Financial Crisis- what Financial Crisis?

December 2, 2008 at 6:40 pm Leave a comment

Kraft Foods has earned the reputation of a trusted brand among consumers. Although the economy’s financial crisis has persisted over the past two years, food makers, including Kraft, are flourishing according to Thomas Gaudio of BNET. In Gaudio’s article, “While Financial Crisis Continues, Food Industry Flourishes,” food manufacturers are a “safe haven in uncertain times” for investors according to Gregg Warren, an analyst with Morningstar, a Chicago based investment research firm. “Their cash flows are stable. When you boil it down, people still have to eat,” he said.


According to Gaudio’s article, Kraft had net profits of $ 1.3 billion on net revenues of $21.5 billion for the six months ended June 30, compared to net profits of $1.4 billion on net revenues of $17.8 billion during the prior year. As of Sept. 22, Kraft shares were trading at $33.05, between a 52-week range of $28.04 and $35.29.


Gaudio also discusses how Kraft Foods Inc. is trying to make its mark in the developing world by getting more exposure in countries like China, Russia and Indonesia. However, brands like Oreo and Maxwell House must compete with other brands that have already made their mark in such countries. This is not an easy task because Warren says that taste tend to be local.


Kraft Foods has not always been so fortunate to have stability in an unstable economy. The company has faced a few crises, but none so big that the company couldn’t handle. Most of their problems can be found in a food safety category where food is contaminated. For instance, in September of this year, milk contaminated with melamine was found to be the cause of the deaths of four infants in China. Food companies around the globe immediately began assessing their products, and according to an internet news source, some companies created new strategies to prevent such problems.


However, rumors of melamine-related recalls of Oreos and other sweets spread by phone text messages and on the Internet, so Kraft Foods Inc. hastened to reassure customers that none of its Oreo-brand products contain milk powder from China. A representative of Kraft Foods said that Oreo fillings contain no milk, while Oreo cookies with icing on them use milk powder from Australia. “Regardless of where they are produced, Kraft products are always held to the highest quality and safety standards,” the company said.


Because the rumors were false, the company could have reacted outrageously, but Kraft Foods simply assured their consumers that information was just not true. The company had a valid explanation of why the statement could not have been true and reiterated that their products are of high quality and safely produced.


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