Packaged goods are usually considered as close to recession proof as any sector can be. But in the current downturn, even frequently replenished staples are suffering. And because the purchase cycle for these products is so brief, the effects are immediate. When Sanjay Khosla arrived at Kraft Foods in 2007, growth in the company’s Developing Markets business was anemic, margins were eroding, and the world was on the eve of a global recession. Yet within a few years, he turned the business around with an unorthodox approach to growth. Today, Developing Markets is a $13.6 billion business. Revenues from organic growth have increased nearly 13 percent and operating income grew an average of more than 34 percent per year from 2006 through 2010. Michael J. Silverstein, a BCG Fellow and coauthor of Women Want More, spoke with Mr. Khosla about his experience at Kraft Foods.
As budget-constrained consumers trade down to private-label products, brands are desperately seeking growth by adding more products, categories, and markets. Is this a good strategy?
In a word, no. Our experience suggests that this approach is exactly the opposite of what business leaders should do to drive profitable growth. The growth-through-more approach just adds complexity. Paradoxical as it may seem, we find that “growth through less” is the best prescription, whatever the economic environment. Focus is a powerful engine for growth—doing a few things and doing them well. Seemingly mature businesses can be reenergized by making fewer but larger bets, and by focusing relentlessly on executing a simple but powerful vision. At Kraft Foods Developing Markets, our blueprint for driving profitable growth is a strategy we call Winning Through Focus, which takes us from strategy and vision to execution and measurement.