Kraft Heinz (KHC) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Kraft Heinz (KHC) CEO Bernardo Hees said he is somewhat satisfied with the company’s recent performance but he thinks they can do better 

“On our last call I said that we’re off to a good start. Good. Not great. And I think that’s how I should describe the first half of the year as well. It’s true when you look at our top line performance and our progress in delivering profitable sales growth. The investments we have made in our global sauces franchise continued to improve category growth or market share gains in United States, Canada and Europe.”

Cited the competitive environment in the food sector as intense right now

“As an industry we are in an environment where retail competition is intensified in our biggest and most mature markets, including the United States, Canada, the U.K., Continental Europe and Australia. Nowhere this is more true than the U.K. where key category declines have been at significant drag in the first half even though our market share trends have been improving. In this market, we must remain disciplined with our go-to-market activities, constantly balancing price, promotion and distribution while we innovate to build our brands and drive profitable growth. And as we have seen, this sometimes leads to a bumpy ride on a quarter-to-quarter basis.”

Two biggest geographic regions, US & Europe, shrunk on an organic revenue basis

“But our biggest challenge remains the fact that you continue to have a number of categories where consumption trends are working against us. And while we’re making progress against those opportunities and expect better performance going forward, our organic sales growth during the first half of the year was held back. Specifically in two of our biggest segments, we were down on an organic basis. Down roughly 1% for the first half in the United States, and down 3% in Europe, resulting in 0.3% total company organic growth for the first six months. So as far as top line goes, like I said, okay, not great.”

Kraft Heinz (KHC) Chief Operating Officer Georges El-Zogbhi laid out their priorities for the rest of the year

“For the balance of the year, our key objectives will be two-fold. First, we must continue to execute our footprint integration while minimizing disruption. Second, we will step up our in-store activity, including a strong agenda of new product introduction we have planned for the second half. Look for new product introductions in our desserts, cheese and frozen categories in the months ahead, which follow the rollout of our new Devour frozen meal this past month.”

Kraft Heinz (KHC) Chief Operating Officer Georges El-Zogbhi said the packaged food environment has decelerated further

“The challenging environment is nothing new. However, it accelerated a little bit over the past 12 months or so. And the way we are dealing with that is by investing more in new product development program in line with where consumer trends are now, and where they are going in the future. And we’re increasing our investment and supporting our big brands. This is the best way to deal with consumer. The one thing we’re not doing is throwing money to try to get quick sales. We are resisting that temptation, and we believe it’s better for us in the long term to invest in sustainable growth.”