Kraft Is Affected by Higher Commodity Prices

Farm Journal logo

Due to higher single digit increases in input costs, Kraft Foods—the world’s second largest food company—gained 2.2% in organic revenue in the first quarter 2011 in the U.S., driven by a 3.3% increase in pricing, but offset by a 1.1% decrease from lower volume.

Kraft has increased advertising and used other ways to blunt the increase in commodity price costs, but the company has had to pass along some portion of its higher costs to consumers, says Kraft spokesman John Simley.
 
In cheese, however, the company increased prices and showed a 1.7% increase in organic revenue from higher volume. “When it’s necessary to raise prices and they’re moving together (with higher volume) you’re really doing your job right.”
 
It’s questionable to what extent consumer food demand is impacted by price, however, according to USDA/ERS economist Richard Volpe. “If the price of food, on the whole, shoots up 10%, we consume between 0.5% and 1.5% less total food,” according to one department study, Volpe says.
 
Not only have the prices of many commodities been high, they also have been volatile. Have companies throughout the supply chain been more impacted by absolute price or volatility?
 
For Kraft, it’s more of price, as it has forward contracts in place to reduce the volatile ups and downs of commodity prices, Simley says.
 
Kraft’s core businesses are in beverage, cheese, snack foods, confectionary, and convenience foods.
 

 
 

 

Latest News

APHIS Now Thinks Wild Birds Are to Blame for Highly Pathogenic Avian Influenza's Arrival on Four U.S. Dairies
APHIS Now Thinks Wild Birds Are to Blame for Highly Pathogenic Avian Influenza's Arrival on Four U.S. Dairies

The livestock industry continues to grapple with the first confirmed cases of HPAI in cattle, while federal and state agencies continue to assure consumers there's no concern about the safety of the U.S. milk supply.

Success is All in the Details at Kansas Dairy Development
Success is All in the Details at Kansas Dairy Development

Kansas Dairy Development provides temporary housing for up to 80,000 head of cattle — from a few days old to springers nearly ready to calve. Their formula for success is all in the details.

Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps
Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps

U.S. employers report challenges in finding suitable job candidates with work-ready skills to fill open roles in ag. The AgCareers.com U.S. Skills Survey offers insights, data and trends to address skill development.

Built Out of Love: How Two Sisters Created a Super-Fast-Growing Yogurt Company
Built Out of Love: How Two Sisters Created a Super-Fast-Growing Yogurt Company

Travel to the rolling hills of Pennsylvania, and you’ll meet Hayley and Stephanie Painter who not only made the Forbes 30 under 30 list, but have also created one of the fastest growing yogurt company in the U.S.

"Boring" Technology Will Reshape Dairy Over the Next 10 Years
"Boring" Technology Will Reshape Dairy Over the Next 10 Years

Once a technology becomes a boring experience it means it has become proven, well-adopted, and easy to utilize. There are three "boring" technologies silently shaping the industry.

Influential Dairy Leaders Awarded World Dairy Expo Recognition Awards
Influential Dairy Leaders Awarded World Dairy Expo Recognition Awards

World Dairy Expo is delighted to announce the recipients of the 2024 Expo Recognition Awards. These individuals have made remarkable contributions to the dairy industry and their communities.