United Natural Foods’ (UNFI) Q3 2017 Results

Steve Spinner – Chairman & CEO

Same store sales under pressure

“Same-store sales at many of our retail customers were under pressure or negative during the quarter. Our retail customers are facing competitive pressure not only from other food retailers, but also from many channels now carrying assortment of better for you products.”

Deflation being experienced

“We continue to experience deflation…This was an improvement from the second quarter; however, reflects a headwind compared to the year ago period when we had inflation of 1.25%.The general lack of inflation also caused what we believe to be a short-term pressure on gross margin dollars…Deflation has continued but is moderated.”

Retailers facing growth headwinds

“…when you look at general same-store sales year-over-year, quarter-over-quarter, many of the retailers across most of the channels are facing some real headwinds in terms of growth. And as part of that, we’ve seen certainly a fair number of store closing as retailers are coming together and so in the near term that’s been a real headwind for us, but inflation will return.”

Michael Zechmeister – CFO

Lack of inflation is a headwind

“In the third quarter fiscal 2017, we experienced deflation of approximately 17 basis points excluding the impact of the recently converted Haddon House warehouses. The result was a slight improvement versus the second quarter of this year, but the lack of historic levels of inflation continues to be a headwind to our net sales growth and to our margins.”

Tyson Foods (TSN) Q2 2017

Thomas P. Hayes – Tyson Foods, Inc.

Strong margins for beef and pork expected

“With continued robust exports, strong U.S. demand from consumers, increased cattle supplies, we’re expecting Beef segment’s operating margins to come in around 5% for fiscal 2017 and we believe the operating environment for 2018 will be just as strong….With hog supplies increasing 3% to 4% and continued strong export demand, we think the Pork segment’s operating margin for the full year will come in around 12% and looks to stay strong into fiscal 2018. Like Beef, Pork is performing well above its normalized range of 6% to 8%.”

There was a drop in food service channel margins

“…we are still in the fix-it phase, and due to volume declines and increased costs in the foodservice Prepared Foods business, we’re lowering our expectations for the year to 9% return on sales for the segment. We expect it to return to normalized range within fiscal 2018…The sales were certainly not what we expected for sure, as foodservice channel has been a little bit lighter than retail, particularly for us”

Dennis Leatherby – Tyson Foods, Inc.

Kraft Heinz (KHC) 3Q16 Earnings Call Notes

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.

Kraft Heinz (KHC) Q2 2016 Earnings Call

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.”



Kraft Heinz (KHC) 4Q 2015 Earnings Call Notes

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.”