Kraft Foods: Industry Analysis & Growth Comparison

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Different industries will be produce different levels of output and growth and certain times during their existence. The fluctuations of these levels can be referred to as Industry Life Cycles. These cycles are usually experienced by all companies, and contain four stages: Start-up, Consolidation, Maturity, and Relative Decline. Many industries, however, do not feel the effect of an industry life cycle, due to the particular industry they are in. Kraft Foods, Inc. is classified in the Food Manufacturing Industry. This industry can be classified as a defensive industry, or one that has little sensitivity to economic cycles. Examples of defensive industries include food producers and processors, pharmaceutical firms, and public utilities. It can be concluded that most defensive industries do well during economic recession because they are necessary to society and will consistently produce revenue. However, while these industries are usually insensitive, they are not completely immune to business cycle conditions. Using certain factors, Kraft Foods will be analyzed and compared to its competitors of the same industry in order to see what stage of the life cycle Kraft and its industry are in. Kraft’s major competitors are Heinz, Nestle, ConAgra, Kellogg, General Mills, and Sara Lee. Averages of these companies’ annual numbers will be compared to Kraft’s (Note: The annual numbers for all 6 companies can be found on Table A). The five factors that will be used for comparison are net margin profit, return-on-equity, operating margins, total debt to equity, and rate of return. A time life of 8 years, or since the beginning of Kraft’s existence in the NYSE, has been used. The report concludes that Kraft Foods and its competitors are in the consolidation phase of the industry life cycle. However, indicators and additional factors can be found that support and refute

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