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What can gum sales in Brazil tell us about the economy?

Kraft Foods had a good quarter, but gum sales continue to be weak.

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What's up with gum sales being down? (Carlo Allegri /Getty Images)

Kraft Foods had a pretty good quarter. The global food giant announced its earnings results on Thursday after the markets closed and was rewarded on Friday with shares up 4 percent on the news.

We were just going back through the transcript from the conference call following the earnings announcement, however, and we found this interesting tidbit:

Gum, in particular, continues to be weak. In fact, in developed markets, the rate of decline was similar to 2011 levels. In Developing Markets though, gum is still growing, but at a slower pace.

Brazil is a case in point. In the second quarter, our Brazilian gum revenue declined, driven by softening category trends. Despite the lower revenue, however, we gained share due to strong merchandising and programming. But we offset much of the weakness in markets like Brazil by posting robust growth in other regions. For example, in Central and Eastern Europe, revenue was up high teens. And in some other markets, especially the Middle East and Africa, we generated strong growth.

That said, given the high consumption among teenagers and the disproportionate impact of the economy on this group, we believe gum is unlikely to return to historical growth rates in the near term. We do, however, expect trends to improve in the back half of the year with the launch of a number of innovations. And we remain confident that gum will be an important contributor to our long-term growth.

 

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