The New Kraft Foods

Yesterday's Wall Street Journal's Marketplace section featured an interview with the CEO (as of last June) of Kraft Foods, Irene Rosenfeld.

The genesis of the piece is Kraft's imminent spinoff from Altria, and an analysts' conference for Rosenfeld, on that occasion.

By all indications, Ms. Rosenfeld is a capable and sensible businesswoman. What is troubling is the simplicity and classic nature of her prescription for fixing Kraft.

Essentially, she arrived, toured the company's facilities, talked to employees, and conducted ground-level, personal visits to customers and their kitchens throughout the world.

Here's what the Journal had to report,

"Ms. Rosenfeld concluded the nation's largest food maker- whose household-name products range from Jell-O to Maxwell House coffee to Velveeta cheese- had lost sight of how its offerings fit into consumers' lives. Deep cost cutting had eaten into Kraft's product quality, eroding the strength of some brands and causing the company to lose market share. Workers were afraid to speak up when they saw problems.

Today, at an analysts' conference....Ms. Rosenfeld plans to unveil a new strategy to reignite Kraft's growth as it gets ready to spin off from Altria Group Inc. Instead of just selling meal components, Kraft will make more complete meals like prepackaged salads and ready-made sandwiches with its Oscar Mayer meats and Planters nuts."

This all sounds great. Except for one thing. Where was this strategy for the past several years? What was the board at Altria doing for the past five years or so, while Kraft slipped into the coma from which Ms. Rosenfeld intends to wake it?

How sad that a leading brand name in American consumer packaged foods simply lost the salient skill of such vendors- staying close to the consumer and her/his habits and needs. Nearly thirty years ago, when I was a graduate student at Penn, we were constantly regaled with tales from our consulting marketing professors of the various new products and consumer research being conducted at their clients, who were typically large US packaged goods purveyors.

As a little consumer behavior aside, Ms. Rosenfeld refers to something that has remained true for over thirty years. Back in the day, one of my marketing professors, Jerry Wind, related how research revealed that completely prepared foods didn't score as well with consumers as 'mostly' prepared foods did. For instance, instant cake mixes didn't use powdered eggs, so consumers could add fresh eggs and feel that they prepared the cake.

Today, Ms. Rosenfeld relates how they leave the consumer to zap a product in the microwave, to give the illusion of a freshly-cooked meal that, in reality, was essentially already prepared in the box.

Still, while Ms. Rosenfeld seems like the real McCoy when it comes to marketing and new product/growth development, isn't it sad that this conventional wisdom of more than three decades is now required as major surgery on a fallen consumer brand portfolio? This is the true failure of corporate governance.

Why didn't Altria's board ask questions about growth and new product introductions? Why didn't they ask what the impact of the ready-to-eat food assortment at 7-11 had to do with Kraft's demise?

How many tens of millions of dollars do you think were paid to inept, under-performing heads of the Kraft unit under Altria?

Well, the silver lining for me is that, perhaps in four more years, I'll be able to invest in Kraft, when Ms. Rosenfeld leads it to performance that qualifies it for my equity portfolio selection criteria.