Kraft Foods (KFT) is looking to strengthen its chocolate and gum segment by expanding into new territories and launching new marketing strategies to boost sales of Toblerone chocolates and Trident gum.

After the acquisition of Cadbury in 2010, chocolates, candies and gums became the most important segment for Kraft, contributing more than 26% to the total stock price, as per our estimates.

In India, Kraft recently launched Toblerone to boost its chocolate portfolio in the country. Kraft has a major presence in India through Cadbury. Its earlier launches in India include Tang and Oreo cookies, which have been successful thanks to competitive pricing and Cadbury's distribution and supply chain networks present in the country. Cadbury has been present in India for more than 60 years.

Kraft is looking to position Toblerone in the premium chocolate category, which is currently dominated by Ferrero Rocher. Positioning in the premium chocolate category will also help avoid cannibalizing Cadbury's chocolates already present in the country, most of which are in the mid-range category.

We have a $40 price estimate for Kraft Foods, which is slightly above the current market price.

Kraft is looking to bolster its presence in the gum market after admitting that it was one of the segments that hasn't received adequate attention and has the potential to improve. Kraft hopes to accelerate the sales of its Trident gum by offering retailers retrofittable gum and mint shelves. Worldwide, gum companies are dependent on a large extent on impulse buying. Initial tests have resulted in sales jumping 15%-20%.

Recently, Kraft also won an innovation award from Nielsen for its Trident Layers gum. Earlier in the year, Kraft announced a new marketing campaign for Trident that focuses on the emotional benefits associated with the product instead of the usual focus on health benefits, in order to appeal to a wide range of customers.

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