Kraft Foods Inc. stock values fell in after hours trading after they announced lowering their projected profits for early 2011. High commodity prices and low consumer confidence were blamed. Kraft and other companies are paying higher prices for commodities such as grain, corn, coco and sugar.
“Consumer confidence remains weak,” said Kraft Chief Executive Irene Rosenfeld. “We expect it to remain weak for the foreseeable future.”
Reuters reported that the lower growth will be driven by high prices. Kraft expects consumers to switch to cheaper products or reduce the amount they buy. Kraft has already raised their prices in Europe and half of North America. They will be raising prices even more this year.
Kraft’s revenue went up after their 2010 buyout of Cadbury chocolates, Halls lozenges and Trident gum. Kraft expected growth percentages in the mid-teens for 2011, and now expects only about 4% growth in organic revenue. Organic revenue excludes sales revenue from acquisitions.
Starbucks coffee plans to sever their partnership with Kraft Foods in March 2011. The companies are in dispute over the contract in court. Kraft distributes Starbucks’ products to retail stores and supermarkets.
Aside from their acquisition of Cadbury, Kraft’s sales met average expectations for 2010, reported Yahoo News. The Cadbury takeover boosted sales for Kraft by 30%, but their net profit fell 24% due to the costs associated with integrating the business.
Cadbury had a mixed final quarter in 2010. Sales of sweets and chewing gum were flat in Europe. Halls lozenges, also acquired by Kraft in 2010, had strong sales which helped the overall bottom line.
Kraft is based in Northfield, Illinois. Velveeta cheese, Maxwell House coffee and Oreo cookies are Kraft Foods companies.