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Kraft keeps cooking in hard times

Steve Henn Jul 28, 2008

Kraft keeps cooking in hard times

Steve Henn Jul 28, 2008


Kai Ryssdal: Part of the economic slowdown is being driven by the fact that consumers aren’t spending as much because everything is getting more expensive. The same thing’s happening to some companies, where rising commodity prices are eating into profits.

Tyson Foods, the country’s biggest meat company, said today earnings dropped more than 90 percent last quarter because of grain costs for all that livestock.

But I guess it depends on who you’re feeding, because Marketplace’s Steve Henn reports Kraft profits are fattening right up.

Steve Henn: Despite a tough economy, the maker of Oreos and Velveta raised its prices last quarter and boosted its earnings.

Matt Arnold follows the firm for Edward D. Jones.

Matt Arnold: Kraft has iconic products and the fact that they do so well at making products that people just adore is certainly going to help them in this environment.

Take my crippling addiction to Oreos…

[Oreo ad]: Whose that kid with the Oreo cookies?

There’s no way I’m giving them up when Kraft pushes through a price increase. And Matt Arnold says if you’re in the mood for a little home-cooked comfort food but you don’t actually want to cook, Kraft has you covered — even in a recession.

Arnold: If you think about the consumer, one of the first things, if they want to tighten their budget up a little bit … eat less at restaurants and eat more food at home. So, Kraft’s product offering plays quite well to that.

Don’t have 25 bucks for a pizza delivery to your door?

[DiGiorno ad]: For fresh baked pizza today, it’s not delivery; It’s DiGiorno.

Coffee at Starbucks starting to seem like an extravagance? Kraft is there with Maxwell House.

Robert Moskow at Credit Suisse says by positioning itself as an affordable alternative, Kraft is growing its waistline in a shrinking economy.

Robert Moskow: People are paying more at the gas tank. They are paying more at the grocery store. If you can market brands and be a hero to the consumer by offering low-price, high-value food, you are going to gain market share.

Moskow says the question for Kraft is how long will it be able to raise prices on its beloved brands before Americans bolt for even cheaper alternatives?

In Washington, I’m Steve Henn for Marketplace.

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