May 30/Beijing/Wall Street Journal -- Kraft Foods Inc. is hoping Ritz crackers that taste like beef stew and Oreos that taste like birthday cake will help it reverse its trailing position with the world's largest population of snackers.

The world's No. 2 food company by revenue after Nestlé SA plans to unveil a slew of new products, broaden distribution channels and rev up marketing in fast-growing China, said Shawn Warren, Kraft Foods China president, in an interview. The U.S.-based company aims to capture more of China's snack-food market, which is expected to reach an estimated 77 billion yuan ($12 billion) by year-end, up 44% from 2008, according to research firm Euromonitor International.

"We want to lead the industry here," said Warren, who declined to disclose spending figures and other specifics.

Crucial to the effort will be an addition of products designed to please Chinese palates. Kraft recently introduced cookies that taste like the sort of white cake eaten at birthday parties. They join Kraft's other cookie flavors in China, including green tea, ice cream, and mango and mandarin orange.

Kraft also will broaden its Ritz line, Warren said. Ritz is a wheat-based cracker sold with cheese and peanut-butter fillings in the U.S. In China, Kraft is launching Ritz with a potato base and flavors labeled "fantastic beef stew" and "very spicy chicken."

However, the Northfield, Ill., company faces shop shelves in China jammed with products from increasingly powerful international and domestic competitors. It will need to persuade increasingly health-conscious Chinese consumers that it has offerings for them. The snack-food segment is fragmented and full of rivals that have niches in products that are uniquely Chinese, said Torsten Stocker, a partner at U.S.-based consulting firm Monitor Group.

The top 10 snack-food sellers by market share in China are dominated by Chinese companies, and Kraft does not rank among them, according to Euromonitor. Want Want China Holdings Ltd. ranks No. 1 in market share, according to Euromonitor's most recent data. U.S.-based PepsiCo Inc. is the No. 5 snack-food company. It has been expanding its Lay's brand in China to suit Chinese tastes, launching potato-chip flavors such as lobster cheese and lemon tea.

Kraft's goals come as it plans to spin off its snack-food business by year-end to form Mondelez International Inc., which will aim to capitalize on growth opportunities in emerging markets such as China.

Oreo, which Kraft launched in China in 1996, is a close second to a Chinese, Nestlé-owned brand in terms of share of the country's cookie market, according to Euromonitor. Cookie sales in China rose to 38 billion yuan in 2011, up 53% from five years earlier, Euromonitor says.

With brands including Toblerone and Cadbury chocolates, Halls cough drops and Tang flavored-drink mix, Kraft already has gained a strong hold in China, consultants say, but they add that the company has room to grow in the country.

Kraft plans to broaden its distribution channels to go deeper into China, beyond the 250 cities where it has sales bases. It also hopes to bolster its marketing with more well-known figures such as former basketball star Yao Ming, whom the company tapped in 2010 to appear in its commercials.

The company also is tweaking its packaging to appeal to local consumers. It plans to roll out Ritz crackers and Chips Ahoy cookies in portable cuplike packages that resemble ramen-noodle containers. "The society is shifting, and there's a greater need for food that is on-the-go," Warren said.

Wei Xiaopo, an analyst at brokerage firm CLSA Asia-Pacific Markets, said acquisitions will be one of the main ways that food companies can gain ground in the fragmented Chinese market. Nestlé gained the top ranking in the sweets category by acquiring last year Chinese candy company Hsu Fu Chi International Ltd., a maker of sweet-onion- and cucumber-flavored cookies.

Warren declined to say whether Kraft will follow Nestlé's lead with an acquisition of a major local competitor. The company plans to follow the recipe it used with Oreo's expansion across China, Warren said, adding that it also will focus on developing new products, which accounted for 30% of revenue from China in 2011.

Warren said he is aware that Chinese consumers are increasingly worried about their health. To address that concern, the company has developed a cracker line, Pacific, with flavors such as sesame and red date that Chinese consumers associate with health and traditional Chinese medicine.

Kraft's snack business has gained attention by adopting the new Mondelez name. The business does not yet have a Chinese moniker, said Warren, who added that it will likely be introduced later this year.

Warren declined to say where China is likely to stand as a%age of sales at the snack-food business, and Kraft does not break out country data. China has been a key driver for Kraft's overall growth for years, with sales from the country having increased about 60% year-to-year for the past five years, Warren said.

 From the May 30, 2012, Prepared Foods’ Daily Update