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 24,700.21 -287.26 -1.15%
Nasdaq 7,725.58 -21.44 -0.28%
S&P 500 2,762.59 -11.16 -0.40%
Treasuries 2.89 -0.03 -1.13%
Data as of 9:53pm ET
Company Price Change % Change
Advanced Micro Devic... 16.69 -0.42 -2.45%
AT&T Inc 32.39 0.20 0.62%
General Electric Co 12.95 -0.25 -1.89%
Bank of America Corp... 29.26 -0.14 -0.48%
Micron Technology In... 59.25 0.80 1.37%
Data as of 4:15pm ET
Sponsors

Sections

Wells Fargo's quest to clean up its act requires workers to shine a light on shady activity when they see it. More

While patents are intended to protect intellectual property, they're also seen in the tech industry as a way to boost the brands of companies and their employees. More

The state's booming industries will be looking for skilled workers and this online community college intends to retrain them. More