Kraft Heinz integration showing progress

by Keith Nunes
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Heinz Yellow Mustard, Oscar Meyer P3 snack pack, Kraft Heinz Co.
Kraft-Heinz Co. has had success with such innovation efforts as P3 and the launch of Heinz Yellow Mustard.

PITTSBURGH, PA. — The Kraft-Heinz Co.’s Nov. 5 release of its third-quarter results for fiscal 2015 was the first for the newly merged company. With the first 120 days operating as a combined company completed, leaders with the company are continuing the integration journey and instilling a new operating philosophy throughout.

For the quarter ended Sept. 27, the company recorded a loss of $303 million on quarterly sales of $6,120 million. Much of the loss was due to costs associated with the integration of the two companies.

Bernardo Hees, Kraft Heinz Co.
Bernardo Hees, c.e.o. of Kraft Heinz

“Our third-quarter results reflect continued progress as we integrate these two great companies while driving greater accountability, discipline and efficiency,” said Bernardo Hees, chief executive officer. “As we implement and expand methodologies such as zero-based budgeting, management by objectives and revenue management, we expect to continue creating the freedom to invest in our business and accelerating long-term profitable sales growth.”

Mr. Hees said Nov. 5 in a conference call with financial analysts that the company has had success with such innovation efforts as Lunchables, P3 and the launch of Heinz Yellow Mustard.

“Investments we have made in ketchup and pasta sauce are driving solid consumption gains in the markets where it competes,” he said. “At the same time, our challenges have continued in certain categories like ready-to-drink beverage, and dinners in the United States, and frozen meals in a number of foreign markets that has held back our growth; so more work needs to be done.”

Mr. Hees said the Kraft Heinz Co.’s strategy is based on three objectives — profitable sales growth, best-in-class sales margins and a return on capital as an investment-grade company.

“Let me speak to each, starting with profitable sales growth,” he said. “We are a sales organization, and as we have said before, we believe there are multiple avenues for sales growth ahead of us by focusing on four pillars. First, innovation, fewer, bigger, and bolder; that’s what we call the big bets innovation. Second, by having high investment in working media dollars; third, to leverage the scale of our go-to-market capabilities by building aggressive sales teams; and finally, by taking Kraft brands global over time.”

To achieve best-in-class margins, the company is focusing on zero-based budgeting and supply chain consolidation. On Nov. 4, the company announced it was closing seven manufacturing plants in North America and eliminating 2,600 jobs.

“In doing so, we eliminate excess capacity and reduce operational redundancies for the new combined company,” Mr. Hees said. “We will also invest heavily in modernizing many of our facilities with installation of a state-of-the-art production lines and this should facilitate further product quality improvements and innovation.”

George Zoghbi, chief operating officer of Kraft Heinz’s US Commercial Business, said future profitability will hinge on maintaining consistent pricing.

“ … It has held up in what has been a high pressure deflationary environment in some of our key categories, and we feel very good about that,” he said.

Second, Mr. Zoghbi said cost savings and productivity programs initiated before the merger were well executed and completed on time.

“So, overall, a good start for our team in the United States, and we know where our opportunities to improve reside,” he said.

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