For too long we in the U.S. — and I would say, quite frankly, we at Kraft — did not take seriously the private-label threat. We are working with our customers to create win-win economic propositions so their private labels can thrive at the same time that our branded products can thrive.
The good news is, in many cases, our products will still drive category demand, and the investments we're making in marketing and new product development have everything to do with the growth of those categories. That's what will continue to keep us healthy over time.
Q: Like most companies, you have lobbyists in Washington. What's their agenda with the new administration coming in?
A: One of the most important agenda items for us is the whole biofuels phenomenon. Forty percent of the food supply is being diverted for use in fuel. There's not a lot of indication that it has a beneficial impact on the environment. Corn-to-ethanol has had a very difficult impact on the cost of food, and I'd like to see the administration take that challenge on.
Q: Can you put a number on how much your costs have gone up?
A: Our costs have gone up significantly in 2006 to 2007 and again in 2008. The particular impact of our biofuels policy is hard to tease out. But there's no question that those policies have had some unintended consequences. We need an administration that is willing to talk about the facts and science as opposed to bending to political pressure to address some of these issues.
Q: You said a couple of times: science-based. Have we gone through a period where decisions in Washington weren't science-based?
A: Yes. Would you write that down?
Q: The Federal Trade Commission reported in July that one-third of kids are overweight, and the food and beverage industry spent $1.6 billion in 2006 marketing to 17-year-olds and younger. Should Washington limit marketing to kids?
A: We do not market to children under 6. Our products for 6- to 12-year-olds meet certain criteria that are consistent with the food pyramid. We will continue to assure that we are acting in a socially responsible fashion.
I am delighted that so many of our peer companies have gotten on board, because we were actually one of the early pioneers in that policy and, quite frankly, suffered some share loss as a result.
Q: A law governing marketing practices would ensure that you're all playing by the same rules?
A: There's no question we would like there to be a level playing field. We believe the way to get that is for the food companies to work together to cause that to happen. I don't think there's any indication that having the government involved will necessarily make that a more effective process or have the desired outcome. There's ample evidence that we can in fact work together in a productive way, and that's a more effective way to address the issue.
Q: About a year ago, you described four growth areas: snacking, quick meals, health and wellness, and premium products. Has the change in the economy forced you to change that emphasis?
A: Premium, the phenomenon of consumers trading up, is going to be less relevant than the mainstream products. We're focusing our efforts on the other three areas: snacks, on quick meals and on health and wellness.
Q: How far along are you in your turnaround plans?