Kraft Heinz (KHC) 4Q 2015 Earnings Call Notes

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Kraft Heinz (KHC) CEO Bernardo Hees stated the recently merged company’s goals

“As you know from our last call, our strategy is based on three objectives: profitable sales growth, achieving and maintaining best-in-class margins, and a superior return of capital as an investment-grade company. This is our multi-year plan on one page, and it is important to understand that not everything starts to deliver at once. In some cases, like revenue management, it’s not a project. We must build an internal capability before we can achieve sustainable results in return.”

One of 3G Capital’s key employee retention and engagement tools is making employees think like owners

We have already made solid investments in our people, promoting more than 2,400 team members worldwide, and introducing a new long-term incentive program that gives many employees the opportunity to increase their ownership in the company. In short, our vision, values and process are building the culture of ownership and empowerment necessary for the long-term achievements of our company.”

They are focusing on increasingly healthier products 

There is ongoing need to drive better consumption in the face of both consumer weakness and consumers’ desire for fresher, less processed food.  Capri Sun Organic is now in the marketplace, with advertising scheduled to hit later in the second quarter. We’re making changes to ensure that Mac & Cheese is more relevant today than ever before, with no artificial flavors, preservatives or synthetic colors. And you will hear us making noise about this very soon. Also, we’re working to improve our nutritional frozen meal offerings.”

Kraft Heinz (KHC) CFO Paolo Basilio cited lower input costs as a tailwind

Net pricing was neutral to favorable in all segments in both Q4, for the full year. This was driven by a combination of price increases and taking out inefficient trade spending, partially offset by lower net pricing related to lower net commodity costs across our big four commodities in the U.S. and Canada. And with dairy prices remaining low, this is something we are likely to see continue into the first half of 2016.”

They are raising prices in Canada to offset higher local costs

That being said, our Canadian business is facing further local cost inflation in many categories, and this month we are implementing additional pricing actions to offset the higher costs.”

Kraft Heinz (KHC) CEO Bernardo Hees expects peer leading margins to emerge from the restructuring

On the cost side, we expect to make significant progress on delivering best-in-class margins through: one, delivering zero based budgeting savings; two, making progress on our manufacturing footprint initiatives; and finally, building a real performance driven culture in Kraft Heinz.”

Kraft Heinz (KHC) COO Georges El-Zoghbi said they focus on profitability over volume

Our focus is on profitable growth. We repeated that a number of times, and we will have some categories where you’ll see volume growth. And while we have other categories where you’ll see a volume decline, overall, because of our size and the diverse businesses and categories we operate in, we will probably reflect what would go on in the marketplace.  You have seen a lot of activity in this area in making, reformulating products to reflect the consumer trend.”