Kraft Heinz Shows Investors the Power of Mac-And-Cheese in the Pandemic
2021年2月12日 - 2:01AM
Dow Jones News
By Annie Gasparro
Kraft Heinz Co. has a new plan: sell more food.
So far, it appears to be working. Since the onset of the
coronavirus in the U.S., food conglomerates like Kraft Heinz have
benefited from people eating more at home. They've also struggled
to keep up with demand because of production capacity constraints,
and endured higher costs from implementing new safety measures at
factories and other challenges.
Kraft Heinz said Thursday that its plan to transform into a
company focused on growth--from one driven by profit margins--is
going faster than it had anticipated in the new year.
"We have momentum at our back," Chief Executive Miguel Patricio
told investors. "We saw very strong consumption gains in January
and February."
He said this year's outlook is still unpredictable because of
the pandemic and economic fallout. "But we are well-prepared to
meet the challenges."
Shares jumped 6% to $35.90.
Kraft Heinz's comparable sales rose 8% in the U.S. in the fourth
quarter, and about half of its businesses, such as Lunchables,
Ore-Ida potatoes and Heinz ketchup, gained market share, the
company said.
The key test for the maker of Kraft Mac-And-Cheese, Maxwell
House and Oscar Mayer is whether it maintains the pace of its
recovery after years of missteps since its formation in a 2015
merger. A heightened focus on reducing costs while consumers
shifted to buying newer, trendier brands ultimately led the company
to write down the value of its brands by nearly $20 billion over
the past two years.
Mr. Patricio, who joined the company in 2019, said Kraft Heinz
is investing more in improving its brands now and concentrating on
fewer product-development ideas.
Like Kellogg Co., Campbell Soup Co. and others, Kraft Heinz is
doubling down on advertising to hold the interest of people who
came to its brands during the pandemic.
Kraft Heinz raised marketing spending by $100 million last year.
It also increased production capacity of its highest-demand
products by 20% since August, in part by decreasing the variety of
produce sizes and variations it makes by 16%. It plans to further
reduce variety this year, which saves money, Mr. Patricio said.
Kellogg Chief Executive Steve Cahillane said Thursday that the
recent slowdown in grocery sales growth from earlier in the
pandemic hasn't been as dramatic as he expected because of the
resurgence of the virus. For the same reason, Kellogg's on-the-go
snacks and its business selling food to outlets like schools didn't
improve as much as the company had expected.
"We are getting smarter," Mr. Cahillane said in an interview.
"But it changes every day."
Kellogg said its comparable sales rose less than 1% in North
America in the fourth quarter. It didn't keep up with demand for
some brands, such as Frosted Flakes, which lost market share as a
result. "We just couldn't make anymore," Mr. Cahillane said.
Kellogg said it is expanding production capacity. It is also
ramping up marketing spending to the benefit of Apple Jacks cereal,
Nutri-Grain snack bars and other brands. However, the
fourth-quarter results fell short of analysts' expectations, and
shares inched down less than 1% to $57.89.
"We aim to do better, but there's a lot of uncertainty," Mr.
Cahillane said.
Kraft Heinz's earnings topped analysts' predictions for the
fourth quarter. Net sales rose 6.2% to $6.9 billion, and profit
rose to $1 billion from $132 million a year earlier. Adjusted to
exclude one-time factors, profit increased 11% from the prior year
to 80 cents a share.
As part of its broader overhaul outlined in September, Kraft
Heinz is divesting big chunks of the business, including most of
its cheese brands and Planters nuts. The company said Thursday that
it would sell the Planters business to Hormel Foods Corp. for $3.35
billion, a deal the Wall Street Journal reported the companies were
nearing last week.
Mr. Patricio said the divestitures will allow the company to
spend more time and money on brands with greater growth prospects.
They also reduce its vulnerability to fluctuations in commodity
costs and competition from store brands.
(END) Dow Jones Newswires
February 11, 2021 11:46 ET (16:46 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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