- Operating income was up 18.8%; margin expanded 290 bps to 13.5%

- Company reaffirmed 2009 EPS guidance of $1.88

NORTHFIELD, Ill., May 5 /PRNewswire-FirstCall/ -- Kraft Foods Inc. (NYSE: KFT) today reported first quarter 2009 results driven by strong gains from operations. Organic net revenue growth reflected the impact of cost-driven pricing actions taken in 2008, together with better-than-expected volume/mix. Operating gains across nearly all business segments drove operating income growth, margin expansion and higher earnings per share.

(Logo: www.newscom.com/cgi-bin/prnh/20090420/KRAFTLOGO)

"We've had a very solid start to the year, and we're on track to deliver our 2009 commitments," said Irene Rosenfeld, Chairman and CEO. "Our business momentum remains strong despite a challenging consumer environment. We are intensely focused on investing our cost savings to build our core brands, improve our product mix and drive superior retail execution. This will further enhance our profit margins and improve market shares as the year unfolds."

(1) Please see discussion of Non-GAAP Financial Measures.

*__ Net revenues declined 6.5 percent to $9.4 billion, including the

unfavorable impact of 7.9 percentage points from currency and 0.9

percentage points from divestitures.

Organic net revenues grew 2.3 percent, driven by 5.7 percentage

points from pricing that was partially offset by negative 3.4

percentage points from volume/mix. During the quarter, net revenues

were negatively impacted by approximately 1.6 percentage points from

the shift of Easter-related shipments into second quarter 2009 and

from the planned discontinuation of less profitable product lines.

*__ Operating income increased 18.8 percent from the prior year to

$1,268 million. Currency translation negatively impacted operating

income growth by 10.3 percentage points, essentially offsetting 9.8

percentage points of growth from the absence of Restructuring

Program charges.

Operating income margin increased 290 basis points year-over- year to

13.5 percent. Approximately 90 basis points of the increase were

attributable to the absence of Restructuring Program charges, while

product mix improved margins significantly. This positive

development reflects the discontinuation of less profitable product

lines and strategic investments in priority categories, core brands

and key markets. In addition, the combination of cost-driven price

increases taken over the past year and successful cost savings

initiatives more than offset higher input costs. The results also

include the benefit of approximately $87 million of unrealized,

mark-to-market gains related to the company's commodity hedging

activities, compared to an approximately $25 million benefit in the

prior year.

*__ The tax rate of 33.0 percent was up from 28.2 percent in the prior

year period. The first quarter 2009 rate is higher than the

company's full-year guidance of 31.5 percent due to the timing of

discrete items.

*__ Earnings per share were $0.45, up from $0.39 in first quarter 2008.

Diluted EPS

First Quarter 2008 Diluted EPS__ __ $0.39

Discontinued Operations__ __ (0.04)

--------

First Quarter 2008 Diluted EPS from Continuing

Operations__ __ __ $0.35

Operating Gains__ __ __ 0.06

Unfavorable Currency Movements__ __ (0.05)

Unrealized Gains from Commodity Hedging

Activities__ __ __ __ 0.03

Absence of Restructuring Program Charges__ 0.04

Lower Interest Expense__ __ 0.01

Changes in Taxes__ __ __ (0.01)

Fewer Shares Outstanding__ __ 0.02

--------

First Quarter 2009 Diluted EPS__ __ $0.45

========

Operating gains of $0.06 versus the prior year included the

unfavorable impact of $0.02 from incremental pension costs and $0.01

from a pistachio recall in the company's U.S. Snacks segment.

*__ There were no share repurchases in first quarter 2009, and the

company's authorization to repurchase shares expired on March 30,

2009.

FIRST QUARTER 2009 RESULTS, DISCUSSION BY SEGMENT(1)

Q1 2009

(percent growth)

---------------------------------------

Organic

Net__ Net__ Operating

Revenues__ Revenues(2)__ Income

----------- ------------- -----------

Total Kraft Foods__ (6.5)%__ 2.3%__ 18.8%(3)

Kraft Foods North America__ (1.0)__ 1.3__ 15.8

U.S. Beverages__ 1.4__ 1.4__ 11.7

U.S. Cheese__ (6.6)__ (6.6)__ 59.8

U.S. Convenient Meals__ 8.2__ 8.2__ 51.6

U.S. Grocery__ 3.3__ 3.3__ 9.6

U.S. Snacks__ 0.6__ 0.6__ 7.5

Canada & N.A. Foodservice__ (11.9)__ 0.8__ (20.6)

Kraft Foods Europe__ (19.0)__ (3.3)__ 17.7

Kraft Foods Developing Markets__ (7.5)__ 12.0__ 8.9

(1) Please refer to the company's Form 8-K filed March 26, 2009, for

discussion of changes to reportable segments.

(2) Please see discussion of Non-GAAP Financial Measures.

(3) Includes the year-over-year changes in: unallocated corporate

expenses, unrealized gains/losses related to the company's hedging

activities, certain components of its U.S. pension plan costs and the

amortization of intangibles.

U.S. Beverages

Organic net revenues increased 1.4 percent as volume/mix growth was partially offset by lower prices. Net revenues for coffee declined due to a combination of the Easter shift and the rollback of 2008 price increases to reflect lower green coffee costs. Ready- to-drink beverages grew at a double-digit rate behind successful quality and marketing investments in Capri Sun. Value-oriented marketing behind Kool-Aid continued to drive solid growth in powdered beverages.

Operating income increased 11.7 percent driven by lower overhead costs, the timing of marketing spending, the absence of Restructuring Program charges and volume/mix improvement.

U.S. Cheese

Organic net revenues declined 6.6 percent as volume/mix was unfavorably impacted by higher price levels and the Easter shift.

Operating income grew 59.8 percent as the benefits of improved alignment of prices with costs more than offset the impact of a decline in volume/mix.

U.S. Convenient Meals

Organic net revenues increased 8.2 percent reflecting the impact of higher price levels and improved volume/mix. Growth was driven by the continued success of DiGiorno, California Pizza Kitchen and Jack's pizza, Oscar Mayer Deli Fresh meats, Oscar Mayer bacon and Oscar Mayer Lunchables.

Operating income increased 51.6 percent. The benefits of higher price levels, improved volume/mix and the absence of Restructuring Program charges more than offset significantly higher input costs.

U.S. Grocery

Organic net revenues increased 3.3 percent as the effect of higher price levels and double-digit volume growth in Kraft macaroni and cheese dinners more than offset the impact of unfavorable volume/ mix in other parts of the business. Volume/mix was unfavorably impacted by the Easter shift and the third quarter 2008 exit of Handi-Snacks ready-to-eat desserts as part of the company's initiative to discontinue less profitable product lines.

Operating income increased 9.6 percent as the benefits of higher price levels and improved product mix more than offset the impact of higher input costs and lower volume.

U.S. Snacks

Organic net revenues increased 0.6 percent as higher price levels were largely offset by unfavorable volume/mix. Net revenue growth was also negatively impacted by approximately two percentage points from the Easter shift and the recall of certain products containing pistachios. Solid growth in both cookies and crackers was driven by approximately 10 percent growth in the top five brands.

Operating income increased 7.5 percent due to solid profit growth in biscuits. Overall, operating income benefited from higher price levels, the timing of marketing costs and the absence of Restructuring Program charges. These benefits were partially offset by unfavorable volume/mix, higher input costs and the decline in snack nuts, which included a $17 million charge related to the pistachio recall.

Canada & North America Foodservice

Organic net revenues increased 0.8 percent as solid growth in Canada was offset by declines in North America Foodservice.