Kraft to pass along higher food costs

Kraft Foods Inc. plans to raise prices or cut discounts on about 90 percent of its products in North America this year as it looks to combat commodity costs that continue to soar.

Chief Executive Irene Rosenfeld said Tuesday the Northfield-based company should be able to counter all of its rising costs this year with price increases, something it could not do a year ago as it was working to fix brands and improve its new product pipeline.

Food companies have been hammered by rising costs for energy, wheat, soybean oil, cocoa and a host of other commodities.

Kraft, the largest North American food company with a portfolio ranging from Nabisco cookies to Kraft cheese, is looking at a varying range of price increases, depending on which ingredients are involved, Rick Searer, president of Kraft North America, said.

Last year, Kraft did not have the brand strength to take price increases that fully covered commodity costs that rose 9 percent.

But entering the second year of a three-year plan to increase revenues and streamline costs at Kraft, the company's brands are strong enough to raise prices and recoup what could be another 9 percent cost increase, Rosenfeld said. A 9 percent increase in cost of goods translates to a lower percentage increase on store shelves, since commodity costs are not the only costs that go into a product.

Kraft is treating higher commodity costs as though they will be a part of the landscape going forward, rather than something that will eventually abate in the market.

"We are acting as if this is a long-term phenomenon," Rosenfeld said.

Aside from cutting costs, Kraft has been overhauling some product lines, like salad dressing, while also developing new "product platforms" that can be expanded over time. An example of this is Oreo Cakesters, which the company has used to get into the snack cake business. Kraft plans to expand that business to other cookie lines, including the Nilla Wafer brand.

But Kraft also is looking to grow sales in its smaller brands, even in tepid categories like marshmallows, Searer said.

Kraft shares closed down 15 cents at $31.18 Tuesday on the New York Stock Exchange.