Kraft Foods Group (UNKNOWN:KRFT.DL) is entering a new era after its recent corporate breakup. Its brand power is indisputable, and its market share dominates. But Kraft's growth potential is limited, and its heavily commoditized categories face massive pressures. I've created a premium report on Kraft to help investors examine the company's future.
Following is an excerpt from the report, which lists the three biggest risks facing Kraft. It's just a taste of one section, but we hope you find it useful.
- Rising competition from branded and private-label products:
Other big-brand and private-label competitors continually threaten heavily commoditized categories in which Kraft competes. But Kraft is confined to the mature North American markets, a limiting factor to its long-term growth potential. While the company has the brand strength to be successful, it's realistic to expect less consistent financial results than those enjoyed by many of its global, best-of-breed consumer staples peers.
- Commodity inflation and volatility:
When corn, sugar, and soybean prices increase, Kraft feels the pressure. High input costs force Kraft to either absorb the increased costs at the expense of margin degradation or to pass the costs on to consumers, risking that customers will choose cheaper brands or private-label goods. In the past, Kraft has successfully raised prices during periods of commodity inflation, and it's critical that the company can continue this practice in the future.
- Weakness in category growth:
Food and beverage companies with strong brand portfolios can typically pass-through higher input costs to customers by increasing prices over time. However, these companies need to maintain volume growth and continue developing those brand portfolios. Failure in any of these categories poses a risk to current Kraft investors.
Looking for more help?
That was just a small morsel of our new premium report on Kraft Foods Group. If you're trying to figure out whether the company is a buy or sell, the report is an indispensable resource for investors seeking more information. The report also comes with updated quarterly guidance so you'll stay in the know. To get started, simply click here.
Fool contributor Nicole Seghetti and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.