Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Kraft Heinz Co (KHC, Financial) is innovating rapidly, launching new products like gluten-free and new flavor options in their Mac & Cheese business, and expanding into plant-based options.
- The company has been named one of the world's Top 50 Most Innovative Companies by Fast Company, highlighting its strong position in the market.
- The Kraft Heinz Co (KHC) is focusing on high-margin channels such as travel and leisure, which are seeing increased activity and offer potential for higher profitability.
- Significant renovations and marketing investments are being made across core brands to enhance consumer preference and drive long-term growth.
- The Kraft Heinz Co (KHC) is effectively managing its portfolio with strategic exits from non-core, low-margin businesses, improving overall business focus and profitability.
Negative Points
- The Kraft Heinz Co (KHC) is experiencing a loss in market share in North America Retail, although the pace of loss has slowed recently.
- Economic pressures such as high interest rates and elevated gas prices are impacting lower-income consumers, potentially affecting sales volumes.
- The company faces challenges in the Away From Home segment, particularly in the U.S., where restaurant traffic is slowing.
- Inflationary pressures continue to impact costs, particularly in key commodities like cheese, meat, and coffee, which could affect profit margins if not managed effectively.
- The SNAP benefits reduction is having a negative impact on organic sales, particularly affecting categories like Mac & Cheese.
Q & A Highlights
Q: It looks like KHC is still losing share in North America Retail, though at a more modest pace recently. But in the ACCELERATE platform specifically, your remarks call out holding or gaining share in about 55% of this platform. Would you expect this percentage to be higher given the disproportionate allocation of resources to this platform?
A: Carlos A. Abrams-Rivera, CEO & Director of The Kraft Heinz Company, explained that the company continues to see volume share improvement and is holding dollar share in the U.S. The ACCELERATE platforms are performing well, showing flat dollar share and growing volume share. Significant brand renovations and innovations, particularly in the Mac & Cheese business, are expected to positively impact this platform moving forward.
Q: You mentioned inflation in your comments in a few areas. I don't think you updated us, but last time you were talking about maybe 3% cost inflation for the year. Is that still a reasonable number?
A: Carlos A. Abrams-Rivera, CEO & Director, and Andre Maciel, Executive VP & Global CFO, confirmed that inflation expectations remain in the low single-digit territory, with specific pressures from key commodities like cheese, meat, and coffee. They emphasized the company's strategic pricing actions to manage inflation impacts effectively.
Q: Can you share with us how much the SNAP issue has impacted organic sales for the first quarter?
A: Carlos A. Abrams-Rivera, CEO & Director, estimated a few hundred basis points negative impact on the U.S. Retail business due to the decline in SNAP benefits, reflecting the broader economic challenges affecting lower-income consumers.
Q: Regarding the Away From Home segment in the U.S. and the deceleration observed, can you give us a sense of how much of the decline is also related to traffic at restaurants?
A: Carlos A. Abrams-Rivera, CEO & Director, noted that while there is a slowdown in restaurant traffic impacting the business, Kraft Heinz is also exiting some low-margin businesses. The company is optimistic about improving trends in travel and leisure sectors, which could offset some of the declines.
Q: Carlos, you highlighted consumer stress as a theme. In North America, where volume declines are still more pronounced, are you seeing anything different, whether it's new merchandising by retailers or new price sensitivity among consumers that's changing the dynamic in these categories at all?
A: Carlos A. Abrams-Rivera, CEO & Director, responded that despite the challenges, Kraft Heinz's strong brand portfolio and recent renovations have helped maintain a competitive edge. The company continues to focus on delivering value and quality, which helps in mitigating the impact of private label growth and maintaining consumer loyalty.
Q: What is your general Foodservice assumption going forward that underlines your mid-single-digit organic growth that you have planned for the year?
A: Andre Maciel, Executive VP & Global CFO, and Carlos A. Abrams-Rivera, CEO & Director, discussed expectations for gradual improvement in the Foodservice segment, particularly in international markets. They are cautiously optimistic about the U.S. market, expecting some recovery but not necessarily full return to previous growth rates in the near term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
