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Kraft Foods FIghts Food Inflation With Smaller Servings

Kraft Foods CEO Irene Rosenfeld says she is closely watching the rise in commodities prices.

We're exposed there in most of our categories, she said. The company, she says has been focused on investing in its franchises to cut costs and improve margins. Part of that process has been introducing smaller packages, smaller serving sizes and lowering costs across the chain.

Its also raising prices. The cost of Maxwell House coffee has skyrocketed 22 percent. How are competitors and consumers reacting?

All of our competitors are facing a similar environment, she said. Hershey's announced this week that it is raising wholesale prices on most of its candy products by 10 percent. And Wal-mart CEO Bill Simon said to USA Today that inflation is an issue and has been creeping into dairy, cotton and paper prices.

Kraft's Rosenfeld thinks consumers will cope with rising prices by buying smaller amounts of many products which is why Kraft is expanding its sizing options.

The recent surge in energy prices is more of a wild card. A factor across the input stream, energy is more of an indirect cost and also harder to plan for. Rosenfeld pointed to the companys sustainability program as one way the company is targeting rising energy prices.

This is a difficult macro environment, she says. Globally there are areas that are thriving.

Kraft has not yet announced a date for its quarterly earnings but, a company spokesman says the company will most likely issue its report May 5th after the market close.

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