It is annual report season, the time of year when companies send out proxy information and annual reports to investors. I own a few shares in several companies so my mailbox fills up with these documents. It is interesting to see what the firms choose to send.
An annual report is an important branding tool. It is an opportunity for management to review business results and discuss where the company is heading. This is important information for many investors. The annual report is also an opportunity to communicate with and rally employees. A company can celebrate successes, recognize contributions and highlight the values that drive the firm.
I received Kraft’s annual report last week. I used to work at Kraft and enjoy learning what the company is up to.
Kraft’s mailing included a proxy statement and a 10-K form printed on flimsy paper. There was no CEO letter explaining the company’s direction and discussing the results. There was nothing on the company’s values. There was nothing about Kraft’s great employees and brands. The cover is a financial form. Here it is, in case you didn’t get one.
This is just embarrassing.
It is particularly bad because most people don’t even know what Kraft is anymore. The company split into two parts in late 2012, forming Kraft Foods and Mondelez. Kraft needs to establish its new identify. This is a critical moment for the organization.
So this year the executives at Kraft decided to send out the formal financial statement and skip the more reader-friendly version of the annual report entirely.
I’m sure Kraft saved a little money with the decision but this is an example of worrying too much about short-term savings and too little about investors, employees, and the brand.
Fortunately, many other companies do a better job. For example:
-United Technologies, Abbott, Mead Johnson and GE sent polished and impressive annual reports.
-Boeing, Lockheed Martin, Eli Lilly, CSX, UPS, Waste Management, PepsiCo and the New York Times sent the required financial information with a thoughtful business update.
-Kimberly Clark just sent the 10-K but at least put a cover on the financial statement.
When building a brand, everything matters. Companies can build short-term profits by cutting spending on things like the annual report but this type of thinking doesn’t create great brands that connect with people and endure.
I agree completely – this is a huge missed opportunity by Kraft. Brand behavior is everything, regardless of the point of contact. Yes, this is an internal document, but it gets read by a lot of important people who legitimately want to know what the company is doing and why. Kraft is missing a huge opportunity to communicate/clarify their vision to an important stakeholder group (investors) that is usually very hard to collectively address, especially in a targeted/contextualized way. If it’s a legitimate cost issue, then get creative! They spend hundreds of millions on marketing to consumers, certainly they could create a cover and a one or two page summary or CEO letter.
It seems to me that there are better more productive ways to spend money building a brand than through an annual report that is read more internally than externally. Further, most people invest through an active mutual fund or passive ETF and don’t really know the companies they are investing in. 70%-80% of most large companies are owned by institutions, including mutual and hedge funds.
I vote they spend money to build their brand where it counts. At the point where the consumer really touches the product or service. Anything else is not being wisely spent building a brand.
Ken—Thanks for the post. Some good points! You are correct that investors using mutual funds and ETFs won’t see the annual report. But there are many other people who will see it: employees, partners, government officials, direct investors. I think it is money well spent.