the most sense.
Ryssdal: You stopped planting flags so you are not looking to expand into other countries, you're going to grow where you are.
Rosenfeld: Well, we're in 150 countries so it's less a question of going to new countries but we have chosen to focus our resources on those ten countries that we think are most important to our future. And half of those are developing markets where we've continued to have significant double digit growth and I think we will continue to see strong growth into the future. The other half are solid markets like we see in Western Europe that have been strong markets for our brands. And we had a terrific performance last year and I think we will continue as we have refocused our spending and our efforts against the key markets and the key brands.
Ryssdal: Let me get into corporate history for just a second. Kraft was controlled for many years by Phillip Morris, a tobacco company, spun off partially in the early 2000's and then finally off into the marketplace last year. Did you find that liberating as a device to help you run this company to not be dependant on a big tobacco company?
Rosenfeld: It's less about being dependant on a tobacco company than it is about being affiliated with a parent that was in a very different business. I think the spin-off was a terrific opportunity for us to essentially reinvent ourselves. I've described Kraft as a 40 billion dollar start-up and I think that's very much the way we approached the opportunity when we spun off in 2007. We took a long look at our structure, we took a look at our compensation systems, we took a look at how we were making our investments and I think the combination of all of that is what has led us to have a terrific performance in 2008 under some very difficult circumstances.
Ryssdal: How much attention do you pay to Wall Street and analysts when you have to talk to them and they ask you about earnings and stock prices and all of that? Does that keep you up at night?
Rosenfeld: It doesn't keep me up at night. It makes me sad sometimes when they don't fully appreciate our story. Clearly our investors are very important stakeholders for the company and I care deeply how they feel. I think that we have tried increasingly over the last two years to become more transparent in reporting our results and in talking about our business and I am confident that as they better understand the story and they understand the guidance that we have given to them that they will truly appreciate the fact that we are doing what we said we are going to do. It's working for us, we have hit our guidance that we have given to them for the last two years and I am confident that we will deliver in 2009 as I've said we would.
Ryssdal: Let me get back to the product that this company has. You have a PhD in Marketing and Statistics, so I'm going to guess that you are fluent in how to get the message out and the numbers behind that message. So help me, walk me through how you go about reframing some of these iconic brands that you have — Oreo's or Kraft Singles — how do you do that?
Rosenfeld: Well Kai, very simply it starts with a deep understanding of consumer behavior and how these products fit into their lives, and I think we've learned a lot. For example, when we think about brands like Kraft Singles, it's not about what we've done to the cheese slice itself but rather about what it means to a consumer and to a consumer, Kraft Singles is about making a grilled cheese sandwich. And so when we go to market those products, of course we talk about the fact that it's got significant calcium in it and that it tastes delicious, but most importantly it makes a great grilled cheese sandwich. And I think as we look at each of our products, If we think about products like DiGorno Pizza, we're talking to consumers not just about the toppings but about the fact that they can have the product whenever they want it and that we actually have a product which is preferred to restaurant pizza. So it comes back to really a fundamental understanding of how our products fit into the consumers life.
Ryssdal: I get that you are pushing grilled cheese sandwiches with Kraft Singles. Why not a ham and cheese sandwich? What made you in the marketing meeting say, "it's gotta be grilled cheese."
Rosenfeld: Well actually you've hit on another one of our important opportunities which is sandwiches in general. As we think about what is of interest to consumers in the current economic environment, they're looking for delicious, great tasting meals at an affordable price. And if you think about our portfolio, it's quite well-suited to deliver that. If you think about the opportunity to have our frozen pizza products where we're talking about a $6.99 or a $7.99 price in contrast to an $11.99 or $12.99 restaurant pizza; if you think about the opportunity to take our Oscar Mayer cold cuts and make a ham and cheese sandwich that's a very delicious and viable alternative for lunch or dinner in the current environment. So for each of our products, we are looking to see what role it can play in the consumers repertoire of foods in particularly today's environment.
Ryssdal: See I think you should have gone with the ham and cheese instead of the grilled cheese and that way you could have gotten Oscar Mayer and Kraft Singles in there.
Rosenfeld: Well I think you are going to see increasingly as you go into your grocery store, we're finding our customers are quite excited about the value meal opportunity that Kraft can bring to them. As you go into your grocery store, you will see a lot of discussion of ham and cheese, of grilled cheese, and a variety of the other simple ideas that consumers can eat that are economical in today's environment.
Ryssdal: Those are all conscious efforts on your part when you sit and run these marketing meetings?
Rosenfeld: Oh absolutely! The sandwich is back and we think that in that context Kraft can be a great beneficiary.
Ryssdal: The Kraft sandwich is back, right? I mean, let's put that on the table.
Rosenfeld: When the sandwich is back, it's got Kraft inside. I'm confident about that.
Ryssdal: As a food company, you guys are incredibly dependant on commodities — milks, cheeses and wheat — all those things that go into making your products. As we all know, commodities prices have been on a tear the last three or four years, they're declining now but you are incredibly sensitive to those prices. What you did was you went out and raised consumer prices as well. Did you worry about losing market share when you did that?
Rosenfeld: There's no question that commodity prices have been on a tear recently and we have worked hard to ensure that our brands have enough value to be able to enable us to be able to recover some of the costs of those rising inputs. At the end of the day though, it's not about just the inputs, it's about the overall value that we're offering and I feel very good about the investments that we've made these last couple of years in product quality, in marketing efforts and in our new product pipeline that enable us to be able to justify value for the prices that we're charging. So we did price in response to the unprecedented rise in costs but I feel very good that we are offering consumers a fair value in today's market and that our products are delivering against what they are looking for.
Ryssdal: Along those same lines, what are your thoughts on food versus fuel and bio-fuels and ethanol and corn going into the fuel stream instead of the food stream?
Rosenfeld: Well I've been on record as saying that I think there are certain of our policies that are not helping the situation both on the sustainability side and on the food side. There's no question that a fairly significant portion of our food supply, it's estimated that about 25% of our corn has been diverted for use in bio-fuels, and the reality is that the footprint of ethanol production as it stands today is not necessarily delivering a better profile. At the same time it certainly has been a contributing factor to spiking food costs. I hope it is an area that the new Administration will tackle as we move forward.
Ryssdal: While you're jazzing up the brands that you have, what else is coming down the pipeline? Is the recession a good opportunity for you to try to get new products out there?
Rosenfeld: Certainly the focus of our new product efforts in 2009 is much more on health and wellness and on convenience than it is on premium kinds of products recognizing the challenging environment. But we've had some excellent success with products like Cakesters, products like Oscar Mayer Deli Creations, that some of our new thin crust pizza products, all of which I think will continue to perform well in the current environment because they offer good value to consumers who are looking for great tasting products at good values.
Ryssdal: Let me ask you a branding question again, and I hate to keep bringing my kids up but that's just kind of the way it goes — My kids know all the words to the Oscar Mayer song, "My baloney has a first name — " They don't know that it is a Kraft product. Is that a problem for you?
Rosenfeld: As long as they know it's an Oscar Mayer product, I'm perfectly comfortable.
Ryssdal: You're alright with that?
Rosenfeld: Yes. This is not — we make many products in fact, there are so many products that we make, Maxwell House coffee for example, Jacob's coffee that consumers would not know are Kraft products. The issue is not whether they know it's Kraft but do they know what the brand is and do they believe that that brand tastes delicious and offers good values. So as long as they can sing Oscar Mayer, I am perfectly comfortable.
Ryssdal: How much contact do you have actually, with the heads of your brand and do you talk to the head of Oscar Mayer every day?
Rosenfeld: No. I certainly don't talk to them every day. I don't think it's appropriate to do that, but I certainly talk to them at least once a month as we make sure that each of our businesses around the world is delivering against the commitments that we've made to our shareholders.
Ryssdal: So what do you do every day?
Rosenfeld: That's a longer conversation —
Ryssdal: No, it's a serious question — Here you are, running a conglomerate that has 9 billion dollar brands and many, many 100 million dollar brands — how do you manage that?
Rosenfeld: I spend most of my time quite frankly on people. At the end of a day the performance of a company like Kraft has everything to do with the quality of the people that we have in the key roles and so I spend most of my time worrying about whether that's the case, making sure and do we have the right people in the right places, that they have the resources that they need to get the job done. We have a couple of businesses that are on my radar screen right now because we didn't exit in 2008 as well as we would've liked and so we have a few more reviews on our nuts business for example than we might have had before. But I spend a lot of my time on people. I spend a fair amount of my time with investors. Yesterday I spent almost the entire day talking with investors, helping them to understand our story, helping them to understand the fact that we did what we said we were going to do. And then the balance of my time is spent, involved in industry activity. I was in Davos last week talking about what we are trying to do to help more consumers around the world have access to food. So it's quite a variety of activities during the day but my number one focus is making sure that the employees at Kraft have what they need to go get the job done.
Ryssdal: I'm going to go back to brands, obviously because that's a key part of what you do. I wanted to ask about reframing and how you go about doing that. Let's take Velveeta for a second. On the label I think it says, "Pasteurized Processed Cheese Food", which does not inspire thoughts of Wow this is really good for you. How do you in a health-conscious environment reframe something like Velveeta to appeal to people who want to be more sensible about what they eat?
Rosenfeld: We do it in a couple of ways — One, we look at how the product is used and what it might substitute for and how, therefore to the extent that you can make a dip with salsa and Velveeta, you have a much more attractive offering than perhaps eating candy or some other kinds of products. I think that at the same time we look at the ingredients of the product itself; and so when we look at a product like Velveeta we continue to look for opportunities to increase the calcium, take down the salt and improve its overall profile. Across the portfolio, I come back to our salad dressing, as we've spent a lot of time talking about what we needed to do to contemporize that business. We took out the preservatives, we added more quality ingredients: fresher herbs to give it a fresher taste profile to a number of our salad dressings. We changed the packaging and the results have been a significant improvement in our share performance.
Ryssdal: This is a company quite literally founded on cheese, I mean the first thing that Mr. Kraft made was a processed cheese, and yet you today are fighting for market share. How do you fix that problem?
Rosenfeld: It comes back to our ability to offer value to our consumers. We have two very attractive forms of cheese that we make: Kraft Singles and products like Velveeta. We also make natural cheese and increasingly we are finding that there's less opportunity to differentiate ourselves in that segment of the market. So it comes back to figuring out how best to build on the equities and the heritage that we have in some of these segments like Kraft Singles and ensure that the consumer feels that she's getting good value in the current environment.
Ryssdal: You were at this company for 22, 23 years — you left — you went to Pepsi-co — you ran Frito-lay for them — you came back here to this food company. What is it about food that is attractive to you as a management opportunity?
Rosenfeld: I love food. Everyone has an opinion about it. If you go to a cocktail party, they can all tell you what's working or what's not working, and it's just a fun category. I think it's especially attractive in the current environment. Everybody has to eat regardless of the economy. And I think the opportunity to make a difference quickly in a category like food is quite attractive.
Ryssdal: When you go food shopping for your groceries at the end of the week or however often you do it, are you able to just shop or do you bring Irene Rosenfeld, the CEO of Kraft Food with you, and you're analyzing market share and shelf placement and all that analytical stuff you have to do?
Rosenfeld: I absolutely bring Irene Rosenfeld, the CEO with me. My family hates shopping with me. (laughter)
Ryssdal: I was just going to say that's so not fun. Right?
Rosenfeld: I straighten all the shelves, I look at our out-of-stocks. In fact, my selling organization is always intrigued to know where I live so they can come and fix the shelves.
Ryssdal: I bet. I bet!
Rosenfeld: Irene Rosenfeld is the chairman and CEO of Kraft Foods. Irene, thanks a lot.
Ryssdal: Thanks for having me Kai.