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Kraft F o o ds 2009 Annual Report

Make today delicious


Table of Contents

Page 4

Page 5

Letter to Shareholders

Stock Performance

Pages 6 & 7

Pages 8 & 9

History of the Company

Finanical Highlights

Pages 10 & 11 New Products

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Letter to Shareholders Announcing New President. Kraft Foods Inc. announced today that W. Anthony (Tony) Vernon will become President, Kraft Foods North America, in mid-August. Vernon, 53, joins Kraft Foods from private equity firm Ripplewood Holdings, following a successful career at Johnson & Johnson. He will report to Chairman and CEO Irene Rosenfeld and become a member of the Kraft Foods Executive Team. “Tony has an impressive history of building and sustaining iconic consumer brands. His strong track record of growth through consumer-driven innovation, world-class marketing and strong retail relationships will help to further accelerate our business performance,” said Rosenfeld. Vernon replaces Rick Searer, who will retire at the end of September. Rosenfeld continued: “For nearly 30 years, Rick has been an exceptional member of our team. At every step on the corporate ladder, he achieved impressive business results. But more than that, Rick has a truly rare combination of intellect and humanity, insight and inspiration, drive and compassion. These are hallmarks of a great leader. We’ll miss him.” Vernon is a 26-year veteran of the healthcare industry, principally in consumer businesses at Johnson & Johnson, and over the last three years as healthcare industry partner of Ripplewood Holdings. At J&J, Vernon ran multibillion-dollar independent business units and led many of that company’s largest consumer brands, including Tylenol, Motrin, Pepcid AC, Imodium and Splenda. His accomplishments include leading the strategic evaluation, licensing and launch of Concerta and turning Remicade into a market leader in biologics; both of these prescription drugs are now billion dollar franchises for J&J.

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Vernon earned a bachelor’s degree in history from Lawrence University and an MBA from the Northwestern University Kellogg Graduate School of Management. Kraft Foods (www.kraftfoodscompany.com) makes today delicious in 150 countries around the globe. Our 100,000 employees work tirelessly to make delicious foods consumers can feel good about. From American brand icons like Kraft cheeses, dinners and dressings, Maxwell House coffees and Oscar Mayer meats, to global powerhouse brands like Oreo and LU biscuits, Philadelphia cream cheeses, Jacobs and Carte Noire coffees, Tang powdered beverages and Milka, Cote d’Or, Lacta and Toblerone chocolates, our brands deliver millions of smiles every day. Kraft Foods (NYSE: KFT) is the world’s second largest food company with annual revenues of $42 billion. The company is a member of the Dow Jones Industrial Average, Standard & Poor’s 500, the Dow Jones Sustainability Index and the Ethibel Sustainability Index.

Stock Performance

Forward Looking Statements Safe-Harbor This press release contains the forward-looking statement that Vernon’s strong track record of growth through consumer-driven innovation, world-class marketing and strong retail relationships will help to further accelerate our business performance. This forward-looking statement involves risks and uncertainties that could cause actual results to differ materially from what is predicted in the forward-looking statements. Such factors, include, but are not limited to, continued volatility in input costs, pricing actions, increased competition, increased costs of sales, a shift in our product mix to lower margin offerings and competition from lower-priced private label products. For additional information on these and other factors that could affect our forward-looking statements, see our filings with the SEC, including our most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this press release. 5


History of the Kraft Foods Company

1928: Kraft introduced VELVEETA process cheese. Kraft introduced MIRACLE WHIP salad dressing at Chicago’s Century of Progress World’s Fair.

1765: A Dorchester, Massachusetts, physician, Dr. James Baker, went into partnership with a Irish chocolate-maker, John Hannon and made America’s first chocolate mill.

1933:

1780: The mill made the famous BAKER’S chocolate.

1936: “Little Oscar and the WIENERMOBILE” started the advertising campaign for Oscar Mayer & Co.

1880: The Empire Cheese Company of New York began producing PHILADELPHIA BRAND Cream Cheese for a New York distributor called Reynolds.

1937:

1882: Isaac and Joseph Breakstone (Breakstone Bros) opened a small dairy store on New York City’s Lower East Side. 1883: The now famous Oscar F. Mayer and his brothers Gottfried and Max started a meat market in Chicago.

1946: MAXWELL HOUSE instant coffee was introduced to the American public after it was used by the armed forces in World War II. 1949: MINUTE Rice was nationally distributed.

1889: Food salesman, William M. Wright created a new baking powder called CALUMET® which he made at night and sold during the day.

1952: CHEEZ WHIZ pasteurized process cheese spread was introduced.

1892: A coffee blend was developed by Joel Cheek for the Maxwell House Hotel in Nash ville, Tennessee, called MAXWELL HOUSE coffee. 1895: In Battle Creek, Michigan, C.W. Post made the first POSTUM®, a cereal beverage. Post created GRAPE-NUTS® cereal in 1897, and POST TOASTIES® corn flakes in 1908. 1897: Pearl Wait adapted an 1845 patent for a gelatin dessert. May Davis Wait named the new product JELL-O brand gelatin. In 1899, Orator Francis Woodward bought the trademark rights to JELL-O® for $450. Woodward launched the advertising campaign for “America’s most favorite Dessert” in 1902. 1903: J.L. Kraft started a wholesale cheese business in Chicago. 1905: YUBAN coffee blend was created by John Arbuckle. 1906: Oscar Mayer is one of the first meatpackers to obtain the Federal Meat Inspection stamp of approval. 1907:

Legend claims that when President Theodore Roosevelt was served a cup of MAX WELL HOUSE coffee and he proclaimed that it was “GOOD TO THE LAST DROP.”

1914: J.L. Kraft & Bros. Co. opened their first cheese factory in Stockton, Illinois, within a year they begin producing process cheese in tins. The U.S. government provided cheese in tins for the armed forces during World War I. 1921: 1927: 1927:

KRAFT Macaroni and Cheese Dinner was introduced with the advertising slogan of “Make a meal for 4 in 9 minutes.”

1950: KRAFT Deluxe process cheese slices, the first commercially packaged sliced process cheese was introduced. 1954:

Kraft introduced CRACKER BARREL brand natural cheese.

1957: The General Foods Corporation introduced TANG, breakfast beverage crystals. 1963: The now famous wiener jingle first appeared in Oscar Mayer commercials. I965:

The company introduced SHAKE ‘N BAKE coating mix in two versions, chicken an fish.

1966:

COOL WHIP nondairy whipped topping was introduced.

1972: STOVE TOP stuffing mix was introduced. 1973: GENERAL FOODS INTERNATIONAL COFFEES flavored coffees were introduced. 1981:

General Foods Corp. bought Oscar Mayer & Co.

1983: Kraft introduced LIGHT N’ LIVELY lowfat yogurt, the first US yogurt in a six-pack. 1985:

General Foods Corporation is bought by Philip Morris Companies Inc.

1986:

Kraft purchased Tombstone Pizza Corporation of Medford, Wisconsin (est.1962).

1988: Kraft, Inc. was bought by Philip Morris Companies Inc. Oscar Mayer introduced LUNCHABLES. 1989: Philip Morris Companies combined Kraft, Inc. and General Foods Corporation to form Kraft General Foods, the largest food company in the U.S. 1989: DI GIORNO brand refrigerated pastas and sauces were introduced.

Louis Rich bought a truck and started his business in Rock Island, Illinois.

1993:

Edwin Perkins created a powered fruit drink called KOOL-ADE, later called KOOL-AID. Perkins created KOOL-AID from his first product the popular soft drink syrup called Fruit Smack.

1995: Kraft General Foods was renamed Kraft Foods, Inc. DI GIORNO RISING CRUST pizza was introduced.

The same year the Postum Company marketed SANKA decaffeinated coffee (first sold in the U.S. in 1923).

1997: POST Cranberry Almond Crunch and POST Honey Nut Shredded Wheat cereal was introduced.

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Kraft General Foods acquired NABISCO ready-to-eat cold cereals from RJR Nabisco.

1996: BREAKSTONE’S snack-size cottage cheese, the first four pack of 4 ounce cups.

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2009

2008

2007

2006

2005

Summary of Operations: Cost of Sales Operating income Operating margin Interest & other expense, net Earning fom continuing operations before income taxes Provision for icome taxes Earnings/(loss) from discontinued operations, net of income taxes Net earnings Noncontrolling interest Net earnings attributable to Kraft Foods Basic EPS attributable to Kraft Foods : Continuing operations Discontinuing operations Net earning attributable to Kraft foods Diluted EPS attributable to Kraft Foods: Continuing operations Discontinuing operations Net earning attributable to Kraft foods Dividends declared per share Dividends declared as a % of Basic EPS Dividends declared as a % of Diluted EPS Weighted-average shares -Basic Weighted-average shares -Diluted Net cash provided by operating activites Captial expenditures Free cash flow

25,786 5,524 13.7% 1,237 4,287

28,088 3,843 9.2% 1,240 2,603

23,656 4,176 11.6% 604 3,572

21,190 4,158 12.6% 510 3,648

21,115 4,372 13.3% 635 3,738

1,259 -

755 1,045

1,080 232

816 233

1,066 (33)

3,028 7 3,021

2,893 9 2,884

2,724 3 2,721

3,065 5 3,060

2,639 3 2,636

2.04 2.04

1.22 0.70 1.92

1.56 0.15 1.71

1.70 0.14 1.84

1.57 (0.02) 1.55

2.03 2.03

1.21 0.69 1.90

1.56 0.14 1.70

1.70 0.14 1.84

1.57 (0.02) 1.55

1.16 56.9%

1.12 58.3%

1.04 60.8%

0.96 52.2%

0.87 56.1%

57.1%

58.9%

61.2%

52.2%

56.1%

1,478

1,505

1,591

1,659

1,699

1,486

1,515

1,600

1,661

1,699

5,084

4,141

3,571

3,720

3,464

1,330 3,754

1,367 2,774

1,241 2,330

1,169 2,551

1,171 2,293

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Depreciation Property, plant and equipment, net Inventories, net Total assests Long term debt Total debt Total long-term liabilities Total Kraft Foods Shareholders’ Equity Total Equity Book Value per common share outstanding Market price per Common Stock share -high/ low Closing price of Common Stock at year end Price/earning ratio at year end -Basic Price/earning ratio at year end -Diluted Shares outstanding at year end Number of employees

2009 905 10,693

2008 963 9917

2007 873 10,778

2006 884 9693

2005 869 9817

3,775 66,714 18,024 18,990 29,251

3,881 63,173 18,589 20,251 29,773

4,238 68,132 12,902 21,009 23,574

3,436 55,548 7,081 10,821 16,520

3,272 57,597 8,475 11,200 19,285

25,876

22,295

27,407

28,536

29,574

25,972 17.51

22,356 15.18

27,445 17.87

28,562 17.44

29,600 17.71

29.84 -20.81

34.97 24.75

37.20 29.95

36.6727.44

35.65 27.88

27.18

26.85

32.63

35.70

28.17

13

14

19

19

18

13

14

19

19

18

1,478

1,469

1,534

1,636

1,670

97,000

98,000

103,000

90,000

94,000

Financial Highlights 9


New Products at Kraft OSCAR MAYER Turkey Bacon OSCAR MAYER Turkey Bacon is a delicious addition to your wholesome

breakfasts. With 50% less fat than pork bacon* and the great bacon taste you want, it’s the sizzle you’ve been waiting for.

Double Stuf OREO Cakesters

New from OREO CAKESTERS, the OREO of snack cakes! DOUBLE STUF OREO CAKESTERS is an exciting new treat for the whole family, with double the soft OREO crème, sandwiched between two rich, moist OREO chocolate cakes.

Kraft PHILADELPHIA Minis Now it’s so easy to spread a little PHILLY wherever you go - with new

PHILADELPHIA Minis. The same delicious flavors and creamy smoothness you love in the big tubs, now come in packs of 4 individual 1.25 oz. snap-apart Minis. Take them along to spread in more ways in more place

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DIGIORNO 200 Calorie Portions IT’S NOT DELIVERY. IT’S DIGIORNO. Enjoy that fresh-baked taste

you love in individual 200 calorie portions.

DELI CREATIONS Focaccia Sandwiches

Try our new, restaurant-inspired sandwich. Imagine everything you need packed fresh, including delicious oven-baked herb bread. In four delicious recipes, including Tuscan-Style Chicken and Bistro Ham and Provolone.

NABISCO 100 Calorie Packs Chewy Granola Bars

These granola bars feature wholesome whole grains, and delicious NABISCO cookie flavors. There’s OREO, CHIPS AHOY! and NUTTER BUTTER flavors.

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