Kraft Heinz still expects organic sales to decline this year despite the US food major’s focus on innovation, marketing and pricing investment to drive growth.
Organic sales fell 3.3% over the first six months of fiscal 2025, close to the top-end of the full-year guidance (retained yesterday 30 July) for a decrease in the range of 1.5% to 3.5%. And volume/mix was a negative 4.2%.
In North America, by far the Oscar Mayer and Capri-Sun maker’s largest market by sales, revenue dropped by a greater magnitude of 4.8%, along with a larger volume/mix retreat of 5.2 percentage points.
Nevertheless, CEO Carlos Abrams-Rivera remains positive on the outlook as he refrained from providing any new perspective on the “strategic transactions to unlock shareholder value” revealed in May.
“We are progressing across key areas of our business as our investments get implemented – including our focus brands in North America retail, emerging markets, and expanding our footprint in away from home,” Abrams-Rivera said in his prepared remarks yesterday to accompany the second-quarter and first-half results.
“We are pleased with the momentum we are building, giving us the confidence to reiterate our 2025 full year outlook.”
In what remains a “volatile” backdrop, “consumers are looking for value – whether that be through price or product benefits – and we are delivering”, he insisted.
Analysts were eager to gain more insight from the Kraft Heinz executives from the media reports that emerged earlier this month suggesting a likely spin-off of business units could be on the cards. But it was not forthcoming.
Bernstein analyst Alexia Howard went so far as to say yesterday that an entire business disposal might well feature as an option.
“For now, this could mean anything from nothing happens to a sale of the company and everything in between,” she wrote in a research note. “The real question is whether any partner could be interested in engaging with brands that are currently declining within the legacy Kraft business.”
Abrams-Rivera was not giving anything away on the potential outcome when pressed by an analyst on a follow-up call yesterday.
“Our board is working with urgency on our evaluation of those strategic options to unlock, as you said, long-term strategic value creation. And, you know, what I will say also is, and I’ll remind our investors, is that, you know, we will operate with the same financial discipline you have come to expect from us,” the CEO responded.
“And so any actions, if any, will be consistent with that goal of unlocking that long-term shareholder value. And that’s essentially all I can say at this time.”
Kraft Heinz’s share price was thrown into the limelight from a $9.3bn non-cash impairment charge booked in the second quarter, which was linked to an $8bn operating income loss in the period. Adjusted, the metric was down 7.5%, albeit in positive territory at $1.3bn.
CFO Andre Maciel stepped in to explain: “The trigger for that was, only the fact that we have a sustained decline in the stock price, and that has reduced the carrying value of our intangible assets.
“We have been monitoring this for some time. It’s nothing new and nothing beyond that. This does not change the view [of] the basic value of the company, including the confidence and direction we have in the strategy.”
Maciel had said in his prepared remarks that the “impairment was driven by a sustained decline in our share price and market capitalisation”.
Kraft Heinz’s shares have fallen more than 7% this year to $28.49 and are down 19% over the past 12 months. They traded at circa $88 when the mega-merger of Kraft Foods and HJ Heinz was initiated in July 2015.
“At this point, we’re really trying to grow the business in a way that we think is healthy, not through price, but through really stronger products and stronger attributes, stronger marketing, which takes more time, but that’s the right thing to do,” Maciel said. “But we are going to step up investments if we deem appropriate.”
