CHICAGO – Kraft Foods is working with Jewel-Osco and other grocers to reshape cheese and dairy cases at more than 4,000 stores to make its most popular products easier to find and its new items easier to stumble upon.

Known internally as “Reimagine Cheese & Dairy,” the program underscores the increased importance of these products for Kraft’s North American grocery business, which will be spun off later this year as a stand-alone company. After the separation, cheese and dairy products such as Philadelphia Cream Cheese will account for about 20 percent of total sales, up from about 14 percent currently. (The rest of legacy Kraft will be a $35 billion company called Mondelez International, focused on global snacking brands.)

Kraft anticipates 3 percent to 5 percent sales gains at stores implementing the program during the first year, as a result of additional space, better organization and other factors. As part of the program, retailers are reorganizing the cheese sections and in some cases expanding it by as much as eight feet.

It’s an ambitious goal for a category that’s become increasingly vulnerable in recent years, following quality improvements by store brands and highly volatile commodity costs that have sent prices higher for consumers. The impact of the heat and drought affecting dairy cows this summer is still uncertain. Northfield, Ill.,-based Kraft has been under intense pressure to give consumers a reason to pay more for its products, even as each dollar spent is under heightened scrutiny. The company has responded with increased marketing investment and new products to make dinner preparation easier.

Kraft declined to name other chains participating in the program.

“Everyone knows the economy drove people home and they started cooking more,” said Art Sebastian, director of sales strategy and customer development at Kraft, adding that cheese is a very popular ingredient in these meals. “That led us to believe we needed to take a look at the shredded cheese section and give it proper space allocation as a sort of a cooking destination.”

Sebastian said Kraft also saw increased sandwich consumption and growth in natural cheese slices as compared to American singles, particularly with “bold flavors” shoppers might find at restaurants.

Snacking is another key food industry trend, and snack cheeses, such as string cheese, are growing at twice the rate of the overall cheese category, at 6 percent to 8 percent, said Ken Gipple, Kraft’s customer vice president of cheese and dairy.

He added that customers have cut shopping times 10 to 15 percent in the past few years, to fewer than 30 minutes on average, citing a Sorenson Path study. Of that time, customers allocate 24 to 30 seconds to cheese and dairy, even though cheese purchases are planned 82 percent of the time, according to Kraft data.

“So for us it’s a couple of things: simplify the shopping experience for customers so they can find what they’re looking for in the departments, and drive store efficiency” for retailers, he said.

To develop the new design, Kraft conducted research with about 1,000 customers who wore eye-tracking glasses and a bio-sensory headset so the company could follow shoppers’ gazes and brain activity to understand positive or negative feelings about what they saw. Kraft also sent researchers on shopping trips with consumers, and stopped others at the grocery to discuss what was in their basket and why.

Kraft learned, among other things, that its best-selling products were hanging too high, and anything they wanted consumers to notice should be slightly below eye level. At the Skokie Boulevard Jewel-Osco near Chicago’s Old Orchard mall, the cheese section has gained 4 feet in the refrigerator case, a significant increase, particularly for a high-traffic area.

“Everyone used to want to put their best-selling (product) at eye level,” or the top shelf, Sebastian said. “They’ll focus here and then shop around.”

Arranging key products in a diamond pattern created another opportunity for Kraft: The top is prime real estate for best-selling products, and there are slots nearby for high-potential new items.

“Consumers said there are always good new items in cheese, but they just couldn’t find them,” Sebastian said.

CATERING TO SHOPPERS

At the Skokie Boulevard Jewel-Osco, Kraft’s Fresh Take, a kit of shredded cheese and bread crumbs to coat meat or fish, now hangs next to the shredded mozzarella on the second shelf from the top. Kraft with a Touch of Philly, shredded cheese designed to melt more easily in pastas and casseroles, also enjoys prominent placement. Philadelphia Cooking Creme, designed to help make flavorful, creamy sauces, is merchandised near the best-selling Philadelphia Cream Cheese tubs.

The section is now broken down into types of cheese, such as shredded, string or blocks, rather than mixed together by flavor. Brands are also separated vertically within each section.

Bob Brown, sales and merchandising manager for Jewel-Osco, which operates 180 stores primarily in the state, said the Supervalu-owned chain is “constantly evaluating sales per square foot” to make sure the most productive categories are properly organized and that the store is catering “to what consumers are looking for.”

Where the chain was able to both build out and reorganize cheese sections, he said, “it has to be easier for customers to shop.”

As for what brands or products lost space in the reshuffling, Brown said it varies by store and was not heavily loaded on any product or manufacturer. Brown declined to provide Jewel-specific sales data pertaining to the reorganization, which was completed this month, adding that the change coincided with price reductions in the department.

NEW OPPORTUNITIES

Janney analyst Jonathan Feeney praised the program and Kraft’s increased investment in advertising and product development in recent years, from 6.6 percent of total sales in 2009 to 7.2 percent in 2011, on a higher base.

“The market is kind of starved for that kind of activity and Kraft has stepped into that breach well,” Feeney said. He added that Kraft has been outperforming the North American grocery category, with modest sales and volume gains compared with declining volume sales at branded competitors that haven’t made the same investments.

Feeney sees the shelf redesigns as an extension of the same commitment. He said that while manufacturers are expected to invest in price promotions to help get their products moving off store shelves, “You never want to offer just price.”

Aside from products designed to aid meal preparation, Kraft recently launched Philadelphia Indulgence, cream cheese spread with dark-, milk- and white-chocolate flavors, and MilkBite, breakfast granola bars with the calcium equivalent of an 8-ounce glass of milk, which it hailed as a big innovation for its dairy business.

“Ideally from a retail perspective, you’re bringing news, spending (promotional) dollars, and volume is responding as a result,” he said.

What’s more, Feeney said, Kraft is finding ways to leverage its well-known brand names.

“Brands are an affordable way for a lot of households that may have other things going on financially or in their working life that make them feel no longer part of the mainstream,” he said. “It’s an affordable luxury for a lot of households where many things have become a little less affordable for them.”

One opportunity for Kraft, said supermarket industry analyst Phil Lempert, is the large crop of relatively unseasoned cooks wandering store aisles. Men are now preparing about 40 percent of meals made at home, he said.

“There’s a whole new group of people who have never really cooked before looking for very basic advice,” Lempert said, adding that he sees content on the Food Network and Cooking Channel moving from “more esoteric to more basic.”

Maggie Hennessy, an editor for a baking trade magazine who writes the food blog “Marge’s Next Meal” in her free time, said she buys “workhorse cheeses,” for shredding or sandwiches from the grocery case. She likes Tillamook cheddar for sandwiches and sliced pepper jack for burgers, but she buys Kraft Singles for her husband’s classic grilled cheese sandwiches.

Although an accomplished cook, Hennessy said she was “excited to see” Philly Cooking Creme on the shelves as an option for beginners.

“I have a positive association with Philadelphia as a brand, from growing up with it,” she said, adding that she buys it as well. “I thought it was a great little idea, and I probably will try it.”