Kraft's End of Year Results

"At Kraft Foods, we owe the world more than a quality product at a fair price. We have the responsibility - and the desire - to help make a difference on the critical issues facing society."(1)

Kraft has had an exceptionally good year with net profits increasing by more than 80%(2). Its coffee business has been critical to this success. It contributed consistently to the growth in profits throughout the year and volumes of coffee sales increased in most major Kraft markets.

A million miles away from these profits are the 25 million coffee farmers struggling to survive. Despite a slight increase in the coffee price in recent months the coffee price remains far below the cost of production. In Papua New Guinea, for example, the cost of production is estimated at 95-102.1 US cents per lb(3) and in Central America at 92 US cents per lb(4)  - compared to a current price of 56 US cent per lb.

Kraft has satisfied shareholders with handsome returns. Its challenge now is to satisfy customers and suppliers, especially poor coffee farmers. Despite philanthropy in Peru and Vietnam, Kraft continues to fail the vast majority of coffee farmers. The company has a dismal record in meeting the structural problems in the coffee market, which keep farmers in misery.

Oxfam challenges Kraft to show its commitment to making the coffee market work for the poor as well as the rich through:

• A commitment to pay a decent price to farmers;
• Only buying coffee which meets the ICO (International Coffee Organisation) quality standards; and
• Purchasing at least 2% of its coffee from Fair Trade sources.

Without a commitment to these farmers, Pres. Roosevelt's slogan that Kraft's Maxwell House is "good to the last drop" will be distorted to become "Good till the last one drops".

1. From the Kraft website at http://www.kraft.com/profile/cares.html.
2. Kraft also reports on Pro Forma results for a better comparison with 2001. In the Pro Forma results they make certain hypothetical assumptions to enable this comparison. These assumptions include that Kraft went public on 1 January 2001 and that proceeds from the IPO was used to retire debt. In this case the net profits increased by 15.2%.