Rosenfeld - Creating an Innovation Culture at Kraft
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Case Code: BSTR469 Case Length: 20 Pages Period: 2000 - 2014 Pub Date: 2015 Teaching Note: Available |
Price: Rs.500 Organization: Kraft Foods Group, Inc. Industry: Food, Beverage Countries: US Themes: Technology and Innovation Management, Knowledge Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Open Innovation at Kraft
During the 2000s, Kraft, like other US-based food companies, was adversely affected by an increase in commodity costs, apart from dramatic changes in the wants and needs of consumers. In addition, leading food companies in the US were struggling against the competition created by private-label products, organic and natural foods, and fortified products such as vitamin-enhanced water.
These factors led to a continuous decline in profits for Kraft and share price stagnation. In 2004, the CEO of Kraft, Roger Deromedi (Deromedi), embarked on a severe cost cutting program that sought to eliminate 14,000 jobs and close 40 plants systematically over a period of four years. However, after Deromedi’s efforts to reverse the company’s fortunes failed to bear fruit, he was ousted by Kraft in 2006...
Leveraging Suppliers
Kraft believed that suppliers had better insight into local markets or solutions, which it could leverage. It worked hard on being counted as a ‘Partner of Choice’ by its suppliers, so that it got the best ideas first. In addition, the company looked out for potential new suppliers, who had the capability to provide unique technologies that were not being used at Kraft...
Sourcing Ideas from Customers
In April 2006, Kraft launched a website "InnovateWithKraft.com", where customers from the US, Canada, and Puerto Rico could submit their ideas for new products, advertising, and business processes/systems. Earlier, the company had provided toll free numbers to customers, which they could call up to provide ideas for new products or improvements. However, the company had failed to act upon any of the customer inputs...
Innovation Transformation
Kraft realized that innovation success was primarily driven by a talented team, who were always on the lookout for ideas that led to brand growth. Barry Calpino (Calpino), Vice President of Innovation at Kraft, added, "... We're not going to accept the fact that this is an old brand. We are going to constantly look for ideas. When you have that mindset all throughout your company, that’s when you’ve really hit your stride."..
Renovation Aging Brands
Kraft placed significant emphasis on renovating its old brands and said it was committed to making them relevant to present customers. The other two US$ 100 million launches of Kraft were Oscar Mayer Selects and Velveeta Cheesy Skillets packaged meals. Speaking about the innovation success of the products, Calpino said, “They were both $100 million launches. But what they both have in common is they’re what people would call old brands....
Outlook
As of 2013, Kraft had ten brands whose annual sales exceeded US$ 500 million, with eight of them leaders in their market. In addition, the company had 27 brands that had sales of over US$ 100 million. Kraft had doubled its rate of innovation within three years. In 2009, the company derived net revenues of 6.5% from innovations in the previous three years. That rate grew to 14% in 2013....
Exhibits
Exhibit I: History of Kraft
Exhibit II: Top Food and Beverage Companies in US and Canada as Of 2013
Exhibit III: Examples of Open Innovation at Kraft
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