• Top Line Results: Delivered in line with expectations.
• Cash Flow Performance: Strong performance reported.
• Balance Sheet: Described as healthy.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Kraft Heinz Co (NASDAQ:KHC) delivered top-line results in line with expectations, demonstrating strong cash flow performance and maintaining a healthy balance sheet.
• The company is prioritizing investments in marketing, R&D, and technology to enhance consumer-facing marketing and optimize brand and media allocation for better ROI.
• KHC is scaling up its brand growth system, which has shown success in previous pilots, to cover 40% of its business by the end of the year.
• The company is seeing growth in emerging markets and expects improvement in key product categories like cream cheese and Ore-Ida in the upcoming quarters.
• KHC is actively managing costs and exploring alternative sourcing and reformulation to mitigate the impact of tariffs and inflation on COGS.

Negative Points

• The revised outlook includes a wider operating income guide due to uncertainties in the policy landscape and macroeconomic conditions.
• KHC is facing increased COGS inflation, particularly in commodities like coffee and meats, with an expected impact of 150 to 200 bps due to tariffs.
• The company anticipates gross margin pressure in Q2 due to increased promotional activity, hedge losses, and commodity price peaks.
• Despite investments, KHC's market share performance has been under pressure, with some categories showing softness.
• The company does not expect North America volume to inflect positively in the second half, relying instead on international growth to meet guidance.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with KHC.

Q: Carlos, you mentioned the revised outlook provides flexibility for investments. Is this approach different from previous ones? A: Carlos Abrams-Rivera, CEO: We are choosing to play offense with discipline, prioritizing investments in marketing, R&D, and technology. We are focusing on consumer-facing marketing and optimizing allocation across brands for better ROI. Our brand growth system, which has been successful in pilots, is being scaled up, giving us confidence in our investment strategy.

Q: Can you elaborate on the North America organic sales guidance update for this year, particularly for 2Q? A: Carlos Abrams-Rivera, CEO: We expect 2Q top line to be better than 1Q, with a tailwind from Easter timing. Emerging markets are accelerating, and platforms like cream cheese and Ore-Ida are expected to grow. Lunchables will improve as new innovations hit the market.

Q: How are you addressing COGS inflation in the revised outlook? A: Carlos Abrams-Rivera, CEO: We had inflation at 3%, now stepped up to 5% due to commodities like coffee and meats. Tariffs add 150-200 bps to COGS, mostly impacting the second half. We are managing this through inventory builds and alternative sourcing.

Q: Can you discuss your promotional strategy and its impact on market share? A: Carlos Abrams-Rivera, CEO: We are investing in promotions strategically to support long-term growth, focusing on key consumer periods like Memorial Day and back-to-school. Our strategy is to drive profitable growth, not just short-term volume.

Q: What are the bright spots in your portfolio from a market share perspective? A: Carlos Abrams-Rivera, CEO: We are seeing progress in accelerated businesses like ready-to-eat meals and snacking. Innovations like our Philadelphia Cream Cheese and desserts are driving growth. Our focus on better-for-you products and consumer insights is yielding sustainable growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.