KHC - Earnings call transcript Q2 2019 | The Kraft Heinz Company

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Operator

Good day. My name is Sherry, and I will be your operator today. At this time, I would like to welcome everyone to The Kraft Heinz Company's First Half 2019 Earnings Conference Call.

I would now turn the call over to Chris Jakubik, Head of Global Investor Relations. Mr. begin. may you Jakubik,

Chris Jakubik

today's thanks up Miguel our Executive Patricio, our and We'll David and both comments me and lines Miguel Officer; update. for today Knopf, David, begin Officer. Financial are our we'll Chief with for everyone, opening business from open joining then With and call the Hello, new questions. Chief your

results that today, may are risks and during filings that release make will note things to we today. materially and SEC. our see differ remarks Actual on due and based these forward-looking in Please how are our we statements our the some uncertainties, with discussed press

replacement also non-GAAP non-GAAP be read for call some discuss And measures financial together today. with will GAAP financial during can to not These should release. GAAP results. find the the earnings a and We measures you reconciliations should non-GAAP considered our within be

Chief to Now Patricio. our it's pleasure Executive my Officer, Miguel introduce

Miguel Patricio

first with you of Kraft Thank everyone. honored CEO today Heinz. the you to of Chris new I'm all as and hello Well be

roughly some nearly in maintaining the has XX their with As brands years the more. consumers. biggest XXX marketplace intimately or world Heinz them in I some XXX know Kraft countries has of with who worked their best and in on globe’s power someone XXX of the brands the of nearly relevance for

American categories. XX% today the or holding of in households XX We spots are in number one two

That’s any as and candid stock want today run. change that at my and this These more deserve The long follow I Heinz of is years. you the business. be I’m through business how for than humbled to that for tremendous to in with bigger start have successfully is far straight I industry the tenure and our Kraft great do to our And plan here. the among CEOs over you assets But from here. are aspirations. talk we about businesses the I’m from me slowest why have adapted periods of great now as of brands valuation you XXX to

has Kraft Board mandated entire The new approach Heinz. a to

job tell wrong and got got As why you to what it’s wrong. such my it we we

I fix but you more Over it with with starts now will it management share our me entire how we’ll months right about coming the team. senior and

To Our any must it’s understand We brands future to are can icons, we job we they do better consumer must icons. leading other ensure the are so that not our than lead, company. the follow. understand

have more driven We consumer data attention put [indiscernible]. on the a but process good start we and on must being

sophisticated the don’t For plant-based Boca burger, tools that impressions] market [ph] instance But we have but versus far to company we're consumer. the behind also plant-based first burger, that the today. tell ourselves had quality-[made the the find reach those

investments zero-based believe one they our our you because do of in in We the this a and change so place Many control consistent of margins apply can need we But to This we story have enhanced has cost to to than our be budgeting. time been strength would our have as we merger. that. Without company of discipline today. strong more brands. since our worse

team honest to values, no we as big first that all enormous in the XXX this conversations forefront world. major to me left Those the Kraft employees been and our an Heinz. and private chance global organization of opportunity as our be have and the XX well more wellbeing. rich a with change. visit conversations of transformation, retail, is big have the such Kraft I health customers. industry have as represents learning with non-traditional premiumization, of we had in leaders, My here at one-on-one transformation with with There in employees moment at label, our doubt channels, Big held offices days townhalls, consumer an have had Heinz our is candid numerous around at need and appreciation for than

Our chapter the them consistent half Their commitment to a my hear on before been is to the the is to and I'm going working path strong have our next drive while a and to why get I through that leader. ask win. thoughts privileged of to is am their review motivated desire they I we message our the to business hard team they've from into and impressions still forward, company But results. first be David first lot,

David Knopf

everyone. Thank morning, you, and Miguel, good

we for four XX-K the was the Forms fiscal with periods restated quarters, off, that the regain time The process SEC. a both years. effort, accounting filing occurred review our over status with audit our second first and to we thorough the past and past and First intensive expect for misstatements have for XX-Q of and filer current

of magnitude income. the X% a XXXX less our XXXX Overall, of net numbers adjustments from of to to historical cumulative than impact was

actions to internal and and financial to including internal extensive taking now improve are We policies strengthen over controls, procedures, reporting.

employees controls and and augmenting To to of for for procurement for organization, teams engaged comprehensive procurement disciplinary reporting found our directly precision date, internal all lines, realigned implemented reporting now at a in finance performed. have well arrangements, related as with experienced so tests indefinite-lived supplier additional are misconduct; which and area the have our enhanced in we enhanced asset finance to the contracts plan professionals have already goodwill of our financial level organization, finance as intangible the reports impairment

as software, and in from the upgrade employees’ reassessing the significant also procurement program. training checkpoints our the deploying a procurement environment, We're process in solutions and will implementing evaluating KPIs, management to be global of comprehensive potential to well as changes evaluate impacts

finance of is financial our and the especially I controls to to organization among and our continue going priority for Miguel forward. these high importance for our teams, for all partners, Taking others. It a legal parties like Board And and improve of steps Board, be to internal our utmost support would will thank myself. their dedication, the Directors,

of overall, trends both half back results performance, and consumption half share Canada partners in first to number a actions our held retail amount our to our inventory carry. while U.S. the of they our continued at improve, first reduce Regarding and by the were

suffer are supply and higher to declines in unacceptable. frankly, EBITDA chain simply EPS year-on-year absolute from And of costs. continued the level We

you leveraging in brands to February, our priorities our If e-commerce our consumption growth investments and recall, we sales set market driving our and by and grow build around and categories. returns share, improving and in-store

retail our the in and since first year, grow United States into have and of continued this XXXX. of improve both far XXXX So second half half and to Canada takeaway the

first this measured versus more X.X% consumption market our with In share a prior Canada normal condiments although the the and X% the calendar advertising sales sauces significant in was up and retail United with in on channels XXX States, gains first half more around year prior to nearly half return in aided the And of than was year. activity In promotional push half, the Heinz grew consumption business. strong behind versus world we’ve anniversary. the merchandising our by continued year

half as the on inventory performance our are dampened financial But fact the well we for year. whole, potential reductions dissatisfied the the full and first our year-to-date, retailer that with as

as These prior the year February sales of exceptionally in the terms timing outlined comparisons States decline. versus UK strong included both and sales the of unfavorable difficult an in for In organic in United our as promotional sources we half, soups. first well net Canada

we and a we to as negotiations that also of negative as at Europe addition we lost parts Continental as that better, pricing lower brands. ketchup from in did newly our trade sales retail anticipate, Heinz In impact due best North in implemented in Kraft levels saw between inventory not America well repatriated to good,

a points reductions first including and in company from down retail inventory approximately net From primarily the in an U.S. X.X% percentage organic half, impact sales adverse of X.X total Canada. perspective, were the

Volume growth levels Canada as was the mix percentage factors. relatively was Latin by inventory points, America. down in States, Pricing United retail offset in first more and driven reduction in the consumption negative, X.X three than flat the half

expense, unfavorable U.S. basis lower including factor price the basis points pricing roughly on was point a decrease XX XX timing approximately driving of basis, in promotional representing first global The in

By half, In neutral the year the for expected relatively second to half of the we in while in the in business year. not versus likely reverse decline to greater the U.S., last a should favorable the cheese timing therefore and year, we reflects of the it full natural including be activity Canada in and half. it’s the second source first contrast, sold promotional year-over-year turn step-up that just

drag continued in promotional pricing global on remainder categories. our first support was second categories, point The third, pricing representing U.S. Launchables select in roughly XX behind key the in half. North selects the reflects factor for mainly frozen primarily basis And commodity and America, driven

toughest our marketing our our as inflation for EBITDA up investments pricing beginning quarter. our about This first to effect to fixed being respect With year. we retail up stepped and the our quarter first as expected indeed half profitability, growth, channel not well against the second take and reflected and until curve, net cost people, spoke comparisons

constant year the In stepped the and logistics in prior production unfavorable roughly fixed the together year. picture half packaging, we currency this while up prior And first the across States. end, drove improving the the cost versus cost versus manufacturing of remained in inflation half United saw EBITDA investments would

versus saw Regarding period. reflected as adjusted the well first as expenses higher in we depreciation amortization EPS, EBITDA, year decline adjusted lower the half the and prior

more tax below favorable the the benefit total first we adjusted effective XXXX. Other income rate versus EPS line were than six our to expected, such were and months of the in XXXX half items of a $X.XX that versus first

deleverage two From $X.X completed our resulted and a after-tax committed natural And cheese. than nutritional of using forward-looking now the in further have proceeds beverages we announced: we sheet. those strengthen proceeds perspective, we remain to to previously combined a divestitures more balance These Canada billion. India and divestitures

here continue year. roughly full However, regards the highlight that rate, to tax I our XX% effective to will we for with expect

we and up higher of XX.X% This the the top XXXX, is continue expected the in rate items, our year-over-year first improved driven only resulting continued back inflation repeat, to price rate should but momentum this increases of specifically, especially see as hold fixed pricing by particularly in what in discrete in we due year. stepped and And offtake innovation cost of saw and coming improvement the half first the in to was The trends, half, versus saw not that market, we bottom-line a take the timing the be growth second benefit half. some half an lapping QX. last costs U.S. half consumer to in and second of to more for in in expect to

would inventory not had we year. as anticipated I further retailer commodity from note the seeing that levels, key the U.S. Although at reductions in accelerating as of that the well costs we risk are in start

Now turn I'll back to Miguel. it

Miguel Patricio

level at the CEO nothing today. should of versus we that roughly Thank have previous officially that saying of while is I'll any decline you, to forward. David. proud And this make for are are we moving XX assessment the days acceptable been I and I year of, where it's start think important point, of candid by nothing I think us a find

shared good both and expressed just you would and At the the long how concerns execution, it outset, to start supply I support, things of brand chain many the number over in of to growing take profits, a the the have position sustainability bottom-lines. like the be top-line of that our

that sustainable made in me the tasks missteps bring it to change their recent Directors they clear full of Board given contemplate long-term our our company's wanted will shareholders. that support for have of any value to and create light And

as have or good, from I as far, read as outside. you are rarely might bad you So expect, things what as found the

consistently clear and strongly we What when in is win invest brands. we is our that

to U.S. grown grown and a for investments an new taste. quarter. And with into old XX% brand the since share superior year-over-year share the For setting instance, and quality ketchup has time reaching in thanks extend segments, the consistently all achieved by category XXXX Philadelphia in innovations XX% XXX-year year-to-date market Heinz to second standard high and share

invested we billion to of fewest significant organization the over the company assess class the recalls on four great America for the than examples risk where it’s also have some important and We Since of past the have I a world consumer quality we hard has the including food detection, avoidance had alone that also industry more complaint have days. years. in and seen had at North But the CapEx shortfalls. end in These of investments facts line $X XXXX mitigation. my things early in face cold are just built

including through roughly First company XX.X% the of for trailing in costs, in a costs. price and chain, in foremost this freight, the to a by well up from of driven decline months inflation the and This costs sales fixed margins adjusted significant XX was the combination support overtime, step had higher end a significant XX.X% increases growth supply to with as as maintenance XXXX EBITDA year. packaging, fiscal in lagging of June peak our

chain supply in not problems driven ability accuracy to to XXXX, persisted continuous forecast a did improvement believe it’s inflation. cost pivot market our offset enough. I productivity our integration-minded and execute clear to Regarding and mindset we productivity lost we cutting soon initiatives with

efforts by supported root functional arrived finance I supply bringing of chain process doing take Before improve make opportunity doesn’t supply in areas, our causes expertise company in and happen chain leading by this the and between category team by But I technical needs of collaboration job across and to to better actions sure be more understanding by started losses again. this visibility. to critical to improving go teams, our see further to a

of sure a I is better supply as in one and this efficiencies-oriented initiatives the have the visibility priorities well ongoing to we have my chain our build and robust company main we So can our forward going value significant part now productivity initiatives. as of proper much a more productivity. If pipeline of across believe solid chain. visibility can critical we generate should make

out costs fixed have significant since we taken our from to business. or the Moving XXXX SG&A, costs

whenever investments capabilities, that like too of working expect. roughly generate be short million tell reinvested also But To once. such me year We and people, big of $XXX returns for the it's in them innovation. me to last a tells difficult a it’s to are of lot time experience in areas which go-to-market there investments early honest marketing my see we period all will at

we investment. critical And the that developing. and fit strategic therefore those currently It’s that that agenda may that the areas investments prioritize working, dollars working the are that we more to move we're that ones for are not need

remain believe costs over low increasing investments our marketing years. the media and in I examples, spend As despite past two overall fixed

more process, we support. practices and spending faster better On behavior and to the so versus innovation products. become to change And can consumer the they brand obsessed There we need it. innovations product core before know need be brand our even more we are and their new marketing, that balance development in side, we better need consumer-centric predict with so to can

e-commerce and rapidly term Kraft back channel of and And to assess strong share channel customer. development, we take in a Kraft terms and of retail but Heinz has need really outlook and had has each incrementality in performance can Heinz growth, of grown how win step develop longer the a the

already not becoming making about cutting work it's in and [ph] harder So [outer elsewhere. about It’s more just costs. dollars efficiency, base]

immediate ahead Let When me became the see month, my Board. to us. I turn and now CEO opportunities priorities I last established I three with of the goals

obvious, be colleagues. customers our which my is our to should first, know to The consumers, our and business, get

existing our business execute plan. to is second XXXX The

to The next to agenda review years. comprehensive develop three to strategic third for and a lead the most a important new five is

is critical now. concentrate the laying to on we our strategic and our the that organization foundation directions, It setting future, for get

Heinz ourselves and and We seek business, best need to both inspiration the the and next And practices, world the hard we out thinking within about need Kraft or not questions ask brands. about build internal to other quarter. to short-term time class take on external our from

that targets and many estimate our and asked do provide or against publicly that we guidance. strategic work Setting bottom-line as we a update I’ve the to we to back the specific directions From half. first productive point deliver top But held financial financial short-term be factors set won't second not in expect and [indiscernible] perspective, of priorities. half the David

investors. learning business I'm evaluating more in and questions this But as away and committed agenda, addition, priority don't spend We strategic credit urgent others. customers. want potential In develop the the investment give rating., absolutely we the our the to to value to And our I to grade get remain our our consumers time to on us fixated more organization process rush ensure is of

taking started to actions put early the and some help already structure work immediate the the three to team in We achieve place right and my right priorities. have

may seen as to help our accelerate structure my have changes to act progress. CEO in make first As was you some our

role U.S. have the and basis. interim me taken First, consumers I represents faster. understand on customers U.S. of an on the our our company President will business, help XX% this and

sustainable plan essential right growth drives shareholder For to this step dive big for an and value that the is Kraft me Heinz. developing

representing our zones global did streamlined, I strategy to Kraft this business role International robust commonalities, our international speeds. create for business. of structure, the Asia American find drive zone also more Latin EMEA, established greater with President to combining and their XX% a and Pacific Heinz We new refine

share our agenda will to to the more coming of We the over strategic approach continue quarters.

work early sharing anticipate We with And expect to our by end. next complete year. the our year conclusions you

As build truly must plan And needs business marketplace where consumer, we invest than headed. will quickly the of change competition. the consistently the make this and a the serve shown future brands sure better core to my our understand then needs that momentum and has experience we those are the identifying to their

years capital that the in ones the that one they not an believe expenses or other. it’s and great use both not the so can we virtue the top-line believe Intense both chain that discipline find efficiencies or base in to in that can is can help whether fixed cost increased and this had our our Further, itself. control I are It’s for supply substantially but a investments the grow fund must last bottom-line. internal I keep end under companies strategy. two new

to community coming very the Heinz. I and to engaging the forward As investment with consumer, Similar at over the also colleagues, attention months my to I customers Kraft look quarters. about ahead and opportunities look excited I’m

Now, to be we questions. take would your happy

Operator

instructions]. [Operator

Our Andrew next question comes from Barclays. of Lazar

Andrew Lazar

little from broadly. first So a me more

As about even really range and immediately It’s feels just hard XQ from into you so mentioned Heinz results Kraft true the to know written what like there's much been February, a a guess lifetime which or I little said outside in not. Miguel.

So a at both off, on just misperceptions maybe as then you And negative? got stage, first through see and specifics up. perhaps could follow what biggest among some of investors positive you of this little a bit the go just I if

Miguel Patricio

what that rumors optimistic about brands, why I’m why shiny, But very the in heritage on believe brands, the not going we are here people not I glad I got. are about household I’m it’s awareness at some have think about amazing some of positive really we doing we have that that portfolio some on we the I speculation we that not. and on in tell the Sorry, an Kraft But the turning comment the of trends you Kraft to brands are that to me I’m or brand as And Heinz. proliferation I’m have that power around well. think makes the possibility of of the feel have have, Heinz. think

have great I scale. that that also America. a And think advantage we very is in a competitive

about it in is that I turning I it am around. the have of before done I my life And excited very, possible. and possibility also the very business think

think moment the the consumer. others. if we business also transformation future, going take understanding this And than to understand define opportunity believe is is that huge on it’s have the to that are critical we that of based will transformation opportunity. I comprehensive strategy. understanding better And the the around, in ones industry -- the future And a ones be this today. take I the are that strategy to Now has a

not followers So understand ones not follow. will will win. The lead. the will And will they that

very again on the a be them. strategy making we to disciplined need simple comprehensive future So for and executing set and

after So, than I'm today future. very was much I one am our XX about excited, on I excited more days day

Andrew Lazar

past But Thanks sort in you're points basis structure address, have what for sort of three is more or EBITDA forward. margin a ready not the in mentioned, XXX as sustainable for you margins so years. know that. some yet, And obviously, of to come I the going you business see

Some related margins marketing or are other of in capabilities, average. been whether been that's some reinvestment, Group the has items, but above to still and well

in makeup, you sustain prepared above much. spending my in guess Heinz a portfolio with you do or Thanks and question Group the efficiently the share using market your So so sort is, think margin Kraft geographic I to I talked Because be well the remarks, should relative not? of structure base. able already think about its more still that's

Miguel Patricio

Andrew. especially you let start Thank believe much need people, invest we and our saying brands. in that our that to Yes. again me I more, Well, truly

of still as I'm before the but that redeploy would these this opportunities. possibility think investments could before system about should course, our to investments, two examples I going you seeing I where I am of can give I'll of they investments. look and so talk just reorganize I inefficiencies said But at and I'm new early be. I it’s media that it inefficiencies below big after in so lot not -- so are a really us the theoretical. bring

In in development. last research, was that really behind years. many that pay redeploy. we declined in declining. This marketing, media, we've things, investment we increased the we the consumer grew to investments the in can been But two production, inefficiencies other agency our we money thing product expense. We sees, fees, put other But or the

converted increasing I complexity supply investments. chain double-digits that’s been put the supplier in root of will to losses the of acceptable. need well that example, losses to we years, in another give very losses the the because actually that that can chain maybe our and have We system, all them. last reduce you We be understand the got causes not in

I system focus reducing about feed I’d before here going my them. and examples that to very and And growth seen to So investments can that seeing in inefficiencies, just margin. after new job. early the my the has of be in talking the best this inefficiencies have two be put

Operator

Thank you.

Stifel. with from Growe next Chris Our comes question

Chris Growe

I ask question. to want just a

bringing improvements to technical to benefit or I improving -- a the something made and your about visibility, to a new -- will get to a it. in order business? today basic or for where the high it Those would the like of, have sense you I’m those spoke be cost level more the and You get had Heinz a lot you expense would understand. factors, much need processes tackling, about there listening you missing company From comments to Kraft that’s sounds long Kraft to processes, a to kind Heinz how you that how expertise. like you to get business that just of timing to needing blocking in and think you’re better that of place the items do think at talking, grow the point where trying visibility

Miguel Patricio

Chris little in Heinz. time, Kraft go a So bit back let me

you cycle or I extracting cycle about and has two first phase think bringing the or put first to when first together, companies inefficiencies. culture new really be

then two We We lot efficiencies. lot a job to it’s company good did of after a extracted I that. on costs. think costs. cutting continue passed years, But a of the to hard

of change -- and but need necessary the efficiencies, You you but change cut Cost have everyday a is so the one-off to year first another way change cutting to and that’s in opportunities. have cost you you following reduce path. is is CEOs, cut. you different it don’t year then have CEO or one when really the way way you to the the operating that the move you about you activity about the to and you forever. have to how better two it’s making to costs CEO, In have need a But business, about cutting it’s strategy have think do

if costs And You can you in need trouble. the to trouble, mindset. get cutting reduce change you

I Yes, think it have from me. but that, started I now company would before benefit starts didn’t. with think have the phase this that and second it could

making better, sales better so the to every efficiencies a as before, from day, marketing I it making efficient, more emphasis with starts I’m cutting efficiencies well. making mentioned but extracting system, cost our put on making much big me much execution better our in our investments, And and on not that, system, in now the going factories much as on

consumer on see, cetera, et see things that cetera. on we So et not invest consumer the doesn't

answer question, able I Chris. Hopefully was to your

Chris Growe

sense. color Yes, David. that that there. for had quick good for you I And question makes thank a

context non-key Just figures giving year, update expect today the and you wait you're can those? information you FX commodity? if more on and or some provide but variable to -- around David Are compensation those do you you get could us not for guidance would

David Knopf

Yes, Chris, thanks for the question.

at the items line. So, like color we're additional this give of below some said, not point can But guidance. I some on the Miguel providing

half couple reasons. to So adjusted relative of expect will we the And greater second continue a $X.XX impact XXXX. this what year different up we for in the to the to full for unfavorability below EBITDA relative be to line negative in saw half first

largest is driver tax. the off, First

in discrete back of the the some whereas we costs within first benefits the year. some have expect half discrete half, We

favorability some did second Second, the income we in half. that see in other the half may flip FX in first

in whereas in happen is the typically incentive delayed the the timing will to this And and of year. XX-K to have half of the the Third, of to our full our that we XX-Qs comp, based related significant half of expense the year. due a filings first expect second

And then well. expense finally, higher we in see half as may some second the interest

Miguel Patricio

disappointment what need be profit internal need don't -- Heinz for -- Maybe big First, short-term. now to targets point, and that Kraft because And why? this is -- this Chris, we're on for guidance. we I'll was tell you because a I and a giving I focused bit you little let further go me on you we that add believe believe on not on the

agenda build. We have to a big

deliver. to second help. short-term on not But a targets have working half will think We I that

I'm have confidence overachieve since days, second, guidance, will if that half to necessary giving the underachieve about going just to I achieve. about feel I'm not been I've a sure number. for going or wouldn't still I not I this second But do comfortable I'm here XX my if

know in don't we always first situation, yet, at or costs of in I When know this even commercial the that the will me pockets, like is managers positive. empty pressures some and pressures look when face leaders in half second they that had like costs, the with that supply the -- but what right, half is

on also I private But categories there's and lot success, like reductions, the an of commodity inventory year, in is of as XX% that’s had has a XX% and at retailer but in the usually cheese, coffee. Heinz natural the first a -- the observation. that one just further historically, that seasonality observation meat, However, early Kraft label EBITDA risks, XX% inflation where such the standpoint, of half from made least earned risks of

see will we we So how do.

Operator

you. Thank

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

Bryan Spillane

So guess, from we just gotten guess forward, guidance times going having I particularly context we the confidence had of in on not how I first me be should least the about at a in few dividend this the before. thinking this we’ve question morning EBITDA

if and talk or you affect dividend what how could may factors So just the are you it? thinking about about may not

David Knopf

the David. this Bryan, Sure, Thanks for question. is

committed accelerate we that payout have the that of as successfully digits and dividend and said and businesses our both to to producing beverages grade multiple. sufficient delevering flow cheese of divesting we support the actions top rating Canada believe know we current over free cash to that our investment as organically So, our time year you before earlier as as business couple have. firmly are well we’ve generates this taken a India as we committed delevering today support we On to dividend

delever that to So sufficient generates dividend and again organically. the cash the cover business currently flow feel also to we

Bryan Spillane

past some And to you’re potentially asset the Miguel, the of then evaluating has reviewing business. been sale. additional and gets the the commentary just There implied portfolio, process just about in going

just to you you more doing lines. could those tend asset so sales provide might parameters be thinking of what create probably you from level along do terms a but perspective would in how you how don't So value? on about what of much Just value, you're just your not terms what think higher about thinking create just in they about something

Miguel Patricio

our until make actually talking nice don’t But question. want be or decisions. don’t want Bryan, we your to you, to evasive talk divestitures to on I non-divestitures about I strategic

and you’re I approved going refining having portfolio for what after with divestitures. our to we discussed consequence these the and get talking carry and and be Board to has that future think should think only I approved, about after

at that this not question reason undertaken. that is moment, For

Operator

you. Thank

next Our Ken comes Goldman from JPMorgan. with question

Ken Goldman

you opting Just pulling today? to you’re year, about guidance horse, make sure a EBITDA the you’ve organic and or the adjusted you clarification right, officially want $X.X already to $X.X sales do billion this understand, are and guidance have talked it growth of dead positive not I but not beat to address of just just I billion. to

David Knopf

Hi, Ken, this is David.

year or guidance. our pulling estimate we're right so for for not that’s bit sales little an can I updated giving EBITDA. color we're guidance full provide So on of But full for the year expectations a point that providing the without

well. So expect that to what in and new second half some drivers like bottom-line first we in February as potential on before the said of some there better the performance consistent do said versus with is top the risk I see we to are year-over-year and and what’s half

expect globally as expectations be that our some we’ve consumption we growth we've market versus in to back changed takeaways service seen X%, continue that food U.S. the hasn’t in with supported of what we Canada of promising X%, accelerated also retail our business February the innovation seen in well. in consumption by are and And So half. continued

expect the the in fully improved with that as On as of the second in half. top we half first we year of lap trade in that, U.S. the some increases half back happen that timing half saw will the what long the versus overlapping, we of in later the price implemented as this well. in will trends see pricing And first to the

And of see cost to we start had of as we as the in lap higher to do that mentioned improving expect then half positive Miguel inflation some side, costs on we finally, earlier, XXXX. the second

has QX is we We our second in inventory half. reductions for versus in through February changed as see risks the further we retailer expectations progressed

try accelerating may be key to we say particularly via inflation, dairy that, in definitely we the in half. risk. to look will we and of commodity we could meats see price, but what do second Although the also in risk us from additional on can’t top U.S. that like, see but a manage And risk

expectations February. we finally, adverse our in currency have then potential translation also versus And some

Ken Goldman

a But of model talk it. that. really my mindset follow understand Okay, a thank you're about not savings But is just I supply anything today gone from up. so to chain, shifting And on Kraft about of thing then and because in the forth. the you I terms down ready lot having important been appreciate Miguel of to there's your detail, turn that's top-line it. the I But merger for you talk can know can productivity. know initial trend. story this and what's ongoing I is to going most you do really spending to the to take, give reverse mentioned top-line? to us me that around wrong specifically there the in media going

any if great? So specifics can with share right now us that'd there's be you

Miguel Patricio

spaces, too white for I the critical. of we need the in top-line. find what share, what strategy brands part big We growth, that lower where should we have for the what bet today a invest, should focus these growth, all strategy, and focused invest think to first channels need I both what on. and will We be find and opportunities, need of structure grow bottom-line past, on bottom-line. on and to were our for do have is countries all attack growth. we Maybe more, And a channels that to which

we In I here a China. good examples, with business that a China colleagues very sauce. very on that, So well, was I just talking know my soy country have

don't are province. have growth. business have we on opportunity But billion, this Fujian, organize initiatives. to big leaders for to three. or ourselves sauce but that's and of a It's have to grow we are other But soy we not It's these the -- also industry side, are to white we -- to it this two the X% we of good opportunity fund year. we space have do it? great growth policies, as sauces in only We and richest it's is work the an done industry, a two haven't $XX And to we soy mindsets to sauce. it. for big exactly. other Guangdong I two But fund grows most opportunity outside provinces, see the There the that activity And in have know just Why per I there. province, of only is provinces. big

very talking not growth XX% need you opportunities be because growth, would even is gives portfolio know attend tell that was to efficient. had to if I the in business. anything to I for absolutely don’t everybody spaces have the when Hispanic And we find to else. represents have I here Hispanic came in sure XX% opportunity. to community. many We absolutely these I I know And truth like didn’t the an we when the white We West, the of don’t today about to and sure America the opportunity We population. population That efficiencies have. be of are in ethnicity, population. was There more today I communicate other of I We this our that arrived efficient than for the and

to in your from Board Hopefully, our plan tools from to country standpoint. we these a able will answer will at only and opportunities a from present standpoint, a everywhere be the ethnicity looking question. I channel you that I’m that this brand So of at at was year. end the to year will put the of And from we next our standpoint, standpoint, beginning

Operator

you. Thank

David from Palmer with comes question next Evercore Our ISI.

David Palmer

And the like cited the there, there chain think some stated they for I chain just last are competencies, that because I shortfall. savings Supply asked costs believe to or given the just is be that year? not, your last are a needed Where Welcome not follow-up. you relative as supply wouldn’t And a the big out company rather quick surprised as Miguel. stories not lot the be? there the do a hear had where investments was to should XXXX of I we it reason savings heard

Miguel Patricio

Look I very had the the first and the but good. best level the in half service if in good ever news were very, high the or last were that year we that I don’t very, know is think very

made the not So is to And were area. me news. that on before of that supply changes that good leadership whole was by a credit way I give the

So this on and one basically in part the things is at putting present execution. are is things which simple we’re working we place,

much We are in better place. a

efficiencies be present that for living. focused talent both and come need competencies service For literally a what day. the the I a the did on good to to losses shift work mentality Again, fronts with there, people We the this let’s on projects, for is our there line lived through things fire on and fire go a to a in or mentality extinguish what was on every forever. of will through and future better means people, service fighting, make the level not the open and that too We we level, it fire. on outside is us life, future. help to better, future go inside with also it but to opened what This for cost external future go front before my chain life that that doing is my efficiencies. define or We’ve of supply, are it’s that to productivity eight supply will cost, this the these way from match know will in in I in professional feed our been

David Palmer

was quick some a year levels some brand in $XXX I follow up, support. last was just was And reinvestment it that there of made think million

those there's there's You And the like you. be? return that in, And feel build can return marketing on here? success far or you're you upon do you in. would some what investment, said categories a that on investment enough about Because that thank and that as But are individual in making your return on as investment in think there you're there. stories the categories marketing questions lot in of some I that of microcosms inefficiencies you're any the any brands

Miguel Patricio

first consumption half Consumption the have them from I positive start of that are the is in categories, haven't with with say of we have progresses. flat. would XX XX Neilson seen And a me in I long -- the share let -- up of shares same and here terms for here time, year. reports Look

mentioned, that Innovation to share. with Ketchup, could there is brand launching you and is Heinz more margins. can do. organic a achieve that we I a more all that that helps brand. innovation well, the of that premiumize that XX% had, the XX% lot brand, added of kinds and us with I good That's the And we image have of to higher sugar, a shares, we investments We the put of what the money -- the a working. example good to some good that behind And of are no charge example. So very would argue example. very versions, communication are

So, brands can on again as I more of innovation core brands, we small focus think better too do but instead lot launching on hand not at brands do a the big new much on on many incremental dilute job brands, dilutive. brands, I said, is and on other investments among more having of a innovation and not

brand of not accretive but extensions enough lot a did we think innovation. I of

invest done I our do can of in be think we wrong to -- homework at is all good big a everything could better and don't brands. is there there we but marketing. So a examples lot and in consistently

Operator

you. Thank

with from question next Sachs. Jason comes English Our Goldman

Jason English

the narrow and to comment the whether love see it on Hey, investors you or maybe would And where investment properly necessary retailers the to in to and you and gaps more I kind in economics just A today price private Miguel. from you you're welcome also incent or have but with and it label, your folks. touched lot And you into of as on space be these trends, referencing media change could speak Two whether brands. may where aligned? gaps or some appreciate well. with white if whether you maybe opportunities. questions commentary reinvestment and we price just of retailer on in economics think me probably that price be not on market on it morning, focus of people, by not the good consumption questioned share

Miguel Patricio

achieving think us categorires on with Look, we say we I we need have And we Philadelphia pricing, maybe pass like the that think past like took we or able growing even industry price we're brands averages Heinz on to because inflation that overall. meet dangerous or been that innovation and -- Ketchup innovation, all to But kind track in and time pressure opportunity. suffered have management lead think an of and market it is would the competition time not that But pricing highs specifically from that we are pricing area the continue pricing in pricing course of share. cheese. we private commodities that of have that. more where have where much revenue more label and to that like driven pricing on categories too also both -- and on more I by we I I

we don’t So -- David mentioned that’s of price cheese is tracking the price expecting risk. a the cheese commodity know follow, if we we’re dramatically, are but before half that and cheese of label and of because yes, private one is risk increasing the to in second the we have

would beyond, be I pricing, as comment would go my exist that opportunities So think well. in I like but revenue on to management

a understand as consequence works play and a much a be can by throughout the better to we better we job investment by think think can allocating discount I is big and do on product Discount I a discount. maximize count, innovation pricing. when year, big that in and the and I better what role what can on how. And also way think on revenue management

in opportunities good are this area there think to moving I forward. explore So

Jason English

was question, impairment box don't to one to five-year Thank charge my in that new specific related I a want fairly this for guys yourself have but with you you, sizable you And year, another last operating did guidance priorities. that's year? helpful. appreciate end changing next you years and could little expectations expectations you revised over more the put a or last where as the look context were out what hoping maybe forecast five versus is at your I around of

David Knopf

David, Jason, this the question. for thanks is

testing know impairment year. you So our on side, occurs XQ the every in impairment first off as

and concurrent And are file preliminary this statements. X-K. we reiterate that our current testing preparing these year then numbers with so procedure XX-K after we to QX QX And our financial the in we performed disclose

in were preliminary factors. So the by main first charge half two driven impairment the

have LTA revised of EMEA Exports our had of evaluated did an we impairment. a current And we said reporting you as developed to that some the in East we off, first Brazil these businesses response unit XXXX in these market as as unit, quarter international reporting factors reminder were are and where first plans. during So expectations five-year

indefinite-lived carrying rate a the we keep of did And relative billion our you less stock Secondly, start in mind price we $XX with also goodwill of that reflect than nearly also in at attrition of year. XX% sustained the had start intangibles the higher should the value. application decline and since to year discount to the

going assumption what particularly means any there's be future forecasts can that given of change or in modeling that. is So to impairments, risk trigger

the updated and of operating And we have question and lower three margin develop your forecasts, I these as reporting expectations, to Brazil answer that we did units specifically for specifically, revenue East, kind mentioned, the LTA EMEA The sustained Exports. the increase the year. impaired price the start were that rate, which stock reflecting brands six in within were again, of discount reduction driven since the QX was by in our

Operator

will come from Thank today you. final our with UBS. And Steve question Strycula

Steve Strycula

short Good then and A of Miguel. Hi. question bit a opening strategic more welcome a one. little very morning

your the strategic to output different notification? And given think when at So from as that the the as the then review, investment the power community the should how standpoint, the I the of that that strategic view industry, your is they're kind what label recognize you ultimately low understand, in a kind would how whole you private question a receive observed? industry, with? relative And some Thank of about similarities to experience expect ABI, does working a short your you. to dissimilarities the with be, portfolio and are but earnings wanted company? portfolio call of shape it impact Kraft’s that current of of

Miguel Patricio

end we'll it's then share rest our going. strategic year the with to with is the Okay, next our you at on But of year. the the look, at how through sharing intention of Steve, update year, of work the Board you and beginning

lot has time. were of but -- food, to that this differences arriving of some can and experience with as questions were well. with I actually and And with has are well talking Now asking my -- there there pretty adapted think been long think similarities, themselves asking beer but a a this little not a people a be lot I how good, here eyes bit food obvious, for about fresh

obvious not about not were Some and asked they been before. it have

this been positive. And has so

past best to I of has the opportunity think ABI the another top-line leading think been Marketing, for Kraft on. players. is going experience mix, players was my the ways premium ran China from That brands not I premiumization you the both an is at I organic from more the And from coming are that because substantially grow me global and ABI. because But with ABI premiumization story I actually of bit very using Head at growing premiumization let much this I think is our of a we When from share past industry. of in actually adapt interesting. of had the brands. been here big and the growth that But in small experience Heinz. Asia, can business for my was

anybody growth business we because immensely. And else. huge why the the will channels in wealth, channel the And would grow than bring -- succeeded that we better we future understood change China reason was premiumization, economic of understood would

best a the for the made Heinz, navigate parallel in to future. food grow that is to future. find Yes, going for need in build that to making ahead of to what was best it with where made We to grow, is where through big else. what happened. we us. everybody business need Kraft is so And I the the And would grow, this And not the all critical necessarily. think We and present going we all be but we need strategy

better that and I that China will second terms the that be the And future future to the In the believe want I was again will we not we the the is in think If follow. to really first And understood we're this group just ones much even them. not future in before. brewers. why local understand we -- win group. talking China and understood the about than I of going than We understand

of will that So an I’m big believe afraid food, to that it as there be transformation optimistic the area are I nature I the will negative and ones be future, is is this by of is would in understand said people win opportunity, going before, an that that. one big and the transformation are those.

thinking there’s to just and understand see consumer to position I But obsessed saying Heinz little call. I the and just take need growth. We the Kraft bit no solid opportunity positive. strategically our are, this continue to encouraging words there anybody our portfolio, to expectation the the headwinds ourselves future have than We only first lot or else. I summarizing to sacred rebuild cows, next improve for in in me to and I’m would determined trends is was to work for must and you what company. support and become Well that I talked are how with our disappointed way report maybe of and absolutely great this not preconceived couple top-line to also forward. eyes by best consumption bottom-line business to I you question. the strategy we finish I’m, new of our with Board direction no and a a the half the have need I tell ideas, to am a a but our move and of for like to our fact level. about know excited wanted put results. with that But last support And just very of during better speed. we fresh how just what delighted momentum. are

to from strengthen focused. That priority. to a need And remains improvement, mentality a the a cost need cutting pivot We continuous sheet. balance to we efficiency

I’m my and So to Thank for -- as you thank and am learning knowing very very delighted much. looking really well. time. our be be to I forward to personally with you views you sharing to here today. you much your you from

Chris Jakubik

Thanks, everyone for joining.

will the up For questions, for as will and be available analysts well. you Michael for Mullen available Larkin those media have follow in who myself and be Andy

So thank have great a very you much day. and

Operator

This conference. thank concludes gentlemen, and Ladies today's in you program. participating for the

wonderful all may and have disconnect You day. a

The Kraft Heinz Company (KHC) 8 Aug 192019 Q2 Earnings call transcript