Milling & Baking News - April 13, 2004 - 25

Moving forward
T

he largest manufacturers of one of
grain-based foods' most troubled
sectors, cookies, are becoming more
proactive in their strategic plans. While
they wisely recognize that the future still
remains racked with uncertainty and continued sales issues, manufacturers are moving forward by formulating sales strategies,
new marketing policies and developing innovative new products to answer consumers' ever-changing desires.
While the grain-based foods industry in
general has been suffering through internal
and external issues ranging from consolidation to low-carbohydrate diets, the cookie
industry in particular has experienced the
brunt of the full spectrum of today's negative issues. Nutrition news, including rising
concerns about carbohydrates, calories, trans
fatty acids and their impacts on obesity, economic changes, reduction in stock-keeping
units, an innovation glut and an increase in
competition from an ever-expanding number of alternatives are among the issues the
cookie industry finds itself confronting.
For the 52 weeks ended Jan. 25, dollar
sales of cookies in supermarkets, excluding
Wal-Mart Stores, Inc. and other super centers, were down 2% from the year-earlier
period while unit sales fell 4%.
Of the 10 top-selling cookie brands,
seven showed dollar sales declines and
nine showed unit sales declines (see table
on page 30).
In an effort to find a formula for success
in the cookie industry, the sector's major
players - Kellogg Co., Kraft Foods Inc.
and Pepperidge Farm, Inc. - each have
followed different strategies to varying degrees of success.
Some within the category have sought to
create efficiencies by eliminating the weaker
brands to concentrate on the "winners"
while others have looked to generate additional volume by introducing convenience
products in the form of miniature cookies
and single-serve packages.

impact the financial health
and structure of Northfield,
Ill.-based Kraft Foods.
In the 52 weeks ended Jan.
25, Kraft's Nabisco brand,
which ranks as the cookie
industry leader in dollar
sales, sustained a 4% decline
in dollar sales, according to
Information Resources, Inc. And
of Nabisco's six major cookie brands, all
experienced drops in dollar sales except for
Nilla, which rose 2%.
Biscuit pricing and favorable product mix
in the confectionery segment partially offset
poor performance of several new products,
but sales in the segment still declined 1.9%,
Kraft said.
Operating income of the Biscuits, Snacks
and Confectionery segment was $887 million
in 2003, down 16% from $1,051 million in
2002. Sales were $4,801 million, down 1.8%.
Weakness in the company's biscuit business was cited as a primary influence adversely affecting quarterly results. "Cheese,
cold cuts, coffee and crackers showed solid
sequential improvement in consumption
and share trends, while the cookie results
remained weak," Kraft said. "The previously
cited factors impacting the cookie category
performance, including consumers' in-

Kraft looks to rebound

The company plans to introduce Nabisco
100-calorie packs, a four-item line featuring
Wheat Thins, Chips Ahoy!, Cheese Nips and
Oreo brands.

The difficult operating environment in the
cookie segment during the past two years
has snowballed into a large enough issue to

bakingbusiness.com / world-grain.com

creased health and wellness focus and lower
contributions from new products, continued
to affect results in the fourth quarter."
Kraft's chief executive officer, Roger K.
Deromedi, devoted considerable attention to
the difficulties Kraft experienced in the cookie market during a Jan. 28 conference call.
He called cookies the clear "outlier" in
what were otherwise "fairly strong and encouraging results" at the company.
"As we discussed before, there are multiple
drivers for our weak cookie results: higher
pricing, less successful new products and a
variety of health and wellness concerns," Mr.
Deromedi said. "We addressed the first of
these, pricing, in the fourth quarter, by returning to more optimal price points. However, this
was only one element on the category issue."

Going forward
In 2003, Kraft had a tough time due to
several factors, but primarily because of
new product introduction failure, and,
more specifically, the failure of Chips Ahoy!
Warm 'n Chewy Cookies. Going forward,
Kraft has decided to concentrate on the
health and wellness category.
Finding a way to satisfy consumer demand for healthier products is crucial for
cookie manufacturers, Mr. Deromedi said.
"Healthier snacks are a top priority," he said.
"I believe we have the right technology re-

Milling & Baking News, April 13, 2004 / 25

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Milling & Baking News - April 13, 2004

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