kraft foods eema & russia - iis windows...

KRAFT FOODS EEMA & RUSSIAOctober 2008

2

Maurizio CalentiGroup Vice President Kraft Internationaland President EEMA

3

Forward-looking statements

This presentation contains forward-looking statements that we will focus where we can win; that Kraft International is gaining momentum; that EEMA is delivering consistent double-digit growth; that Kraft's biscuits potential to be unlocked after LU acquisition, in particular, that geographic expansion plans are in place; our belief that our broad manufacturing footprint allows low cost local production; that Kraft is well-poised for growth in EEMA; that the Bolshevik/LU integration is underway; that capacity expansion is in progress in St. Petersburg; that Kraft has upside potential in Russia; our belief about where we see opportunities; and that we're extremely well-positioned for profitable growth in Russia. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statements. Such factors, include, but are not limited to, continued higher input costs, pricing actions, increased competition, increased costs of sales, regulatory actions or delays, unanticipated expenses such as litigation or legal settlement expenses, our indebtedness and ability to pay our indebtedness, risks from operating internationally and tax law changes. For additional information on these and other factors that could affect our forward-looking statements, see our filings with the SEC, including our most recently filed Annual Report on Form 10-K/A and subsequent reports on Forms 10-Q and 8-K. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this presentation.

4

Overview

EEMA

Russia

5

Kraft Foods Worldwide

5

Nearly $40 billion in revenueSales in 150+ countries

Operations in 70+ countriesNine billion-dollar brands

50+ brands over $100 million

6

41%$16 Bn

Net Revenue

34%$1.7 Bn

Operating Income

International a vital part of Kraft

2007 pro-forma estimated results including LU biscuit.

7

Three pillars to rewire Kraft International

1. Win locally, leverage globally

2. Build management depth

3. Focus where we can win

8

Established a more flexible, decentralizedbusiness model

Empowered business units with full P&L responsibility

Linked pay structure to local results

Ensured leveraging of global expertise

1. Win locally, leverage globally

9

2. Build management depth

Best of home-grown talent

Experienced international managers from the outside

Key leaders from LU biscuits

10

3. Focus where we can win

5 Categories

10 Brands

10 Markets

11

Snacks Beverages

BiscuitsBiscuits

PowderedBev

PowderedBev

CheeseCheeseChocolateChocolate

CoffeeCoffee

5 Categories

Biscuits

Chocolate

Powdered Beverages

Coffee

Cream Cheese

10 BrandsComposite organic revenue growth

H1 2008

14%11%

2007

6%

’03-’06CAGR

12

10 Markets

4 Growth Engines

6 Scale Markets

13

14

2.4%

03-06 CAGR

6.9%

2007

Organic RevenueGrowth*

H1 2008

11.7%

(3.5)%

2.6%

Operating IncomeGrowth (ex items)*

15.0%**

Gaining momentum

03-06 CAGR

2007 H1 2008

14

Kraft International

* See GAAP to Non-GAAP reconciliation at the end of this presentation** Organic OI growth (excluding currency and LU biscuit); See GAAP to Non-GAAP reconciliation at the end of this presentation

15

Overview

EEMA

Russia

Kraft Eastern Europe, Middle East, Africa

Kraft’s largest geographic region

16

17

Kraft an early starter in the region

Markets in CEE begin to open1990

* Countries which entered EU in 2004: Poland, Czech, Slovakia, Hungary, Lithuania (+ Latvia, Estonia)

10 acquisitions (5 in Central Europe*)Local brandsInfrastructure

1992 – 1995: Start up

Strategic direction and controlsGlobal brands introducedCost base improved, operations strengthened

1996 – 1999: Consolidation

Category expansion5 acquisitionsAcceleration of investments on stronger base

2000 – 2006: Growth

LU Biscuit acquisition2007: Together we go Further

1930s – 1950s Start export of cheese and Tang in the Middle East

18

Today a strong player in a high potential area

7,800 employees in 18 countries

16 plants in 11 countries

Catering to a population of 530 million (18 countries)

Rapid economic growth

* Real GDP 2008, 2005 – 2007 avg.Source: Kraft calculations based on EIU data

2008 2005 - 07 avg.Eastern Europe* 6.5% 7.2%

Middle East* 7.0% 5.6%

19

Substantial scale, but opportunity exists

Nestlé Unilever(Food)

Ulker * PepsiCo WBD Coca-Cola

Danone Cadbury

Source: Annual reports 2007 & Kraft Estimates* Ulker food share

EEMA Peer Comparison2007 Food & Beverage Revenue

Kraft

20

2000 2001 2002 2003 2004 2005 2006 2007

Delivering consistent double-digit growthEEMA Net Revenue

CAGR 2000-2007

+21%(Ex LU)

Acquisitions

Note: 2007 Results do not include LU Biscuits

Nova Brasilia Stollwerck (RUS) Family Nutrition (EGY) LU Biscuits (BG/RO)Samar (MOR) Kar Gida (TR)

21

Johannesburg

St. Petersburg

MoscowPokrov

VyshhorodTrostyanets

Pendik

BrasovSvogeKostinbrod

CasablancaAlexandria Dammam

ManamaCairo

Sobinka

21

Broad manufacturing footprint allows low-cost local production

22

Four distinct business units

Russia− Exports to Central Asia

Ukraine− Exports to Belarus and Caucasus

Southeast Europe / Turkey− Bulgaria, Romania, East Adriatic Markets (former Yugoslavia), Turkey

Middle East & Africa− Gulf Cooperation Council (Saudi Arabia, Emirates),

Morocco, Egypt, South Africa

23

Russia and Ukraine account for more than half of revenue and profit

53%

Net Revenue

55%

Operating Income

24

BeveragesSnacks

BiscuitsBiscuits

PowdBev

PowdBev

OtherOther

ChocolateChocolateCoffeeCoffee

EEMA is largely a snacks and beverage business with strong positions in chocolate and coffee

Biscuits

Chocolate

Powdered Beverages

Coffee


25

Note: shares cover only countries where we are present and Nielsen data available

* Nielsen Value shares FY 2007

Share* Position Competitor

Biscuits 18% 1 Ulker # 4%

Chocolate 17% 1 Nestlé 14%

Salted Snacks 16% 2 Frito Lay 60%

Coffee 20% 2 Nestlé 28%

Powdered Beverages 65% 1 Foster Clarks 5%

Cheese 29% 1 Al Marai 24%

Category

Leading positions where we compete

# Competition is fragmented – key ones are Ulker (GCC) and General Mills (United Bakers in Russia)

26

With a global and local brand mixGlobal icons Local gems

27

Priority and regional core brands account for about 85% of EEMA net revenue

Other16%

Other16%

10 KI Priority51%

10 KI Priority51%

Regional Core33%

Regional Core33%


Brand Net Revenue

28

Multi-tier chocolate portfolio

Premium

Mainstream

29

Milka in premium segment

30

Strong local chocolate brands

31

Strong chocolate positions across region

CroatiaAlgeriaBosniaBulgariaRomania SerbiaSloveniaUkraine

Share Position

Source: Nielsen Value shares FY 2007

#1 #2Russia

#3

32

Biscuits potential to be unlocked after LUacquisition

Limited geographic presence, but strong positions

Geographic expansion plans in place

Leveraging Nabisco and LU portfolio

#2PakistanSaudi Arabia

#1EgyptRussia

33

Jacobs is the key premium coffee brand across the region

34

Leading coffee shares

BulgariaMoroccoRussia

RomaniaUkraine


Share Position

#1 #2

35

Powdered beverages key in the portfolio forMiddle East and Africa

36

Kraft’s leading powdered beverages positions

EgyptKuwaitMorocco

Saudi ArabiaSouth AfricaTurkeyUAE


Kraft #1 Position

37

Philadelphia 80%

Kraft Cans 72%

Kraft Spreads 37%

#1 in Middle East cream / processed cheese

Source: Nielsen Value shares FY 2007In Kuwait, KSA and UAE (tubs, tins, jars)

38

EEMA Summary

Kraft’s largest region

Consistent double digit growth

Strong positions in all countries where present

Leading positions in all categories

Well-poised for growth

39

David SteerVice President and Area Director, Russia

40

Overview

EEMA

Russia

41

Russia: attractive market

143 million population

Highly educated

GDP CAGR 58% over 5 yrs

Consumer up-trading

Growth platform

“The hardest decision in Russia is what not to do…”

42

Kraft in RussiaPrior to 1994

1994

1999

2000

2001

2007

2008

Opportunistic exports

Representative office established

Transition to local legal entity

St. Petersburg - coffee packing plant

Stollwerck chocolate acquisition

Bolshevik (LU) biscuit acquisition

St. Petersburg - freeze-dried coffee plant

43

Bolshevik (LU) integration underway

Acquisition effective 12/2007

Leadership team 7/2008

Operational integration 9/2008− Distribution

− Marketing and sales

− Shared services

To follow :− Systems

− Legal

44

St. Petersburg - new freeze-dried plant

Freeze-dried fastest growing / premium segment

First in Russia

Commissioned Q1 2008

5000 ton capacity

Further 5000 ton capacity expansion in progress

45

Russia now a significant business

$25 $50

$200

$700

Net Revenue$US Millions

IncludingStollwerck

IncludingBolshevik (LU)*

1998 2001 2002 2007

AcquisitionBase Kraft

Pro-forma estimated results including Bolshevik (LU) biscuit.

46

St. Petersburg

Pokrov& Sobinka

Moscow

Modern, well-placed local manufacturing footprint

47

KI - 5 core categories - Russia today

Biscuits

Chocolate

Powdered Drinks

Coffee

Cream Cheese

#1

#3

#2

48

Key category segments in Russia

#1 in tablet chocolate

#1 in freeze-dried coffee

#1 in sweet biscuits

Source : AC Nielsen Retail Audit Russia JJ 2008

49

Strong track record of growth in key segments

0

5

10

1520

25

30

35

2002 2003 2004 2005 2006 2007 2008JJ

Kraft FD Nestle FD

Freeze-dried coffee is half the volume and 2/3 of the value of the soluble market

Kraft now leads in value

0

5

10

15

20

25

30

35

2004 2005 2006 2007 2008JJ

Kraft Tablets Nestle Tablets

Kraft strengthens its lead in value in chocolate tablets

Kraft is also volume leader

Source : AC Nielsen Retail Audit Russia 2002 - 2008

Dollar share

KI’s top 10 priority brands – Russia today

Milka – #1 premium chocolate tablet

Cote d’Or – new premium pralines

Toblerone

Jacobs – our growth driver in coffee

Carte Noire – #1 super premium coffee


KI’s strategy – leading local brands

Jubilee – #1 biscuit

Prichuda - #1 wafer cake

Alpen Gold - #1 chocolate

Barny - Fastest growing soft cake snack

Vozdushny - #2 chocolate tablet


52

Competitive trade position

* Source : AC Nielsen Retail Audit Russia JJ 2008

Full national coverage

Exclusive sales teams in 500+ cities / towns

Coverage of 70%* value-weighted universe

Trade marketing teams in place

Positive synergy from Bolshevik (LU) integration

Upside potential

53

Strong local talent base

70% of business unit leadership team membersare local

Average age is <40

Only 5% of second level leadership are foreign

Strong mix of internal promotion and external recruitment

95% of Bolshevik (LU) talent retained

54

Opportunities…

Premium coffee leadership

Premium pralines

Chocolate and biscuits synergy− Snacking and cross-branding

Biscuits – leveraging Kraft distribution scale

Route-to-market efficiencies

Category management

55

Kraft Russia Summary

Critical scale with strong infrastructure

Strong market positions

Proven track record of success

Portfolio well-aligned, strong global and local brands

Talented local organisation

Extremely well-positioned for profitable growth

57

AppendixGAAP to non-GAAP reconciliation

As Reported (GAAP)

Impact of Divestitures /

OtherImpact of

AcquisitionsImpact of Currency

Organic (Non-GAAP)

For the Years Ended:

20041 5.7% 1.4pp (0.2)pp (7.1)pp (0.2)%

20051 7.0% 0.9pp 0.0pp (3.6)pp 4.3%

20061 3.9% 0.3pp (1.1)pp 0.1pp 3.2%

2007 18.4% (0.9)pp (2.1)pp (8.5)pp 6.9%

For the six months ended June 30, 2008: 50.3% 0.8pp (26.5)pp (12.9)pp 11.7%

Compound Annual Growth Rate, 2003 - 2006 1 : 2.4%

1 These numbers have not yet been restated to reflect the impact of the Post discontinued operations.

(Unaudited)Net Revenue Growth - Kraft International

58


Reported (GAAP)

Asset Impairment, Exit and

Implementation Costs -

Restructuring

Asset Impairment and Other Costs - Non-Restructuring

(Gains) / Losses on Divestitures, net

Excluding Items (Non-GAAP)

For the Years Ended:

20041 (33.0)% 15.6pp 3.4pp 2.1pp (11.9)%

20051 20.3% (7.9)pp (4.4)pp (9.3)pp (1.3)%

20061 (14.1)% 14.2pp 14.0pp (10.7)pp 3.4%

2007 9.8% (12.9)pp (11.3)pp 17.0pp 2.6%

Compound Annual Growth Rate, 2003 - 2006 1 : (3.5)%

1 These numbers have not yet been restated to reflect the impact of the Post discontinued operations.

Operating Income Growth - Kraft International(Unaudited)

59


Reported (GAAP)

Asset Impairment, Exit and

Implementation Costs -

Restructuring

Asset Impairment and Other Costs - Non-Restructuring

(Gains) / Losses on

Divestitures, net

Excluding Items (Non-GAAP)

Impact of Divestitures /

Other Currency

LU Acquisition, net of

Integration Costs

Organic (Non-GAAP)

2008 First Half vs. 2007 First Half:

Operating Income Growth 44.2% (9.1)pp 0.7pp 17.8pp 53.6% 1.6pp (11.3)pp (28.9)pp 15.0%

Organic Operating Income Growth - Kraft International(Unaudited)

kraft foods eema & russia - iis windows...

Documents