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Kraft Foods Upbeat on 2009 China Sales

Source: Reuters
05/06/2009

Shanghai, June 5 - Kraft Foods Inc, the world's second-largest food company, expects its sales in China to rise more than 10 percent in 2009, similar to last year's rate of growth despite a slowdown in the country's economy, its China chairman said on Friday.

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While the global recession has taken a toll on many industries, from airlines to ship building, food manufacturers have been little affected and remain optimistic on their outlook.

"This is one of the times when I love being in the food business. This is a market that, whatever happens in the economy, people still eat. And we have a range of products to serve everybody's needs," Lorna Davis told Reuters in an interview.

Kraft, which started operating in China in 1984, runs 7 plants in the country, producing Oreo cookies, Maxwell House coffee and Tang brand powder beverage.

It reported "double-digit" sales growth in 2008 and Davis said she expected business to continue to expand at a similar level this year due in part to market potential.

China's per capita consumption for biscuits is less than 1 kilogram compared with 8 kilograms in the United States, 11 kilograms in the United Kingdom and 13 kilograms in New Zealand, according to data provided by the company.

"Opportunities here are just huge," said Davis, who is also president of Kraft's China operations, designated as one of the four major growth engines for the top North American food maker along with Russia, Brazil and the greater Southeast Asia region.

She declined to provide annual sales figures for China, but said it was less than Brazil, which contributed about $1 billion to Kraft's overall sales of $42 billion in 2009.

Globally, Kraft Foods, second only to Pepsico Inc, posted a higher-then-expected profit in the first quarter of this year due to cost-cutting initiatives and changed consumption patterns.

Like other multinational food makers such as Nestle AG and General Mills Inc, Kraft has been investing aggressively in advertising, considered an essential driver of its business in China.

The food manufacturer is spending roughly 20 percent more on advertising in China this year compared with 2008, she said.

"If you want to build your business here and you don't spend more than 10 percent of your total revenue on advertising, you are not going to grow," Davis added.



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