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Kraft and Kellogg pursue increase in ad spending despite fall in income

BY Diana Alickaj

CHICAGO Kraft and Kellogg Co. have decided to increase ad spending despite decreases in net income, according to published reports.

According to Kellogg chief executive officer David Mackay, the company’s loss, which was 3 percent in the fourth quarter, was mainly due to an increase in ad spending. The company is said to have spent 12 percent of its $11.8 billion in sales on advertising. The Kraft Co. decided also to increase its marketing spending to about 8 percent of its total sales by 2009, despite a 6 percent fall in net income.

The decision to increase marketing spending comes in response to its desire to increase prices, which the company feels will not be possible unless it devotes adequate spending in advertising. The increase in marketing sales are put in place in the hope that consumers will feel that the product will be worth the new price increases Kraft hopes to establish.

“Our pricing realization was not as strong as we would like it to be, because we don’t yet have suitable brand equity,” stated Kraft chief executive officer Irene Rosenfeld. “But the key to our future in cheese, as it is in so many of our businesses, is continuing to ensure that we have invested appropriately in quality, in marketing support and in innovation to be able to realize those price opportunities.”

According to published reports, analysts are not convinced that this will work as quickly as the chief executive officers of Kellogg and Kraft would hope. As Jonathon Feeny, a Wachovia analyst explains, “The problem in the cheese business isn’t so much costs; it is that brand equity and product differentiation are well below average, not something that can be fixed overnight.”

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SheerBliss releases gourmand’s ice cream sandwich

BY Jenna Duncan

HALLANDALE BEACH, Fla. Gourmet frozen dessert maker SheerBliss Ice Cream announced the launch of their designer ice cream sandwich, Blisswich. The rich, all-natural, ice cream sandwich contains vanilla ice cream with a pomegranate juice swirl squeezed between vanilla or chocolate cookies.

Gary Barron, president of SheerBliss, said the new product was created in response to a growing demand for deluxe ice cream treats.

Blisswich was released in stores in the Midwest and east coast this week and will receive wider distribution throughout the west in the next few weeks.

SheerBliss products are now carried in more than 4,600 stores in 36 states.

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P&G creates new company for the Folgers Coffee brand

BY DSN STAFF

CINCINNATI Proctor & Gamble announced plans to separate its coffee department into an independent company, which will be named The Folgers Coffee Co. The company will have four different locations, one of which will also be the headquarters in Cincinnati, Ohio. It will employ 1,250 employees, adding to what P&G feels is, according to published reports, “good for the coffee business, as the business will get greater priority and attention as a standalone company”

This new venture has been put in place as a result of its major earnings in 2007, which include sales of about $1.6 billion. By separating the coffee business as its own independent company, P&G is hoping to make Folgers, which is the leading retail coffee brand in North America, the focus of its own company. As A.G. Lafley, chairman of the board and chief executive officer stated, “This separation allows us to focus on our core businesses and The Folgers Coffee Co. to further develop and leverage its brand portfolio in a coffee-specific business model.”

To start off Folgers’ new business venture, P&G has named Jamie Egosti, current president of P&G’s Coffee and Global Snacks division, chief executive officer of The Folgers Coffee Co. The split of P&G and Folgers is set to be completed between July and December 2008, but will not do so until the company decides the form of separation, which would be either a spin-off or split-off transaction. The final decision for the two separation options will be finalized during the April-June 2008 quarter.

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