KRAFT SLICES BUDGET FOR CORPORATE CAMPAIGN: $50 MIL AD PUSH IS TRIMMED AFTER JUST 3 MONTHS

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Kraft Foods is close to pulling the plug on its critically acclaimed $50 million corporate advertising campaign, just three months after putting it on the air.

Although a Kraft spokeswoman insisted the "equity" effort is "alive and well," she admitted the marketer will be scaling back ad spending on the campaign by an unspecified amount beginning this month.

The promotional elements will continue to get support, including consumer promotion, merchandising, co-marketing and a Web site.

DOWNGRADED

The spokeswoman said the equity advertising will carry on in 1999, in the form of a test-market campaign. When asked whether it will also continue to run on a national basis, she said, "We haven't decided that yet."

"We are always committed to producing strong business results, and it is important to put our priorities on the brands," said the spokeswoman, who noted the program was "always considered an overlay."

The umbrella program is the brainchild of Kraft CEO Robert Eckert, and was a high-minded effort to raise the profile of the country's leading food company among consumers, investors and retailers. The goal was to set the $16 billion Kraft apart as the best in its class at meeting consumer needs.

The battle among roster ad agencies to handle the assignment was hotly contested, and the win by J. Walter Thompson USA, Chicago, was a big feather in that shop's cap. Losing the account deals the latest blow to the WPP Group agency, which lost the $150 million Sprint account last year, and is currently in an ugly court battle with another former client, Dell Computer Corp.

Brian Heffernan, president of JWT, Chicago, couldn't be reached for comment at press time.

JWT NOT TO BLAME

By all accounts, the cutback won't be the fault of JWT's creative effort. The umbrella campaign was widely lauded for its documentary-style footage, haunting Celtic sound track and heartwarming tales of how Kraft brands can bring families together to "make something good."

But, said one agency executive close to Kraft, "the equity effort was not beloved among the division heads who were diverting their hard-selling brand budgets to the campaign while sales of their own brands were slipping."

For the quarter ended Sept. 30, Kraft's North American food business was flat at $4.01 billion in operating revenue. Operating income for North American food was up 5.1% to $722 million in the quarter, "with slightly higher volume and continued strong productivity savings partially offset by an unfavorable mix and the impact of record-high dairy commodity costs on several Kraft businesses," according to its most recent financial report.

Another executive close to the company said Kraft has managed decent volume increases by shipping product out to retailers' warehouses but hasn't managed to move it off store shelves. The umbrella program funds, therefore, are being earmarked for trade programs and discounting to clear out excess inventory, he said.

Kraft denied that, and said it hasn't engaged in the practice, called trade loading.

RISING COSTS

Instead, the spokeswoman said the marketer's decision to trim ad spending on the umbrella effort was influenced by the volatility of the Canadian dollar and skyrocketing cheese costs that the company is absorbing rather than passing price hikes along to consumers.

Kraft blamed high cheese costs when it slashed its ad budget 20% in the fourth quarter. Even so, the spokeswoman said Kraft ended "about even" on ad spending in 1998 compared with `97. Flat spending, however, wasn't the plan when Mr. Eckert predicted the company would hike its $800 million ad budget by 12% in 1998.

For 1999, Kraft is planning a "modest increase" in both its ad and promotion budgets, the spokeswoman said. She denied speculation in agency circles that

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