Release Date: October 30, 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) reported strong cash flow generation, which allows for reinvestment in the business.
- Global away-from-home and emerging markets segments are growing and gaining momentum.
- The company has maintained best-in-class productivity levels for five consecutive quarters, exceeding 4% of COGS.
- Kraft Heinz's Heinz brand grew 4% globally in the quarter, showcasing successful brand management.
- The company is focused on innovation and renovation, with new product launches like spicy nachos for Lunchables and new flavors for Mac & Cheese.
Negative Points
- The Kraft Heinz Co (KHC) does not expect to reach its long-term growth algorithm in 2025, particularly due to challenges in the US retail segment.
- Lunchables faced significant headwinds, including negative publicity and competitive pressures, leading to a large charge and an elongated recovery timeline.
- Spoonables continue to face soft sales, attributed to unfavorable price gaps and execution issues.
- The US retail segment is under pressure, with a propensity for consumers to trade down remaining high.
- Mac & Cheese, despite improvements, is still experiencing market share losses due to increased competition and premium product entries.
Q & A Highlights
Q: Carlos, can you clarify your expectations for reaching an on-algorithm pace in 2025, and how much of the elongated recovery in US retail is due to execution versus consumer price adjustment?
A: (Carlos Abrams-Rivera, CEO) This year has been different than expected, impacting our long-term algorithm. We don't expect to reach our goal next year, with pressure mostly in US retail. (Andre Maciel, CFO) We remain confident in our strategy, focusing on base volume growth, innovation, and prudent promotions. Some categories, like Capri Sun, take longer to recover.
Q: Regarding Lunchables, how do you balance optimism about the brand's recovery with the charge taken today?
A: (Carlos Abrams-Rivera, CEO) Lunchables is crucial, and we're committed to defending its market share. The charge reflects the current decline and elongated recovery. We're investing in category penetration, new flavors, and marketing campaigns to rebuild trust and drive growth.
Q: Can you provide more details on the ingredient supplier issue affecting Lunchables?
A: (Carlos Abrams-Rivera, CEO) A supplier issue affects one SKU of Lunchables, creating a short-term shortage impacting Q4. We expect to resolve this soon and improve as we enter 2025.
Q: How do you plan to address continued trade down in 2025, and what role do price adjustments play?
A: (Carlos Abrams-Rivera, CEO) We focus on superior products, marketing, and value formats. Promotions are used strategically to support base growth. (Andre Maciel, CFO) Our long-term algorithm includes gross margin expansion, supported by supply chain efficiencies and productivity.
Q: Outside of Lunchables and Capri Sun, how do you feel about the underlying business trajectory?
A: (Carlos Abrams-Rivera, CEO) We're focused on three growth pillars: global away from home, emerging markets, and US retail. Improvements in Capri Sun and Mac & Cheese show progress. We have the tools to address challenges and drive growth into 2025, supported by strong productivity and cash flow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
