Kraft Foods Southern Africa

Kraft Foods Southern Africa is in the spotlight as the region becomes an increasingly important revenue stream for the world’s second largest food company.

Kraft Foods is renowned across every continent as the powerhouse that punches with the tastiest and best-loved snacks. Forty of the 100 or so brands that Kraft holds in its global portfolio have been in existence for over a century and the company now ranks as the second largest food company in the world. Through a clutch of iconic brands that include Cadbury, Jacobs, Oreo, Oscar Mayer and Philadelphia, not forgetting Kraft itself of course, the company markets an eclectic mix of biscuits, confectionery, beverages, cheese, grocery products and convenient meals in over 170 countries.

Last year, Kraft had revenues of $49.2 billion—more than half of which was earned outside North America. As disposable incomes rise across the developing world and instantly impact on food budgets, emerging markets are a priority and the company is eyeing the African continent with a new zeal.

Kraft’s presence in Southern Africa received a major boost through its recent amalgamation with Cadbury. The Cadbury brand became part of Kraft in February 2010, with both companies already having an established presence in Southern Africa. The integration of the two companies into a single legal entity—Kraft Foods South Africa—was formally completed on March 1, 2011. Cadbury had the larger presence and the move dramatically and instantly gave Kraft a much more sizeable footprint in the region, particularly in confectionary markets. The company now manufactures and markets candy, chewing gum, biscuits, coffee and groceries.

Southern Africa, in keeping with its economic status, has the most keenly developed appetite of all for snack foods. The region has been added to the roster of 10 priority developing markets that will receive disproportionate investment from the company.

“The Southern African confectionary market is very comprehensive in that there is both a developed market and an undeveloped market,” explains Sean Murphy, managing director of Kraft Foods Southern Africa. “This raises challenges in ensuring that we have a comprehensive premium portfolio to meet the needs of our more developed market as well as having a number of products that offer value for money.”

One example is the launch last year of the Cadbury Perk bar. It is a premium product; but Kraft managed to hit a R2 price point, making it far more affordable for consumers. “It’s not about making lower value, lower quality products—it’s about making the same premium Cadbury brands available at lower price points,” Murphy comments.

Today, Kraft has a headcount of 2,400 employees in Southern Africa and operations are guided by a head office situated in Johannesburg, South Africa. The company has six manufacturing plants in Southern Africa: Port Elizabeth, South Africa for chocolate; Botswana for chewing gum; Swaziland for sweets; Tunney in Johannesburg, South Africa for biscuits, sweets and royal baking powder; Namibia for speciality chocolates; Kenya for powdered chocolate beverages; Nigeria for sweets; and Ghana for powdered beverages.

Kraft is set to invest US$150 million into its African manufacturing operations over the next three years, targeting the operations that manufacture high-profile brands such as Stimorol chewing gum and Cadbury Dairy Milk chocolate. The company is also investing in increased capabilities and capacity for its research and development facilities in Johannesburg, which will serve as a centre of excellence throughout Africa. “Improving our cost base isof course our key objective, in addition to enhancing our people capability and being better able to meet our customers’ and consumers’ needs,” comments Murphy.

The company’s Port Elizabeth site in particular has been the beneficiary of targeted investment. “We have had a large amount of new equipment and capability put into the plant over the last three years, which was really driven around the areas of automation and improved production and process control. We have reorganised the workforce to enable us to better invest in the development of skills sets and consequently provide a more sustainable cost base and produce high quality products that meet consumers’ needs,” he states.

Of all the improvements that are currently taking place, Murphy feels it is investment in relationships that will help Kraft Southern Africa to further cement its competitive advantage. “We need to work very hard on our relationships with our partners—both our suppliers and our customers. As a leadership team we believe we have lost some ground in this area over the last 18 months due to the fact that we have been quite internally focused as we worked through the mechanics of the integration and some internal reorganisations. So we now need to refocus and rebuild our relationships, progressing them into partnerships.”

And that focus on relationships extends to the company’s dealings with local communities. “As a global food company, our corporate social responsibility extends to three key areas—hunger and poverty alleviation, healthier lifestyles and sustainable agriculture,” explains Murphy. “We recently launched our flagship Enterprise Development Project which speaks to all three pillars. The project has been made possible with funding of R2.3 million from the Cadbury Foundation which provides annual funding to Africa. The money will be used to empower communities to become self-sustainable through small and medium enterprise development.”

The initiative will see income-generating skills being taught to unemployed community members in the township of Tembisa, on Johannesburg’s East Rand. Around 30 unemployed community members have been identified to participate in this enterprise development project, which comprises skills training in baking, sewing, nappy-making and vegetable gardening enterprises. The funding will be used to purchase infrastructure—including equipment and offices—as well as the provision of technical and business skills training. Depending on the success of the pilot project, Kraft plans to replicate the concept at other sites in South Africa and other parts of Africa where it has operations. www.kraftfoods.com