Kraft focuses on Cultural Preferences

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For a long time, Kraft Foods Inc., the second-largest international food company by revenue, struggled to make headway in Asia-Pacific, the world’s most populous region.

“The top line [revenue] was sluggish, profits were under squeeze. And critically, we didn’t have a strategic direction,” says Pradeep Pant, Kraft’s president for Asia-Pacific. “There was a lot of activity, a lot of churn, but not much impact.”

Kraft’s operating profit in Asia-Pacific between 2001 and 2007 was “slightly negative.” But starting in 2008, operating profit in the region has grown at a double-digit rate. The company doesn’t break out Asia-Pacific performance figures, but Kraft’s global net income in the second quarter jumped 11% to $827 million from $745 million in the year earlier period; sales fell 5.9% to $10.16 billion in the quarter.

The turnaround prescription in the region had several critical elements, including Kraft’s $7 billion acquisition of French company Groupe Danone’s global packaged baked-goods business in 2007. (Last week, Kraft’s latest major expansion effort, a $16.73 billion bid for Cadbury PLC of Britain, was rejected. Kraft said it would continue its quest, which would create a global food giant.) Another key “game changer” was that “we gave people close to the point of action the power to take decisions,” says Mr. Pant, who was ap

pointed to his role in January 2008. Also crucial was instilling a “mindset of risk-taking, people willing to experiment.”

That experimentation extended to altering product formulations to suit local tastes. For instance, when Kraft’s research showed that Chinese consumers found Oreo cookies too sweet, “we toned down the sugar, whereas the Indonesian version is definitely sweeter than the Chinese product.” As a result, he says, Oreo is now the best-selling packaged cookie in China.

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