Kraft Foods Emerges as the Big Spender Post-Company Split

North American Pure-Play Beefs Up Base; Mondelez Focuses on Global Growth

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Mondelez International has the faster-growing brands and ambitions to dominate the global snacking market with the likes of Oreo and Nabisco. But when it comes to U.S. ad spending, Kraft Foods Group is proving to be the bigger cheese.

Kraft's total 2012 U.S. ad spending was $683 million.
Kraft's total 2012 U.S. ad spending was $683 million.

Kraft -- whose brands include slower-growing cash cows like Velveeta, Oscar Mayer and Mac and Cheese -- is No. 62 on Ad Age's 100 Leading National Advertisers ranking published this week. The marketer had $683 million in measured-media spending last year, according to WPP's Kantar Media. Mondelez International, meanwhile, failed to crack the Top 100. The report, which covers U.S. spending, represents the first time the companies have been ranked separately since they were formed when Kraft Foods Inc. split last October.

Deanie Elsner, a 20-year Kraft veteran four months into her job as chief marketing officer of the new Kraft, said the marketer plans to pump more than $100 million into brand-building in the second half of this year. Kraft is aiming to differentiate its classic brands in commodity categories like cheese that tend to have a high private-label penetration, while launching new U.S. products. At the old Kraft, a lot of North American profits were plowed into launching new business globally, Ms. Elsner said. As a pure-play North American company, "we've got to increase our spending against our base business ... while we incrementally spend to launch and bring new news to the marketplace."

Mondelez is no advertising slouch, of course, putting plenty of domestic marketing muscle behind brands like Oreo, which was in a Super Bowl ad this year. But the marketer has its eye on overseas growth, especially in emerging markets, which account for about 40% of the company's $35 billion in global revenue. Kraft gets nearly all of its $18.3 billion in revenue from the U.S. and Canada.

Mondelez has "established leading brands in the U.S., so my sense is they are spending less in the U.S. in order to fund its international focus," said Rick Shea, a former Kraft exec and president of Shea Marketing. But he said Kraft's goal to build brands in meat, cheese and beverages will likely depend on its execution of its U.S. marketing strategies. Measured-media spending on Kraft brands in the U.S. jumped a hefty 25.3% in 2012, while spending on Mondelez brands fell from $263 million in 2011 to $212 million in 2012, according to Kantar Media.

Domestic advertising on Kraft brands as a percentage of sales is rising. At 3.5% last year, it remained short of the 4.5% average spent by food-industry peers, according to Morningstar. But Kraft is trying to get there.

Mondelez's total 2012 U.S. ad spending was $212 million.
Mondelez's total 2012 U.S. ad spending was $212 million.

In the first half of the year, the company launched more than 10 brand campaigns, including an effort by Saatchi & Saatchi that revived the 59-year-old Kool-Aid Man in ads that promote liquid drink mixes. A saucy salad dressing ad, by TBWA's Being, showing a muscular man wearing only a picnic blanket, is part of a campaign called "Let's Get Zesty" that launched in April. "You will see more reinvestment and the commitment to revitalize brands like Jell-O and Planters," Kraft CEO Tony Vernon told analysts in May.

The new regime has already overseen one big agency move, shifting Philadelphia to Roberts & Langer DDB from Dentsu Inc.'s McGarryBowen. Ms. Elsner said there are no plans to shuffle the roster, but the company will continue to evaluate all of its agencies.

The marketing push has gotten good reviews from financial analysts. "Kraft's brands had been underinvested in by its previous owners," Morningstar said in a recent note to investors. By boosting innovation and marketing, the company "should realize a decent level of top-line growth." But because Kraft operates in mature categories, there is only so much room to grow. According to Bernstein Research, Kraft brands had organic sales growth of 1.8% from 2009 to 2012, compared with 5% for brands owned by Mondelez, which has sought to capitalize on the growing appetite overseas for snacking.

Kraft is seeking to break through on U.S. grocery aisles with innovations like Fresh Take, a meal kit that combines fresh cheeses, spices and breadcrumbs that is positioned for easy recipes. And the company is trying to awaken old brands with new formats and messaging. For instance, new advertising for the 140-year-old Philadelphia brand is replete with farm imagery that seeks to capitalize on the rising consumer interest in how products are made. "The only thing that is old about some of our brands is the mind-set that people approach them with," Ms. Elsner said.

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