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Queen of Brands: Kraft CEO breathes new life into old favorites

By Linda Myers

Bright, focused, innovative
Kraft strategy specifics
Irene Rosenfeld

Irene Rosenfeld '75, MS '77, PhD '80, was listed as #5 on Fortune magazine's list of 50 Most Powerful Women in Business in 2006 and 2007, and dubbed a "shrewd, no-nonsense marketing genius" with "legendary marketing know-how" by Forbes. She was brought in as chairman and CEO of Kraft Foods in order to revitalize a company that had been consistently losing market share. Less than a year into a three-year turnaround strategy, Rosenfeld's emphasis on creating new products, access to international markets, and fresh marketing ideas looks like it's paying off.

"Did you know that a grilled cheese sandwich has more nutrients than a peanut butter and jelly sandwich?" Irene Rosenfeld '75, MS '77, PhD '80, asked a group of Johnson School students during a whirlwind return visit to campus this October that included her delivery of the twenty-first annual Lewis H. Durland Memorial lecture, the Johnson School most prestigious business speaking event.

Rosenfeld is trying to restore the sandwich to its former place of pride in American kitchens by touting its easy preparation and delicious memories while selling thicker, more flavorful cheese slices with which to make it. A new advertising campaign also suggests that eating the sandwich will make you happy, according to a recent article in The New York Times.

A Kraft veteran of twenty-two years, Rosenfeld had left her position as president of the food giant's North American division in 2004 to become chairman and CEO of Frito-Lay. But she was wooed back in 2006 with the challenge to rescue Kraft from weak sales and lagging growth.

The largest food company in the United States, Kraft is home to such billion-dollar brands as Philadelphia and Oreo. Rosenfeld had led its acquisition of Nabisco, the world's biggest cookie maker, in 2000. But Kraft has been underperforming for about four years and has been further challenged by the rising cost of commodities. Can Rosenfeld change that as CEO, or has she bitten off more than she can chew, as some in the business press suggested

Anatomy of a Turnaround
"At the time I came back to Kraft our financial results were at the bottom of our peer group, and a focus on cost cutting had left the organization tired and disillusioned," Rosenfeld candidly told the crowd who attended her lecture, "Anatomy of a Turnaround: Returning Kraft to Reliable Growth."

But as "an insider with an outsider's experience," she was optimistic about the potential for change: In addition to offering an opportunity to do things differently and better, Kraft also was about to be spun off by parent company Altria.

As CEO, Rosenfeld urged staff to start thinking about the company not as a behemoth but as "a $35 billion startup." To put muscle behind her message of "Let's get Kraft growing," she invited employees to offer suggestions for change via an Internet site dubbed "Ideas for Irene."

"You've re-energized my belief that you are truly going to turn this company around," wrote one employee. "You go, girl!"

"It's refreshing to learn about progress through periodic updates, instead of infrequent sweeping announcements," wrote another, reaffirming Rosenfeld's practice of communicating frequently, consistently, and honestly.

In February 2007, she unveiled her three-year plan to analysts, investors, staff, and stakeholders.

"My strategy has been to rewire the organization for growth," Rosenfeld told her lecture audience, many of them fellow Cornell trustees. She started by putting the right people in key positions, replacing half of the top leadership within the first two months of becoming CEO. She also pared down the next two levels of management. In addition, she has tied compensation and bonuses to performance, streamlined Kraft's corporate structure, and made the business units more accountable.

Rosenfeld and her team are working to reframe the firm's categories by looking at them through the eyes of consumers. "Our ability to understand our consumers better than everybody else will set Kraft apart," she told her audience. The company now categorizes cheeses, for example, by how customers use them (as snacks, in sandwiches, and cooking) rather than by the firm's manufacturing processes (in chunks, slices, or grated).

When she returned to Kraft in 2006, there wasn't much in its product pipeline, she recalled. Now Rosenfeld speaks with pride about the company's latest offerings, among them Oreo Cakesters, a soft cake version of the beloved black-and-white cookie, taste-tested favorably by David Letterman; and LiveActive cheese, made with "probiotics," special live cultures like those in yogurt that promote digestive health.

And she seemed pleased when students at the roundtable said they were intrigued by Kraft's marketing campaign for DiGiorno Ultimate Pizza, which introduced the fresh-tasting freezer product in "pop-up" pizzerias – short-term storefront eateries – in key cities like Chicago.

Grading Kraft nine months into its three-year plan, Rosenfeld reported: "We're making good progress on all fronts. We're enjoying faster revenue growth in all geographies, bigger, better ideas are coming to market, and we've increased our earnings guidance for the year."

Asked what the company will look like when she eventually steps down, she predicted: "Kraft will be a top-tier performer, a slimmer, more nimble competitor, more in touch with consumer needs. We have every right to aspire to that, given our people and our assets, and we'll get there.

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Bright, focused, innovative

Irene Rosenfeld was energetic and eloquent throughout her many engagements on campus Oct. 18, including her delivery of the Lewis H. Durland Memorial lecturer, at which she spoke about her strategy for turning Kraft around.

Also on her schedule were a power lunch with women MBAs, a roundtable discussion with current business students, a guest lecture for International Competitive Strategy, a class taught by Johnson School faculty member Jan Katz, plus a series of events connected with Trustee-Council Weekend, as Rosenfeld is a Cornell Trustee.

"I thought she imparted a lot of her knowledge of leadership skills, and I really enjoyed hearing about how she managed to rise in a competitive environment," said Michelle Colban, MBA '09, who attended the luncheon and the roundtable, and who aspires to a leadership position in the food industry.

Now a Cornell trustee, Rosenfeld holds three Cornell degrees – a BS in psychology (1975), an MS (1977), and PhD (1980) from the Johnson School in marketing and statistics. "She was one of my brightest students, extremely dedicated and highly resourceful," recalls Vithala Rao, professor of marketing and quantitative methods, who oversaw her thesis on a model to describe the process consumers use to make groups of choices – innovative at a time when most models accommodated only single choices.

Dean Joe Thomas, Nicholas H. Noyes Professor of Manufacturing, who introduced Rosenfeld's Durland lecture to a packed house in Statler auditorium, recalled that she was undaunted by hard courses as a student and was as smart and focused then "as she is now as a leader of a tremendous organization."

Rosenfeld honed her brand marketing skills at General Foods, and then segued to Kraft after both firms were bought by Philip Morris. She went on to become president first of Kraft Canada, then of Kraft North America. She led the company's acquisition of Nabisco and served on the team that led Kraft's initial public offering in 2001.

On what propelled her to the top slot, she said: "I always wanted to be the best I can be," adding, with a laugh, "Back when I was treasurer of my Brownie patrol I was diligent about collecting those dues."

On the success of women in general, Rosenfeld said, "It's great to see how far we have come in business and other fields." But women at the helm aren't new, she pointed out. "I would like to see the media get over their fascination with the subject. There have been plenty of top women leaders, from Indira Gandhi to Margaret Thatcher to Angela Merkel."

Rosenfeld's husband, whom she met at General Foods, is a mergers and acquisitions specialist. She has two daughters: one is an environmental engineer; the other, a senior at Cornell, was in the audience for her mother's address at the Durland lecture.

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Kraft strategy specifics

Irene Rosenfeld gave thoughtful and detailed responses to students' and other audience members' questions at Q&A sessions throughout the day on Oct. 18. Here's what she said about a few key areas:

On global strategy: Rosenfeld told International Competitive Strategy students that she had named a new director of Kraft International who had extensive experience in local markets around the globe. "Now we are managing our global operations locally," she said. Another positive development: By year's end the firm hopes to complete its acquisition of the Danone biscuit business, which has operations and assets in twenty countries and a product line that is doing well in key Asian markets. "I'm confident this will fuel the 8 to 10 percent growth rate that is so important to our success," she predicted.

On consumer health and childhood obesity: At the power lunch, Rosenfeld called Kraft a leader in promoting healthful eating among children. "We no longer sell snacks in vending machines. We've never advertised to kids under six. And in 2004, we began marketing only healthy foods that meet our Sensible Solution guidelines to kids six and older." The company also promotes exercise among young people and encourages portion control for adults through its 100-calorie packs and South Beach Diet line. "The best thing we can do is make great-tasting foods that are good for you and educate the consumer," said Rosenfeld.

On sustainability: "I share [GE CEO] Jeff Immelt's view that 'green is gold.' Employees and customers want to feel good about the company they are working for and buying from. We now have a vice president of sustainability and an agenda with goals for 2012 that include reducing energy and water use, greenhouse gas emissions, and packaging waste, as well as increasing the sustainability of our commodities."

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