Kraft Heinz (KHC) 3Q16 Earnings Call Notes

posted in: Earnings Call, Notes | 0

KHC plans to modernize its meat business like it did its cheese business

“What we’re trying to do, we’re trying to get two things at once. One, modernize the manufacturing capability and the technology to be able to make the products of the future rather than the products of the past. And two, try to get a cost advantage compared to anyone in the marketplace and we believe we are in a strong position to do so. It’s just going to take a little bit of time for us to complete that project, and once we’re out of it, no different to the model we did in cheese when we modernized and reduced our costs and we became world-class, cost effective in it. The meat business would be in a similar situation.” George Zoghbi – The Kraft Heinz Co.

 

Investment is across the board, not just in meat

“It’s a very good question. Yes, there are. Actually, meat, while meat has taken the lion’s share of our footprint investment, there are a number of other manufacturing sites where we are making investments. As a matter of fact, about 15% of our active lines are affected between transfers, decommissioning old lines and installing new ones. What we’re also doing, we are outsourcing a number of non-core low volume SKUs across the board, and we are in-sourcing some higher volume SKUs, again across the board, not exclusive to meat. And we’re also reducing the number of warehouses and distribution centers. So all together, it’s a very large investment across the entire network. The meat happened to have the larger portion of it, but we’re doing it across the board.”  George Zoghbi – The Kraft Heinz Co.

 

Data analytics are being used to determine promotional activity

“What we’re finding though, it’s not just the promotional activities or the sales generated from promotional activities, rather than the return that we get from promotional activity. We have become, through data analytics, lot more competent in the ability to select which promotion and which category with which account. And we’re finding very, very different returns. And that, by itself, is allowing us to actually do more with that.” George Zoghbi – The Kraft Heinz Co.