Kraft Heinz executives share agenda for 2017

by Monica Watrous
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Kraft Heinz brands - Kraft, Heinz, Planters
The Kraft Heinz Co. is focused on improving the performance of its Heinz, Kraft and Planters brands.

PITTSBURGH — In the year ahead, the Kraft Heinz Co. is focused on improving the performance of three key brands — Heinz, Kraft and Planters — and five global product categories, which are condiments and sauces, cheese, meals, nuts and baby food, said Bernardo Hees, chief executive officer. Mr. Hees said the company will make significant investments in marketing, go-to-market capabilities and product development.

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

“Our agenda also includes achieving best-in-class operating efficiencies with top quality,” Mr. Hees said during a Feb. 15 earnings call with financial analysts. “We plan to reduce complexity to active assortment measurement in the United States and achieve best-in-class operations, efficiency and quality within our manufacturing facilities.”

In its first full year as a merger company, Kraft Heinz made solid progress and set a strong base to build upon going forward, Mr. Hees said.

Net income attributable to shareholders of the Kraft Heinz Co. in the year ended Dec. 31, 2016, was $3,452 million, equal to $2.84 per share on the common stock, which compared with $861 million on a pro forma basis, or 72c per share, in the prior fiscal year. Net sales were $26,487 million, down from pro forma sales of $27,447 million.

For the fourth quarter, net income was $944 million, equal to 78c per share, up from $285 million, or 23c per share, in the year-ago quarter. Net sales were $6,857 million, down 3.7% from $7,124 million. Organic net sales increased 1.6%.

Kraft Heinz Devour meals and Cracker Barrel macaroni and cheese
Kraft Heinz recently launched Devour frozen meals and Cracker Barrel Mac & Cheese.

Mr. Hees said the company generated significant gains during the year from some of its “big bet” innovation, including condiments, specialty ketchup and barbecue sauce.

“We also pushed into place as whitespace where Kraft Heinz did not previously compete,” he said. “Products such as Devour frozen meals, Cracker Barrel Mac & Cheese and Heinz barbecue sauce in the United States. There was Planters, which now is available in both China and the U.K. We also brought Heinz mayonnaise to Europe, Brazil and Australia, and we made significant progress toward extending our food service presence, not just in the West, but through strong performance in Canada, Brazil and Russia as well.

“Nevertheless, there is much, much more to go after in 2017 and beyond.”

Mr. Hees said Kraft Heinz also made meaningful progress toward achieving best-in-class margins, using zero-based budgeting to achieve $1.2 billion in cumulative savings. The company now expects its integration program to generate $1.7 billion in cumulative, pre-tax savings by the end of 2017, up from the previously stated target of $1.5 billion. The program is forecast to result in $2 billion of pre-tax costs, up from $1.9 billion previously, and $1.3 billion of capital expenditures, up from $1.1 billion.

George Zoghbi, Kraft Heinz
George Zoghbi, c.o.o. of U.S. operations at Kraft Heinz

“Looking forward, our agenda for 2017 is focused on three simple goals: one, on the top line, drive profitable growth and further improve challenged categories; two, better leverage our scale at retail with increased in-store activity, including more scale events and improve our day-to-day sales execution; and three, utilize our supply chain modernization or footprint initiative as a way to increase investments in innovation and renovation, particularly at the back half of the year,” said George Zoghbi, chief operating officer of U.S. operations at Kraft Heinz.

The company expects continued headwinds from competitive retail markets and a strong U.S. dollar, Mr. Hees said.

“So, at the top of our agenda, is an even sharper focus from profitable organic sales growth,” he said. “By that, I mean that we will focus our investments in innovation, renovation and marketing on our leading brands, along with prioritizing fewer bigger and bolder bets within our portfolio. This will include expanding our core by innovating into adjacent categories and new segments where Kraft Heinz brands have the ability to win.”
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