Shoppers hoping to stick to their post-holiday diets should avoid the dairy aisle come January, when Kraft Foods (KFT) unveils its newest creation, Philly Indulgence, a sweet-and-tangy blend of cream cheese and chocolate that can be spread on a pretzel or just devoured straight from the tub. A similar concoction introduced in Europe blew past sales projections this year, prompting Chief Executive Officer Irene Rosenfeld to bring it to the U.S. It’s the latest evidence of a surprising revival for Philadelphia cream cheese, Kraft’s $1.7 billion spread that dates back to 1880. (The brand has no link to the City of Brotherly Love—the company’s founder, A.L. Reynolds, thought Philadelphia was synonymous with quality food. That was likely before the invention of the cheese steak.)
When Rosenfeld took over in 2006, the world’s second-largest food company after Nestlé was content just to maintain market share against rival cream cheese brands and private-label copycats. Lately, though, an international team of brand managers and research and development teams has expanded Philly’s target market, unveiling new variations that have spread cream cheese far beyond the bagel to everyday cooking and snacking. They’ve doubled Philly’s annual growth rate, to about 15 percent in just one year. “We used to play not to lose,” says George Zoghbi, president of Kraft’s Cheese & Dairy business. “Now we’re playing to win.”
Philly’s resurgence began in 2008, when Kraft researchers learned that frequent buyers of cream cheese were using it as a cooking ingredient, not just as a schmear. “That was quite an eye-opener for us,” says Tuscany native Piero Capizzi, president of Cheese & Grocery in Europe, where Philly generates more than a third of its sales. “It gave us an idea to change our strategy.”
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