KHC - Earnings call transcript Q1 2018 | The Kraft Heinz Company

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Operator

Good day. My name is Lateef and I will be your operator today. At this time, I would like to welcome everyone to The Kraft Heinz Company's First Quarter 2018 Earnings Conference Call. I will now turn the call over to Chris Jakubik, Head of Global Investor Relations. Mr. begin. may you Jakubik,

Christopher M. Jakubik

We'll and that thanks our with within our QX Strategic to some our an discussed plans for President our our and Officer. measures Chief start Paulo Then, financial Please discuss the session. can the Actual may at results update. presentation Zoghbi, Director, today's And release some considered call filings press our GAAP during to today. XXXX financial Basílio, CEO; non-GAAP Hees, for based remarks Bernardo today. GAAP call be overview replacement website. we uncertainties, available from Knopf, join a for everyone, SEC. reconciliations and results. earnings our not our make should be Advisor business are with risks the in find during differ Financial will joining of measures slide the We'll end together and also of our today, David our read release Hello, of Zone; statements we U.S. you these should Georges are the due how on non-GAAP will and forward-looking Q&A note results and These non-GAAP and and see rest us the and on that, the of things and with our

to turn Bernardo. let's slide Now to hand X, I'll over and it

Bernardo Vieira Hees

everyone. afternoon, good and Chris, you, Thank

that we're call. expectations line February by more from Let in our to outlook saying me than QX about better start feeling confident our slightly with the

increasing result top-line inventory Planters working pressures to Big Brazil United performance from implementation. the the SAP us freight and accelerated that media well of at from headwinds from significant weak the the as especially and and our United customer retail in beginning our in best-in-class and reductions go-to-market Bet investments there for Rest capabilities, in on At impact Ore-Ida, and XXXX, If were half about we States you Canada, of the the services, spoke recall, factors cautioned of launches, EBITDA, including as in inflation, lead near-term the World cost in several the dollars, States from year. first be

fulfill important to and America; sauces On presentation sauce food that and being vision company, the a become iconic Europe; framework build baby set to in our we are The for better capability as gains second played whole, positive desserts, many and continue and XXXX same the our QX, as for consumption Indonesia. world. is Russia; as out investment from Heinz XXXX, to year. categories trends as of we we into February slide call. the and highlight the coffee and to transitory meals to categories these the actually we United top of goals and of UK; – first advantage it quarter anticipated pasta States; beverage for will countries it's in ready-to-drink growth outlook well and – soy cheese in and More Canada; and driven both factors, making and in are the improvement key half ongoing condiments best in expected. the Kraft in in expect These the remain are the factors in across natural of soups cheese, in fourth six most to such that we the drive bottom-line we progress include by that the food believe most as show And were these in trends these the Outside On brands. sauce is Latin balance sustainable seeing in quarter to provided beyond, in condiments in growing three in meals

win two we marketing instance, years our be last by a renovation. necessary marketing It's have spent portfolio of on approach a the English brands of that spend focusing capabilities product investing the renovation largely to our we to are set consumers. to to in efficiency portfolio data-driven one the and number goal with we in and fair For say on

billion a us quick chocolate in than all better Seriously behind in helping one-fifth soups cases are the building company pace. items. new more we We to every impressions United we quarter consumer in Good incrementality, higher our when Real has and like innovation, Just that, a just strong sales, funnel breakthrough gross definition we than Crack understand a Mayonnaise a incremental the than point more United generated be XX%. Heinz Mayo. of base, our just a we're time Easter We impressions more are as impressions and innovation new projects to that innovation not selling impressions X data-driven for XXXX. new soup into on develop In And Oscar Cheese States commercial faster breakfast, In Mayochup This single investments Cream new our a innovation a are around current and by our got to we mayo announced with and States from in-house season sales Chips product, offense marketing, the X Philadelphia than digital our more kicking data-driven generated net playing flavored first pushing dayparts In during Canada. gross make did response the media Mayer and sales marketing, Dips, UK, positioning Mayonnaise in country of new billion U.S. in Also than Plates, season tools Premium Bagel real-time are across generate and more innovation. XX% about on to in wider & with new instance, launch at focus impressions. gain X.X with more on and and XXXX, premium our size launching brand Super for Egg share presence proprietary within that's behind for in social it. now billion team's the billion roughly at and Heinz Think adaptable coming campaign States, Meat ad product have mobile, X snacking faster Bowl classic to campaign to in like alone, Heinz we our digital mediums the of designed interest during such initiatives executed especially than In Natural Cheese categories, target data-driven hours. are Maxwell this Planters year, in incremental with a nuts. doing off continue United UK quality new an PX doing Kraft occasions, a in impact we to in refrigerated we can plan launches in many Disruptive XX segments, complementing more innovation Signature like measure

should managers equities same That's Kits partnering Network Kraft as sauce, bring and sales to Cooking well States in significant will Food market we from with for Comfort Outside to still the see you maximize half the effectiveness the the Planters to of States, Europe and our effort still activities. Good! the in Rest joint platform seeing of have in World growing in launches with And to Items the room Springboard Meal we like As more second to Sauces. the whitespace in gains Oprah United the items Momofuku of ahead. new our are and soon through impact Foods, our of strongly category brand O, United expect instance, Australia. already impact Heinz market show At under incremental have the specialty from our ventures. year and in retail improve and promotional of Kraft,

continue which velocity adoption, our tools. improve assortment have reset In complexity. management hub our And the across and and our right for be will at take to improve our windows us go-to-market reduce Global our also assortment to chain to what management our to product adding we organic capability and at supply consumers foodservice, started value the We that catalog, and to actions and of expect through right recently Center Excellence Netherlands management, key revenue distribution we summer U.S. significant for high-velocity our incremental to zones, drive capture winter growth. In product right enable the this capabilities, place, global growth. the get believe emphasizing time made streamline we we the in ability to SKU team to planogram SKUs,

untapped returns United consumer have whitespace more that implemented portfolio last markets, seeing Our store this this and this is in-house the with of United sales in in-house are versus The science better approach our retail we the in analytics expect we Kraft foodservice, consumer is theme good Europe, make leverage than partner to And baskets the the are developed that customers. new we with larger States in-store there a and our can indication previous opportunity developing our States focus is model. teams a in we some incremental year, In channel. it of Heinz expertise capturing everywhere building and the in purchase breadth on single-item potential now in XX% a most and data time together e-commerce, focus-only

our making also goal best-in-class progress operations. are in to significant We create

year. position competencies through and first our because Heinz areas alone, and building the factory targets on are as Brazil the Kraft We we like brands. what to to our leadership, to this in people come and nearly in we've fuel our up to and XX,XXX online people across strong university rapidly of though win pressures the in times investments while costs, interactive to environment adapt new inflationary investing quality, we in in the procurement, to which underestimate are potential. in manufacturing, these we that our even in producing safety R&D, know to platform. And it China to in problem-solving solid area critical we in in Kirksville, made sales, of other cannot include continued ramp pacing inflation completed second integration service marketing, have changing these our is the nearly pipeline people, and aggressive high-return our complete both SKU state-of-the-art cost develop the program operate, new Heinz geographies logistics to in of marketplace. all and These We Kraft industry-leading really new a true their develop in in quarter ahead customer Davenport, pressures get projects each minimize QX, how words, remain we courses view and employees half substantially even should where In offset of

and half sooner. So to to shaping be net now see summarize, profitable the XXXX. between in these on to to brand of Two, we're half one, factors order three, we likely are achieve sales benefits what's and to growth. balance create EBITDA a category first in second are advantage and building And investing capabilities aggressively key typical

So out likely these let our results David factors me impact build commercial how how to explain over momentum QX in and financials. investing play we to are to is hand the to

David H. Knopf

hello, everyone. Thank you, Bernardo, and

quarter, better Turning Pricing the trade slightly last percentage X, X.X QX, positive spend a EMEA. slide U.S. impact, States percentage points retail in point the by the overshadowed with organic a Rest Canada, company to pricing foodservice Planters our was points consecutive and the By QX driven and out headwind segment, third and United X.X% Ore-Ida the sales known Easter the and United laid World expectations on from Volume States to X.X was solid of negative were in percentage World markets programming in initial in EMEA lower we States consistent and sales. strong in and in growth QX, favorable U.S. the down timing to and X.X% that total up Rest both a than net was headwinds and the United perspective, for had due markets. X net call. in of expectations, growth was mix

was items do in in in soups re-alignment by the supported disruption held zone, forward. SAP pricing, the canned southeast across impacting of significantly UK, inventory to expectations, and agreements end the we primarily cost In associated on results page costs, investment year, capital. Indonesia moving as net by better mix effective we results said, we in additional of while expected basis sauces versus key a up a productivity versus year a than top now to cash solid line Excluding versus where Mexico than consistent a will retail that's versus continue by results improvement. gains that Rest between a To sum, QX QX roughly the were better our primarily on And in another. XXXX. solid and growth improvement reflect shortage with equally growth continued as and tax with in by and adjusted a more year At elevated lower Kraft EMEA outlined our the generation. gains will strong the year, below-the-line reductions Rico, condiments the QX I'd slide we are better rate split pricing, was and was selling is came sequential aggressive half was of in XXX nearly Asia back expected, by That expected, our and of offset XXXX half key largely sequential as XXXX, had be inflationary point delivered At earlier World, central start savings we Europe, second first note Brazil. other half half. full-year driven outlook and cash consumption vol reported first agenda. commercial roughly were EBITDA seafood Southeast with be than growth these as issues, period. the tempered of that million in taxes EPS, lower second X. and meals line continued from although financial and In the sales driven were factors, $X.XX a delivering by provides to net is and is business one than of $XXX One quarter, retailer, start, final implementation expect And This EBITDA first reduction distribution-related combination our Puerto EBITDA, well half in the well underlying last cash less in just compared while at show go-to-market specifically brand. U.S. delivered adjusted growth to about Canada, to QX where the our retailers, lower expect and as QX, primarily were net from performance capital than in freight expenditures, where to In and performance this slightly like not resin QX of was half. with and working the our pressures, drivers and our make the year-ago last including offset sales

see half behind months in us now turnaround and solid similar gaining into half drivers XXXX. operationally strong Bernardo be against will sales of commercially investment In our the comparisons and versus press headwinds on fact, last will specific, to will up our we to of QX second with visibility we drivers, year. we in of trend-bending and four both heading strongest are cost while us, commercial second agenda, confidence To that be are the and year QX, more tangible of a momentum giving we EBITDA four number in set But in continue aggressive said, segment XXXX. as of be the every a reporting the

fade year-on-year Planters in during are half cold into frozen and Mayer go-to-market U.S. turn strong contributors, nuts, the headwinds just business. likely transitory positive should the plans to not Oscar but first our for First, given the cuts

and seeing well in U.S., in-store the presence we benefit key begin innovation to as Second strong investments both planned more category have also with the benefiting management as agenda expect and customers. the we go-to-market in our capabilities, from

strong logistics and across the virtually the is World. innovation whitespace we of ramp-up. from greater in growth And we've year, market, work February. of for as XXXX versus combination EMEA and revised every adjusted manufacturing delivering we're and procurement, perspective, leveraging currency clear, as base, Canada, the to the overall Rest growth the a by growth driven From targeting initiatives EBITDA EPS standards have outlined growth, implemented. an confident in savings fourth international benefits is Third we initiatives we at constant new be and following full positive net in EBITDA remain And, accounting

And sales for expect combination in $XX depreciation lower cash amortization and versus share, capital per working advantage generation profitable growth, roughly as and to of step taxes earlier now in shaping net earnings incremental order investing $XX expense approximately the in to are XXXX. of QX, the continue I'd be and aggressively lower brand and balance million rate expenditures, lower cash significant an capital. tax the incremental we by in EBITDA To category to second echo close, terms we're an $XXX million evidenced Bernardo's our that our capabilities see an is the cash of up between and factors interest that that likely effective thoughts generation and and a strong year the the path create we year of of to half forward first continue last XX% a on previously to developing versus year. million and For benefits sooner, we half in now these expect full of key to expect atypical from achieve what we're

we'd your happy questions. to Now be take

Operator

sir. you, Thank

comes Capital David Our RBC Markets. the from of first of line Palmer question

Your line open. is

David Palmer

Thanks. evening. Good

the the you are You you mentioned feet can get give sense that you investments? Have and investment? talk your something for feeling investments street, those in stores. where that you're you confident seen in us you'll on returns that Could about with sales a in

Paulo Luiz Araújo Basílio

is Hi. Paulo. David. Sure, This

we that salespeople. What basically in-store we're we you this the activity. I up being advanced have metrics on and actually to guarantee and doing XXXX. analytics, We leveraged own, that, the we're have model different it and can doubling forming our track that deploying it's are this. with in we execute that third-party this some needs we category yes, coverage started down better can to existing involves we stores this merchandises we in So, replacing believe that in-house understand

David Palmer

the that you lately. for categories and some big nuts, tell there your a you're on share you Could four element. regard to with They've question been else beneficiary the lunchmeat looking like terms private a those us categories looks these. price something – which four, issue that cheese, timing in what's of has coffee, And something strategy brands adjust? of going It is market label have just been or promotion in Is wobbling of your have been it Thanks. pass-through on? to Great. their your

David H. Knopf

Hi, question is Thanks here. your This David. David. for

on you and me let and me step QX pricing forward. then back a give let color little So going some more bit on

of something pretty year, and amount that is was pricing, going Heinz maintain stability Kraft fair okay, our so of a is last in likely we we up realized were this out into the last planned, we that this will outside the overall QX in that carryover that stable you quarter forward, for places X% from rest and pricing saw pricing the so So really year. key so kind of for the of going QX pricing. commodities, expect commodities we that's of to Outside that

Going I to will practice, get strike a talk our won't actions, confident as matter that we of a balance continue but profitable I pricing each and don't to forward brands potential in will of of be very the so is for we say our we and continue into strength market about share future what categories. volume between

David Palmer

Thank you.

Operator

Thank you.

comes question Ken the Goldman line of of from JPMorgan. next Our

Your question, please.

Kenneth B. Goldman

if I for can. Two Hi. me

I is exactly in XQ. around XQ, anyway understand modeling $X.XX. EPS, than EBITDA sure You headwinds what XQ. today, Street's want talked $X.XX about about to message what XX in the make they've $X.XX Typically, – EPS been I at if is seasonality, look there. you This versus the the just higher

lift that guidance, headwinds on typically of like EBITDA it hearing seasonality similar or you similar that we So but Does sure right? XQ make to it I can't just does? could meant, I want XQ's EBITDA comment what you we're expect ahead correctly mean give still should know

David H. Knopf

you is David. for the Ken. Hey, This question. Thank

earlier, in less said in likely as bit XX/XX year So that half, is the to I roughly more we second that half, a XXXX. and to first had be the XXXX a last split bit compares

on year-over-year every what points given in And last geographic on changes. strongest in QX, few very comparisons cause perspective up the percentage shifting terms can of top EBITDA margin that, segment. against percentage a obviously of we're significant in having year So particularly

relevant I very So quarter. highly half there be that's for of something being again, second will said, next outlook. kind our that are three to think tangible That drivers

cold headwinds I into transitory significant three as Ore-Ida. said, in U.S., are First, fade factors the the including and the These cuts should second that nuts, half.

pipeline traction Rest already very and agenda a Second, the strong year out kind the World. actually company gain us, that Canada in this think I U.S., EMEA we and whitespace have that and across innovation of for of is proving will

Finally, the progresses. up made that our bottom should the the inflation in investments business the that line, we've as business seen and to we've savings on in year catch curve the

category we're of the brand-building, of, capabilities kind we us going us for again, and management, said, to kind we're just will benefit into that's and year our benefit year. And investing both So again, will this building breakdown what this aggressively, and later reiterate the go-to-market in that forward. XXXX XXXX in

Kenneth B. Goldman

to going Okay. follow mentioned, for you're more, to management is up think, innovation and as my a XX% heard I I that. you the thought team, correctly, Thank have if you heard phase than projects I you I the told the the And ago. past? us I projects I do an as Bet you more reconcile Thanks. about Big year define understand of of and strategy you've in sort innovation how XX% talk it, with project the what's wanted

Paulo Luiz Araújo Basílio

What This here. Paulo. innovation is the can U.S. about Ken. I pipeline Hi, talk

from can growing what that being for year-over-year to XXXX now and coming many and – launched you number So innovation versus being XXXX are shipped. of I expect – is when that examples I innovation projects we compare dollars seeing and of the we that tell in is number has have the

We another we incorporating here. have all these in of one driver that are projects,

innovation of incrementality the launching. that are We the are very we focused on

of have Heinz our Egg, Crunchers, a Network, dressings. coming, an Crack partnership Mayo Just So new Planters is Food we the lot with

meals, QX, frozen from we base of we We pipeline already brought have the top and and strong second also are a XX have half. on soft And very frozen meals entering in Capri Sun renovation. the that that, we refrigerated

are innovation that XXXX. with pipeline distribution happy U.S. and we again, got we already in very the confident So

Bernardo Vieira Hees

rest have a the an renovation to that's adding Paulo, the you're of in right, same, work, complement projects, story to going a that Just totally the projects set of incrementality the similar we number what of the to and extension few a all we Ken. strategy, Just platform Bet right? we the connected. on MAX call the it's market, have Boost in That's name international call Canada. Big That's launch, why to of

in several in territory right, well. coming Australia have We to now Kraft Europe, as

Jif We soy in Indonesia, Asia. Heinz China. in in have Japan. Jaf and have the in renovation I cookies baby Europe food have entire sauce I in the premium sauce line pasta

some worldwide. those So key of time, you renovation Big innovation concept addressed. the widening pipeline that that to our are the are just Bet platform At match we same

Kenneth B. Goldman

you. Thank

Operator

Thank you.

David Our Citi. of next Driscoll from line comes question of the

Your line is open.

David Cristopher Driscoll

Thank talk bit or then gross emerging it's region? you and specifically, evening. I'd about Can little a gross developed to gross constraining then good a trended if if margins about like pressure? by market the you, and to wanted retailer I ask how And are Great. pressures margins. margins understand

David H. Knopf

the Hi, question for David. This David. is Thank here. you

know, we whether manage you as EBITDA it's margin, to margin EBITDA gross or So broadly margin. dollars not

EBITDA That year. gross said, you essentially So, flat overall QX focused growing in we're our being versus on prior saw very margin was our dollars.

next from that's not going two we QX shift the a into to that's another did have work One, small something and mix Easter think have two, impact and, this note us against pension timing is going did quarter. to that. of a things post-retirement small QX and benefit benefit from from to repeat, we I costs a on from

ahead EBITDA curve, Going and the investments savings I'd EBITDA that forward, and the have making commercial again, accelerated growth ramp-up sales growth. improve we're our to run coming back this coming again, business improves expect to year, and we the and fact before that our inflation the in in before growth that of into

David Cristopher Driscoll

growth pressure you to here. about a constrain that, you're a potential actually pressure can wondering bit in though, the the regions? this mean, your the David, hear sales on so I environment do what sector just you little all margins back I one sense right issues talked is weak your on gross the mean, comment to of the business. comment most about just would and over is the we're U.S. time? I half now I the ability margins it the mean, on something and is on year, saying as current like but think manage your the of

David H. Knopf

Yeah, no.

for to and that weighted Canada, U.S. the So cuts curve segment of Ore-Ida speak EMEA consistent in drivers through again, kind headwinds in innovation world and including inflation investments. about again, cold with the but going talked I whitespace plan and be with agenda again and going tangible year I'm rest U.S. and nuts, QX. in by second and abating the to of the our strong that the the the year, us, with with should with and margin savings that catch our happy for up is performance gross We're half by we're zone three not or with the to and plan running very

David Cristopher Driscoll

Okay. you. Thank

Operator

you. Thank

question of Credit from next Suisse. line the comes Our Moskow of Robert

trade Ore-Ida on then series some was you I say – pushback relationships were issues how also for and could Thank would meats Davenport open. you evolved. hoping understand line Last LLC their of a help some a (USA) and you and Robert Credit on for service major Your issue. had from Moskow have and the there had Securities year, me private with the Hi. pricing cheese label I is the Suisse retailer - your then scheme that question. you

and point you have you a are of feel trends, issues So those that's your clean that that big given the with? terms and your bit feel do being tipping And in of innovation these here distribution are weren't retailers you Thanks. to all why a of your resolved slate like you're now? confident trends, programs? kind issues Or begin seeing a

Paulo Luiz Araújo Basílio

is Hi, here. Hi. Paulo It's Hi, David. This Rob. Paulo.

year you about So, can this for think service tell we again, our a had is what improvement. big I that when you level

you the strong now the good service a started majority we with of know, level. is As again, very year the footprint a and so, work behind us,

products our Ore-Ida, capacity in all have delivering and this demand. they are from capacity our issue and We what but aligned focus of beside that, customers we

we (USA) some that it's really to this feel there, JVPs good and Okay. our the distribution, total so relationship my in again, Ore-Ida, Moskow get feeling to Suisse Credit but products ability the to to innovation negotiate staff – constraints to going engage place - our are level Robert get about Thank get we're for the to customers, you. seeing we Securities with service year. overall So, well, service (XX:XX) and LLC our

Operator

you. Thank

line the from of Lazar comes question next Our Andrew Barclays. of

open. Your line is

Andrew Lazar

Good afternoon, everybody.

Bernardo Vieira Hees

afternoon. Good

Andrew Lazar

comments as transactions from staple words, interesting, that I he certain I for how those other they make a thought guess hard were to, brands compelling impact comments inform second, bit from sudden realize but does out of, a disruption XG recent and and context made I make this financial and better this forever guess, Hi. thoughts that them. can other It's day by guess acknowledging that to could last the was such, maybe be assets know, Lemann then what disrupted capital take like And a And basically I then less of Jorge KHC. some decisions a I understand allocation or but all comments. read first, bought on his of of these your in hoping even put I Paulo it, some got kind standpoint? words. of slower taken get conference kind were if growth to

Bernardo Vieira Hees

is been has year segments case, come support them campaign, big cheese will for the in marketplace, since we me so it's is significant announced you to message $XXX be knowledge go that try changing need you the cannot e-commerce, really it new very right, say year. quite question will and can and categories I part to We something we investments, from that doing States, profitability, brands dollars we said, habits you also Kraft DEVOUR you It's there on, think, brands offering It's that the It it right, frozen if the new are and service. The scale, last and that right? the million the that have also on. true innovation a United and Kraft's right, Heinz end any offers million excited them, actually the really XXXX. the the the growing these brands being different behind to address happening have your of lot I But big disruptive – some big that the relevant. offers brands on some here right, give have. time the that with time, Super re-allowance opposite. they right to when and commercial relevancy, been in other right have $XXX with XX% Bowl different new believe compliance that's And Bernardo. our think example, well. digital we the we about angles be greatly channels, so with brand with for behind territory. about smaller market for When behind and Look, Andrew. they of let With well initiatives, giving behind consumer media us behind have coming the every market channels for in to case that's a behind support that think at the directly, as behind working the if is think to is new family Thanks, in of The go-to-market, of as of the the in that's right? product in

like like Just right. Classico, you Cool about things Whip, If are doing Egg going about Crack you the A.X, If refrigerated, for breakfast in with like think think an we right? brands

If right? combination extremely the Signature with the things you So two extension NUT-rition, are think about of important. Planters Planters of the the and

it's sense your a changed My capital it's to no. allocation, answer, in question, our mindset. So

Andrew Lazar

Okay.

Bernardo Vieira Hees

we some saying framework very Our right? been organic what time, with allocation, capital quite for line I it's think changed. have Actually, has for inorganic, in and not

We like brands. continue to big

We products invested continue to to continue efficiency like we can growth, business people. brands, and travel business that can behind can that generate like be that and

Andrew Lazar

much very that color. you Thank Great. quick for One follow-up.

guess, even XQ, in improvement, have plus suggest Easter similar you? an XQ? some Thank Or could sequential with would organic impacts you'll XQ does some reverses the you expect headwind I shift from of sales added be XQ you XQ, If the topline sequentially that shift as that a compared the little you. weaker hurting expect in Easter to that in

David H. Knopf

Andrew, this question is there. the David. for Thanks

zone-by-zone the bit or on little a through walk geography-by-geography me QX let So for side. sales

sequentially be the kind U.S., from similar of expect topline QX. to we perspective So to a in

to and Okay? Planters headwind and cold from us. Ore-Ida So this see headwinds as the we from cuts, still expect point percentage of again, and impact about. And Club we've for about talked will X.X be

the QX, be combined for we we point that shift, us. combination reverse saw to and headwind the in trade that, have addition should which about In a Easter of X phasing

we pretty similar saw in So overall, QX. what to

in you look driven will we difficult other each for the factors. three most the If QX comparison see by zones Canada, of

be cheese. business. innovation is little had So had summer in we it is lapping, and was retailer second that will in rebuild strong of the pipeline first, half XXXX. weighted our XXXX kind fact primarily in this than was And in particularly that Two, more which condiments we we programming, a in XXXX inventory QX a our three, strong

the to sequential to Okay? of growth year we're in continue And then for investments XXXX materialize. in and I'm year. if Rest World, confident accelerated really you we expect to see making And the improvement that our in the through of kind strong and excited look of we Europe, be then the

Andrew Lazar

very Great. Thanks much.

David H. Knopf

Yeah.

Operator

Thank you.

Consumer comes next from Our the Edge. of line Jonathan of question Feeney

Your open. is line

Jonathan Feeney

you Thank guys. very much,

higher points, or as XX look consolidating higher, you question, all things kind successful the or question? secondly, competitors freight basis initiatives the on co-manufacturing, you of past Andrew's coming you've but with to my a that you up is better, the Thank you so years? up it's savings say remain valuations Following does ask you cost continue worse, struggling, get simply of I really outlook plants, unchanged first at if acquisitions like attractiveness over coming the XX-year you. all with been costs threaten doing should going outsourcing, cross-currents likelihood on, of the and And couple at down for would

Bernardo Vieira Hees

Jonathan. Hi,

think first I Here's and changed framework really Bernardo don't M&A. it about about question that. the the you had addressing the think way we

very are focused, We right. long-term

before, M&A, things business reinvest that two look travel, and very two mentioned are that we can our brands, than is place. framework approach about that at in Like have question to can in that four. really capture disciplined synergies liking of still to the plus as We is more in allows I the us looking

seen price long-term more of basis. don't devaluations for attractive the those think XX this a and the months seeing in about I the stock movements What you talking in get So right than way you're framework. we rates framework said get is ago that this us you're today in even months way in are six or have interest in relatively ago,

Jonathan Feeney

Thank And freight? you. on

David H. Knopf

Hi, is This Jonathan. David.

Let me take freight for you.

of this two pieces. I'll So split into kind

kind the took footprint, on forward. did going on of into we're on kind we of potential fuel we footprint up what whether fluctuations could I'd changes, these we variable first very footprint initial projects, say each when case, cause And all the with happy costs potentially it's or other So still of modeling being consideration did that that side. the

it's whether seeing in oil of kind our similar targets inflationary what pressures plan to are it's or costs talked packaging, certainly while peers manageable higher, inflationary of in it's seeing, And what context on despite still our our curve. so of within say freight. we're we that. definitely of kind are pressures But terms these feel in we're some we Second, surprisingly savings XXXX of not whether the is have I to will about,

Jonathan Feeney

you. Thank

Operator

Thank you.

Pablo Zuanic from SIG. comes question next Our of

open. is line Your

Pablo Zuanic

Look, very and balance about my sheet is much, question Bernardo, you more Thank afternoon good flexibility. everyone.

post comment divestitures up end would could in Heinz future go be deals, terms of remind us And give to fund there asset leverage scenario you group of maybe If how Basílio. control potential terms really deal. a nothing flexibility your things, expands? in different debt where can about high keep other the can also I that a so future, for products, the of you you Kraft with a in And equity structure second follow-up about lot as and share about Paulo Oscar can controlling Capri Sun, innovation, the hear class base coffee. Mayer dual but a

terms an in but not much in Just Kraft Heinz. innovation you from hearing other update with give of coffee obviously us you. lots of companies, Smucker's Keurig, are Thank and where from

Bernardo Vieira Hees

Hi, Pablo. This is Bernardo.

going I'm to question. part David your Let of first me Then ask address to the comment.

have the portfolio, portfolio. we, existing been saying, I happy On can while we're with as say that we

I think a each brand does and role. category play

the we in years they're performance, each to a looking their happy and terms, and and What have stage But years half us understanding a much that. sure, say of the categories right. integration, For of measure of returns that five, much each our would after in the general life the with of better Also different in than XX that X.X we're year as expected. their ago, different perspective is of way a them different. of allows category true one one

portfolio. to in each and I we way. So the in look each complement do David, want would we're different do say category But you transaction a please? happy our general with question,

David H. Knopf

thanks Thanks, the is for Pablo. Bernardo, and David. question, This

and I'd very said before, on focused balance continue is we sheet, So say to of in I what delevering. be again terms

That are perspective. is That from We committed investment-grade top policy non-negotiable us. is priority capital to for fully status. a for us

point. want just to I think I that reiterate So

to medical largely of getting very post-retirement all That's our the strong the due end last sheet. be and But to Second, part get where intended balance the with pension better. significantly XXXX. not and that in is. believe we're happy we our the in bottom fact may sheet to on We've at the very going run our prefunded way we rate We de-risked year, of our line, the year. credit's balance part

cash expect and better post-integration about the cash and significant We talked I from last as well. considerably free Cuts Jobs benefits expect quarter, flow that Tax Act we

grade the good sheet very balance are status. and our feel about investment committed we to again, So

Paulo Luiz Araújo Basílio

is This Pablo. Paulo. Hi,

Maxwell cold ready-to-drink we're a second also in behind under think you're going in going House of I And On you brand. investments to the the liquid and our be half. – see products in launching see that will lot coffee be in question, going brand, to brew, more brands you're in the the coffee segment new Max see to category

Pablo Zuanic

you. Thank

Operator

you. Thank

the from comes Steven Strycula line question of next of Our UBS.

Your line is open.

Steven Strycula

quick A for Hi. David. question

a be That's XQ wanted to question. to Just we XQ? largest expect first bit the of the phasing of get that or my drop, a should little Was to for bigger feel first reinvestment bulk than the Thanks. quarter spend.

David H. Knopf

Hi, This is Steven. for Thanks the question. David.

say terms pretty through consistent from should the be year. I'd of a in P&L So the investment profile, perspective,

So expect there. volatility a I of wouldn't lot

bit talk important it's think call. investing where a the we're talked which about little we again, I kind to about on of last

in these of our go-to-market we're We're in-store as America. talked SG&A line. and international key that's distribution markets first, sales And little that both some like investments be types Paulo our bit U.S. earlier. about China largely well as Bernardo in through a expansion like mentioned, of and the So Latin in e-commerce investing in will investing

America, also flow then as goods investing Second, in and XXXX we heavily of SG&A type our dollars, largely of will media in which be our primarily and investing also line. line. working investment And North we're sold will plan finally, through drive but well. service, Europe this we're in cost to concentrated investing in that's more And we're in in

Steven Strycula

for Okay, great. And then Bernardo. question second is

the seemed the bit going In back half to that revenue Just to sense Sales get that. a were really come fruition. prior you trended a summer below of lot year to pretty the XXXX, versus wanted level of confident acceleration your in confidence plans year. this a of

I the this you. degree year added year? Thank gives guess So relative to what of last you confidence

Bernardo Vieira Hees

Steven. Hi,

and I constraint think regain question. here, to be on trend a on territory. capacity in David Paulo, behind related we contracted the territory. a to have what already the David pretty potato nuts We'll seeing lot's or fair much think highlighted before, that I Well, it's able are the right, the we're

on towards strong manufacturing and Our the of speak, especially the place innovation described all the are procurement And the cost even weighted they really on the half we side, by David, is put year. as very actions which in we pressure right. with second coming side, inflation the

in in suffering that still trend coming innovation Europe, we're market. execute, Canada, are need look main about are sales to and The in Latin the joint where I place. America we categories we business to and the main of top the when for all United place are sure in is the So States, Asia, decline with drivers plans but seeing EBITDA, the clients in

in are seeing most of parts So to the better all means, consumption continue operate. get by we we to countries

QX, there is actions today against carrying and momentum the coming So headwinds like are investments payout to we're to putting will taking We this for confident start the lot place in do a we our second us have into year but of the know we us in there still going that half in are XXXX. analogy. the we're

Operator

Thank you.

Bank of of Our next question comes of from Spillane line Bryan America. the

Your question please.

Bryan D. Spillane

Hi.

Christopher M. Jakubik

just could that more we take great. one question, If would be Thanks.

Bryan D. Spillane

All right. Hey. afternoon, everybody. Thanks. Good

Just two me. for quick ones

guess I as seen get not yet stocks, of like to I'd on for come specifically transactions multiples. And we've reduce the well more your Bernardo, staple given consumer First, markets down the valuations. we've the perspective within valuations seen the equity industry sort transaction

So And what of the the appetite maybe give looking a affected your where near that at kind can term multiples have you in on you're to ask of in if is least all you'd bid? at perspective market, be how fared. versus terms just is thinking about transaction what the just

Bernardo Vieira Hees

a like Well, don't of our right. to on practice, thanks, as rumors speculations peer's we and Look, Bryan. on transaction, comment matter

and like prices not I return are think longer-term look invest highlighted and framework of in that value operate remember, perspective, has say, value. create and we job. sense seeing long-term there a the shareholder not we changed the what is those M&A can sense. we definitely We're own right. and We that disciplined before, long-term our and things way for again, traders Because, that as owners in a very from we can I

that a the is are that definitely do plus sense, believe we is move two two we about that believe when relative right, If today, if price more valuations. you can valuations we even do situation attractive we find think more than four. in So

Bryan D. Spillane

true? does is I looking transformational Like at of and bolt-on there's be think look small Do follow-up, that the matter? large a but simultaneously? size large type perception a As necessarily properties would at transformational, sort only of you're that you

David H. Knopf

is Bryan. Hi, This David.

is one term. think the value look, number I said, goal, long Bernardo over to as So, shareholder generate our

that's our again opportunities. look but of comes goal, to and not So speak any but we'll way, to a potential across we'll any hypotheticals, number we're opportunity sort look going different of at that one our number

Bryan D. Spillane

you. Thank Okay.

Christopher M. Jakubik

Great. today. Well, thanks everybody for joining us

and questions, around to analysts Mullen you myself available for calls. those in have Andy with Michael who will Larkin further your media well. For the for the questions, as follow-up be be And take will

thanks thanks much joining and for today. So us very

Unknown Speaker

good evening. Thank you. Have a

David H. Knopf

you. Thank

Paulo Luiz Araújo Basílio

all. you, Thank

Operator

participation, have Thank a you for wonderful your day. and

Christopher M. Jakubik	The Kraft Heinz Co.
Bernardo Vieira Hees	The Kraft Heinz Co.
David H. Knopf	The Kraft Heinz Co.
Paulo Luiz Araújo Basílio	The Kraft Heinz Co.
Bryan D. Spillane	Bank of America Merrill Lynch
David Palmer	RBC Capital Markets LLC
Kenneth B. Goldman	JPMorgan Securities LLC
David Cristopher Driscoll	Citigroup Global Markets, Inc.
Robert Moskow	Credit Suisse Securities (NYSE:USA) LLC
Andrew Lazar	Barclays Capital, Inc.
Jonathan Feeney	Consumer Edge Research LLC
Pablo Zuanic	Susquehanna International Group of Companies
Steven Strycula	UBS Securities LLC

The Kraft Heinz Company (KHC) 3 May 182018 Q1 Earnings call transcript