Chicago, April 16 - Kraft Foods Inc has been enticing consumers in Northern Brazil with lower-priced products in smaller packages, helping lift the company's sales growth in that poorer region of the country to twice the rate of the country as a whole.
Now the world's second-largest foodmaker is hoping that economic improvement in that traditionally impoverished region will help encourage consumers to trade up to higher-priced products, a strategy that could perk up sales growth, the head of the company's Brazilian business said on Wednesday.
"We expect to continue to focus there and really, in the future, the hope is to continue to accelerate," Mark Clouse, managing director for Kraft Foods Brazil, said of the company's push to expand sales in Northern Brazil.
Brazil is the largest developing market for the maker of Tang powdered drinks and Oreo cookies, with a mix of larger cities like Rio de Janeiro in the south and rural, less affluent areas in the North. Brazil accounts for about $1 billion in Kraft's annual sales of about $42 billion.
Kraft has began focusing on those rural areas only in the past two to three years, Clouse said. Now, while sales growth in the country as a whole is in the double digits, growth in the North is twice that, he said.
Part of the company's strategy in the north is selling products in smaller, lower-priced portions.
One example is a medium-sized Lacta brand chocolate tablet -- a larger, thicker, sectioned type of candy bar -- which sells for the equivalent of about $1, compared with the larger size of the product which sells for $2 to $2.50 -- a price that many consumers in the region could not often pay.
The lower-priced product "is a terrific vehicle for entry into the lower income areas and growth areas in the Northeast," Clouse said.
The company also has a powdered drink brand called Fresh, which sells for about 25 cents for a packet that makes two liters of the drink, compared with a 30-cent packet of Tang that makes one liter.
While consumers have to add sugar to Fresh, the end result is still a less-expensive alternative to Tang and moves consumers up from tap water into a Kraft product, Clouse said.
"Then as income levels rise, we can trade them up to Tang," Clouse said.
Sales of Fresh and Tang are about equal in North Brazil, while Fresh sales are only about one-third of those of Tang's in the entire country.
Overall, while food sales in Brazil have not slowed down in the midst of a tough global economy, consumers have been trading down to lower-priced products.
One example is consumers forgoing carbonated soft drinks and turning to powdered drink mixes.
"There is a migration moving back into Tang," Clouse said.