How Lactalis Revitalized Kraft Natural Cheese After $3.2 Billion Acquisition

In 2021, Lactalis USA made headlines with its $3.2 billion acquisition of Kraft Heinz’s natural cheese business. This significant investment encompassed well-known brands such as Kraft Natural Cheese, Cracker Barrel, Breakstone’s cottage cheese, and Knudsen sour cream and cheese. The acquisition led to the creation of the Lactalis Heritage Dairy division, which has been methodically transforming these products over the past three years.

A Strategic Approach to Change

When Lactalis first acquired these iconic brands, they were in a state of decline. Ken Padgett, marketing director for Kraft Natural Cheese, recalls that the team didn’t rush into making immediate changes. “It wasn’t a rush to do something from day one that wasn’t meaningful in the market,” he explained. Instead, they took a calculated approach, recognizing the potential for innovation and growth.

The initial focus was on understanding the existing products, their market positioning, and consumer perceptions. By evaluating how customers used these products and identifying gaps in the market, Lactalis aimed to improve accessibility, availability, and brand loyalty.

Leveraging Lactalis’ Expertise

Lactalis, with its 90-year legacy in dairy through brands like Parmalat, Président, and Stonyfield, brought a wealth of research and development expertise to the table. This knowledge was instrumental in enhancing the Kraft cheese portfolio. Lactalis provided insights on optimal cheese blends, cutting techniques, and the science behind achieving the perfect texture and flavor.

Innovating the Product Line

After several months of intensive work, Lactalis began rolling out new products. In March, Kraft Natural Cheese introduced its first innovation since the acquisition: Signature Shreds. This product line features three blends—Cheddar, Mexican, and Mozzarella—each crafted with a whole-milk mozzarella developed by Lactalis. The goal was to create a cheese with a more melty texture, akin to what is found in restaurants, without compromising on flavor. Additionally, the shreds are wider than traditional shredded cheese, giving them a premium look and feel.

“Kraft is a brand that’s been around for over 100 years and holds a lot of nostalgia for people,” Padgett noted. “Our goal for the last three years has been to understand what that means to people and to reignite that connection in new and different ways, from our communication to our innovations.”

Refreshing Other Brands

The revitalization efforts extended beyond Kraft Natural Cheese. In January, Cracker Barrel launched premium Artisan Flavors cheeses in Truffle Cheddar and Dill Havarti, catering to the growing trend of charcuterie boards and upscale snacking. Late in 2023, Breakstone’s received a marketing overhaul, capitalizing on the rising popularity of incorporating cottage cheese into fruit pairings, ice cream, and smoothies.

A Roadmap for Future Innovation

The recent wave of product launches marks just the beginning of Lactalis’ innovation strategy. Padgett hinted at a faster pace of new product introductions moving forward, with a focus on items that simplify home cooking. “The first thing we had to do was build out what that pipeline looked like. And now we’re in the world of executing what that pipeline could be,” he said. “I would expect a more rapid pace of innovation, but making sure it’s the right ones.”

The Impact of Thoughtful Revitalization

Lactalis’ careful and strategic approach to revitalizing Kraft’s natural cheese brands illustrates the importance of understanding consumer needs and leveraging existing expertise. By taking the time to assess and innovate thoughtfully, Lactalis has breathed new life into a declining segment, positioning it for future growth and success.

The company’s commitment to quality and innovation, combined with its ability to adapt to market trends, sets a strong foundation for continued expansion. As Lactalis continues to roll out new products and refine its offerings, it remains focused on maintaining the legacy and trust associated with the Kraft brand while meeting the evolving demands of modern consumers.

Conclusion

Lactalis’ acquisition of Kraft Heinz’s natural cheese business has proven to be a strategic move, bringing new vitality to a once-declining product line. Through deliberate and informed innovation, Lactalis has not only preserved the legacy of Kraft’s cheese products but has also positioned them for renewed success in a competitive market. As the company continues to innovate and expand, it serves as a testament to the power of thoughtful investment and strategic growth in the food industry.

Related: Lactalis 2023 Financial Results