New Kraft Foods Group Delivers Strong Third Quarter 2012 Results

Newly independent Kraft Foods Group, Inc. reported strong third quarter 2012 results with top- and bottom-line growth fueled by new products, increased investments in advertising and consumer spending and significant productivity gains.

"Our third quarter results demonstrate the power of our brands, our people and our innovation," said Tony Vernon, CEO of Kraft, in a prepared statement. "We have an excellent foundation as a new and independent Kraft, and we're confident we have what it takes to fulfill our mission of becoming the best food and beverage company in North America."

Net revenues in the third quarter 2012 grew 3.0 percent to $4.6 billion. Organic net revenues increased 3.2 percent from volume/mix gains of 2.6 percentage points and favorable pricing of 0.6 percentage points, reflecting significant gains from new products. The customer inventory shifts in the third quarter, largely related to the spin-off, benefited volume/mix by 2.6 percentage points. These gains were partly offset by 1.3 percentage points from product pruning.

The company's operating income in the third quarter increased 7.6 percent to $762 million. The operating income growth reflected volume/mix gains, improved productivity and increased investments in advertising and consumer spending.  The restructuring Program costs of $54 million negatively impacted operating income growth by 7.7 percentage points while the year-over-year change in unrealized gains/losses from hedging activities added 10.2 percentage points of growth.

The spin-off of Kraft by Mondelez International, Inc. was completed on Oct. 1, 2012. Kraft's financial statements for the third quarter ended Sept. 30, 2012 were prepared on a "carve-out" basis, reflecting an allocation of costs incurred by its former parent company. The carve-out financials are not indicative of the complete future cost structure or expected future financial results of Kraft as an independent company, particularly in the areas of interest, taxes, overhead and pension costs.

wmargin?bS@? ? : “Based on our own experience, consumers appear to have accepted two-tier pricing because of the convenience it offers,” said Lisa Leuchter, founder and co-owner of Snackworks, with well over 1,000 vending and coffee machines in Florida. “Adding USAT’s Two-Tier Pricing Program as one of our cashless payment options has helped us to be more flexible and competitive, and is bringing in enough additional pre-tax profit to pay for our card processing and one-third of our ePort Connect service fees. The program has made installing cashless payment more viable with a broader base of customers," she said.

 

The Rawls Distributing Co.: “We are continually adding new technology and services to improve operations and the customer purchasing experience,” said Robin Rawls, founder and owner of Rawls Distributing Co., with 1,200 vending machines in Georgia. “I was prompted to try USAT’s Two-Tier Pricing Program when I learned about the positive findings in their latest study of two-tier deployments. Now, we try to get two-tier pricing on all of our machines as existing contracts run out with some of our more intractable clients. Their employees want the service and are willing to pay for it,” he said.

CNC Vending: CNC Vending, Houston, Texas, owner/operator, Chuck Olson, acknowledges that consumers are spending more at CNC machines when they can pay with their debit or credit cards instead of cash—on multi-vends and on higher priced items. “Every CNC vending machine that goes out now has an NFC-enabled card reader, giving our consumers more convenience, ease of use and speed of transaction, adding so much more value to their shopping experience. This was another reason for going with USAT’s Two-Tier Pricing Program. We can offer every payment option and open up new streams of revenue,” he said.

“We continue to enhance the value of every connection for our customers, and for USAT,” said USAT’s Turner. “Our Two-Tier Pricing Program is a great example of that; we are extremely pleased that we have attracted 11,000 ePort Connect locations to our Two-Tier Pricing Program in just nine months. Operators of our self-serve retail locations, particularly in vending, are now realizing that USAT’s Two-Tier Pricing Program can help them to quickly scale their cashless deployments while also enhancing their business returns,” concluded Turner. 

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