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Originally published Saturday, July 28, 2012 at 8:01 PM

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Kraft takes new approach to cheese case

Kraft is working with grocers to boost sales in cheese aisles.

Chicago Tribune

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CHICAGO — Kraft Foods is working with grocers to reshape cheese and dairy cases at more than 4,000 stores to make its most popular products easier to find and its new items easier to stumble upon.

Known internally as "Reimagine Cheese & Dairy," the program underscores the increased importance of these products for Kraft's North American grocery business, which will be spun off later this year as a stand-alone company.

After the separation, cheese and dairy products such as Philadelphia Cream Cheese will account for about 20 percent of total sales, up from about 14 percent currently. (The rest of legacy Kraft will be a $35 billion company called Mondelez International, focused on global-snacking brands.)

Kraft anticipates 3 to 5 percent sales gains at stores implementing the program in the first year as a result of additional space, better organization and other factors. As part of the program, retailers are reorganizing the cheese sections and in some cases expanding it by as much as 8 feet.

It's an ambitious goal for a category that's become vulnerable in recent years after quality improvements by store brands and volatile commodity costs that have sent prices higher for consumers. Northfield, Ill.,-based Kraft has been under intense pressure to give consumers a reason to pay more for its products, even as each dollar spent is under heightened scrutiny. The company has responded with increased marketing investment and new products to make dinner preparation easier.

Cooking at home

"Everyone knows the economy drove people home and they started cooking more," said Art Sebastian, director of sales strategy and customer development at Kraft. "That led us to believe we needed to take a look at the shredded-cheese section and give it proper space allocation as a sort of a cooking destination."

Sebastian said Kraft also saw increased sandwich consumption and growth in natural-cheese slices as compared to American singles, particularly with "bold flavors" shoppers might find at restaurants.

Snacking is another key food-industry trend, and snack cheeses, such as string cheese, are growing at twice the rate of the overall cheese category, at 6 percent to 8 percent, said Ken Gipple, Kraft's customer vice president of cheese and dairy.

He added that customers have cut shopping times 10 to 15 percent in the past few years, to fewer than 30 minutes on average, citing a Sorenson Path study. Of that time, customers allocate 24 to 30 seconds to cheese and dairy, even though cheese purchases are planned 82 percent of the time, according to Kraft data.

"So for us it's a couple of things: Simplify the shopping experience for customers so they can find what they're looking for in the departments, and drive store efficiency" for retailers, he said.

To develop the new design, Kraft conducted research with about 1,000 customers who wore eye-tracking glasses and a bio-sensory headset so the company could follow shoppers' gazes and brain activity to understand positive or negative feelings about what they saw. Kraft also sent researchers on shopping trips with consumers, and stopped others at the grocery to discuss what was in their basket and why.

Arranging products

Kraft learned, among other things, that its best-selling products were hanging too high, and anything they wanted consumers to notice should be slightly below eye level. At the Jewel-Osco near Chicago's Old Orchard mall, the cheese section has gained 4 feet in the refrigerator case, a significant increase for a high-traffic area.

"Everyone used to want to put their best-selling (product) at eye level," or the top shelf, Sebastian said. "They'll focus here and then shop around."

Arranging key products in a diamond pattern created another opportunity for Kraft: The top is prime real estate for best-selling products, and there are slots nearby for high-potential new items.

"Consumers said there are always good new items in cheese, but they just couldn't find them," Sebastian said.

Janney analyst Jonathan Feeney praised the program and Kraft's increased investment in advertising and product development in recent years, from 6.6 percent of total sales in 2009 to 7.2 percent in 2011, on a higher base.

"The market is kind of starved for that kind of activity and Kraft has stepped into that breach well," Feeney said. He added that Kraft has been outperforming the North American grocery category, with sales and volume gains compared with declining volume sales at branded competitors that haven't made the same investments.

Feeney sees the shelf redesigns as an extension of the same commitment. He said that while manufacturers are expected to invest in price promotions to help get their products moving off store shelves, "You never want to offer just price."

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