Kraft braces for inflation's hefty price tag

Kraft, commodity costs, inflationKraft tells industry gathering that raw material costs could add between $700 million to $800 million in business expense this year. By Parija Kavilanz, senior writer


NEW YORK (CNNMoney) -- Kraft Foods said Tuesday that it is facing a huge increase in commodity prices but pledged to shield its customers at the supermarket checkout.

The maker of everything from macaroni and cheese to Oreo cookies said rising prices for grains, wheat, and rice could add as much as $700 million to $800 million this year to the company's overall costs in North America.

"Half of our sales of meat and dairy products will be hit specially hard because of higher commodity prices," Tony Vernon, president of Kraft Foods North America, told an industry gathering at the 2011 Consumer Analyst Group of New York conference (CAGNY) in Boca Raton, Florida.

To protect customers from having to pay more for its products Kraft (KFT, Fortune 500) executives said the company would try to shave costs on the business side.

At the same time, Kraft has made product packaging changes such as reducing the number of slices in a pack of Kraft Singles cheese in order to compensate for the rising commodities.

To offset raw material prices, Kraft also said it would invest more in marketing. Kraft also said it plans to introduce new products.

Northfield, Ill.-based Kraft generates $50 billion in annual sales from its portfolio of brands that include Kraft cheese, Kool-Aid, Chips-Ahoy, Nabisco 100-calorie packs, Oreo and Oscar Mayer.

Many consumer goods companies are on edge due to rising commodity prices.

Executives for Spam-Maker Hormel Foods (HRL, Fortune 500) told the industry gathering that they remain concerned about grain prices, which have shot up between 40% to 50% this year and remain volatile.

Hormel executives said the company would look closely evaluate retail prices of products given the current commodity prices. To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Sponsors

Sections

Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.