Kraft plans smaller, lower-priced packs

By Brad Dorfman

CHICAGO (Reuters) - Kraft Foods Inc (KFT.N) plans to offer more products in smaller sizes that cost less per package to address economic pressures on consumers, Chief Executive Irene Rosenfeld said on Wednesday.

"Without a doubt, we are focused on the opportunities to lower the dollar outlay, particularly in developing markets but also in developed markets," Rosenfeld told Reuters in an interview.

Among products coming to U.S. store shelves this year will be smaller pizzas for one person and Oscar Mayer deli meats that come in single-serve portions, she said.

U.S. consumers have been hit hard by soaring gasoline and food prices, as well as falling home prices and rising costs for adjustable-rate mortgages.

Food prices were up 4.5 percent in March from a year earlier, according to the U.S. Labor Department's Consumer Price Index report.

Companies have largely been successful in passing on to consumers soaring costs for ingredients like wheat and soybean oil, as well as for energy.

Kraft, the largest North American food company, said higher prices accounted for more than half of the 8 percent increase in "organic" sales it reported in the first quarter. Organic sales is a measure that excludes the impact of currency fluctuations and acquisitions.

"We have taken some additional actions and we are going to see more of the pricing action flow through in the second quarter," Rosenfeld said.

But she said there was also a need for lower package price points.

Aside from price increases, Kraft has taken other steps recently to improve productivity.

A new organizational structure, with financial incentives geared more directly to the performance of a specific business, has helped foster cost-cutting efforts, Rosenfeld said.

"Finding new ideas on productivity, simple ideas like pruning some of least productive SKUs, is gaining much more traction in the current structure," Rosenfeld said. SKUs, or stock keeping units, is an industry term that refers to individual package sizes and product varieties.

Kraft shares were up $1.05, or 3.4 percent, to $31.82 in morning trade on the New York Stock Exchange.

(Reporting by Brad Dorfman, editing by Gerald E. McCormick and John Wallace)