KHC - Earnings call transcript Q2 2021 | The Kraft Heinz Company

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and thank you for standing by. Welcome to The Kraft Heinz Company Second Quarter 2021 Business Update Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Instructions]. [Operator to (ph), over Head have today, your the Jakubik Chris of hand now to conference speaker I'd Investor Relations. ahead. go Please

Chris Jakubik

Thank to XXXX our business is This session for Investor Kraft hello, quarter Head Q&A Company And of second Heinz you Global the Relations Chris welcomes and update. our of at you. Jakubik everyone.

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

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

hand Patricio quick to I'm begin, over our it we comments. Miguel CEO, opening going Before few a Miguel? to for

Miguel Patricio

Thank we've what we all Transforming very elevation, It's strongest do service. emerging maintaining strong, want retail because Kraft industry-leading and call are the have we taking from with the tell in you, you, sustainable been need summarize about that we we continue advantage scale have building Heinz. the and XX, and bottom versus business we we line we top very of and to agility the future. are markets. that Heinz to what our we and better and at coming the a add comes posted that how back And and platforms, recovering and Kraft priority everyone. like are optimistic encouraged recovering growth build profitability. to been for transformation Chris. platforms that, We've I We progressing gains And you to mind. or line in fast. growth we just And is we're thank see food markets,

investing a are brands our as as more better well building and Company. in We creative more much

deliver XXXX Turkey. inflation. is million elevation strengthening to our closed net grow energize strategy time, We're the emerging track operation, close the small know, to expect divestiture And on we improving and in we half the platforms. also our s effectively to gross the this managing Recently, are to and second Portfolio year. to drive, important capacity products we efficiencies we, in of in flexibility. of because and in down a accelerates $XXX financial It's is continue emerging our our and into very but Cheese acquired markets, We adding as and Assan step At the debt And the continued markets. Nuts improve this very a divesture in Foods pay leverage. we same and you

We continue speaks business. have of we to initial than good projected actually that the when potential a And a to Thank XXXX outlook provided our XXXX in expect February. very stronger and you. to ongoing we strength our to deliver

ready for questions. We are now your

Operator

roster. Q&A compile standby instructions]. Please the [Operator while we

first from comes question Stifel. of from line Our the Growe Chris

begin. may You

Chris Growe

build slower all-in-all, low, overall. categories rate the cases how had little data your look as just above I is what And backdrop, little pricing was give through the a you, curious maybe please, in of the a the half prices like morning. and than if pricing would could quick category, good second expect some just a bit for in some you and color categories, it relation but Hi, the I a I a to as I if across realization price are U.S. IRI the year. around you in say, could just question more to your your Kraft's little

strategic that's year. second helping if just half you. in Thank gains of the timing pricing So more your I'm coming if share drive and curious that's there's or just

Miguel Patricio

question. you for And thank your

start me and and Paulo give maybe Carlos Let color can then you on that. more

on our remains deliver, with than expect stronger even as And I in that said, XXXX, I businesses the we projected we inflation, inflation believe manageable. As mentioned a to call, before. we

action to Paulo continue necessary. take to course more give to at invest monitor anticipated it the our We brands in we is to things our you will can maybe Carlos, But, and as and maybe levels well. And transformation. drive continue of color further if

Carlos Abrams-Rivera

that against the good is we the actions managing And to about first, But I for need. and have when see ability inflation would the see. I where U.S. question. in we actually, we is think Thanks Miguel. our the the implement say proactively incremental Sure are feel in past those we said we

look but in too recently, coming If some we we transportation saw rising mainly costs rates. to is ingredients, most also like we quarter. some from and and soybeans, saw very things increases oils, you QX driven inflation edible as And first similar saw higher in at is the And some by transportation well. packaging, what

Now the from to we key mentioned pullbacks the drive a pandemic-induced activations are call, restoring we that the in XXXX. had I pricing perspective, business on promotional as because of

the those Now, drive brands as have we year, mentioned hassles. have to rate our or be to and now with the our discovered among connect earlier consumers repeat continues goal in that rediscovered

we offset of in net and rate. the ability feel So maintain inflation, and repeat again, and achieve household that inflation strong our about a to need good that we pricing context, to

also What primarily consumers, renovating to of our that Portfolio I management initiatives. is X key diversifying through we improving and marketing, that our it Given for drive revenue that will doing media and strengthening content created this value add better are we're our impressions.

our First, that we'll the I promotion activation while in call. retail we levels frequency restore depth optimizing are and of discussed the

broad-based have across pricing Second, we're doing actions, we announced our Portfolio. which

manage to category levers, we're all architecture price price using key manager lastly, commodity Third, pack the and revenue pricing. And we're including continuing managing ladders.

the trade those investments we so current optimize environment. our If guiding deflationary on returns smart through you at and management revenue are manage initiatives, look can they investments

term, reflected And outlook. versus the to into of let exit comments but we degree cost Any (ph). as pricing inflation see with may lead year. other (ph)? net near some coming our Now, this Paulo the to that, of you pass me in balance realization timing and we the it want add pressure cost margin price over in And is to Paulo

Paulo Basilio

Sure, Carlos.

we you costs the move to if lower April, that continued and have think as pricing going inflation. mid-single-digit want explain that so a you're end said the of on a perspective, to but inflation of in higher. Company range that I to break COGS down percent expecting We're total our inflation at first it Since in recall April, range. from

in likely inflation for Now, above still range midpoint mid-single-digit but we're of full-year expecting mid-single-digit the the now range. the is the

has important Carlos to that pricing, in we including management multiple half think comparison for going we [Indiscernible] last an just the keep Regarding said, are I pricing leverages of as price mind actions in we to us year. revenue facing but mentioning, it's are using be difficult to manage and second are inflation. unusually

promotion just protect Whereas more back to than Just we for year, last service. better half context year. was remind, on pulled second our prior higher than to the X% customer price

soften of term. timing realization the timing lower the the to rate expect pricing our to run than In realization, cost margin the and short terms the versus inflation percentage the levels we while of price in

for already in the considering note expecting year. important it's as outlook all to we than have And are those we EBITDA beginning, anticipated now even of impacts think the before. we we're that stronger the that I again, mentioned dollars

Chris Growe

Thank you for the color.

Operator

question from from Bernstein. Alexia The Howard comes next

begin. may You

Alexia Howard

Good morning, everyone.

Paulo Basilio

morning. Good

Alexia Howard

to back margin. how Gross now, the possibly the imagine might of margin? of shape the not know about Thank looks points be am Thank I I But intense in on in you. commodity going release, into as year much would down press except XXX pressures, Any some of as cost expecting anywhere appear we're such you're out Gross it's be numbers in the you. XXXX. I in ask year, that commentary adjusted wondering formal appreciated. though a year. Can about half I it it doesn't that out but just situation that through basis the that

Paulo Basilio

this start here Alexia, I answer. can with

year-over-year, there in last left where a with think QX the pantry lapping going year that I to margin. they're are all you to that when yes, make think quarter remember think the in were in quarter. happened we be loading I some Gross big about adjustments But we the

in healthy these Our very the in are business a overall margins of QX.

that I that we to in pricing we the work to were inflation second able But offset had. pricing we the heavy a were had more enough think last efficiencies very in we quarter. we quarter, to to mix compared price the set had our than enough plus and

Alexia Howard

the do going expect you it Great. and And -- back-half? how to change in forward,

Paulo Basilio

half promotions back to Carlos And already start Also, will the of and we inflation impacts mentioned. as our going we between the outlook. profit. go embedded that inside think these the forward mixed the going Going outlook But all we're on. to in realization, going also, that in are exactly, and going impacts I year already have that what to and see to are those see the pricing start impact the price disclosed. key that timing that some gross to are is We're to we have, that's our restoration components is

Alexia Howard

it Great. pass you on. I'll Thank very much.

Operator

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

You begin. may

Andrew Lazar

shifted still around to year it's from morning slide at the I but change, expected I Thanks to to just back or presentation, for September it and be would that such 'XX. I'm that on on presented specifics roughly add stage, to wanted go much. guess thinking And the EBITDA get Good sense divestiture looks it at so and the be a so impacts, we base can obviously has versus like at maybe thanks just XXXX, we Great. early Day of in in have longer-tail expectation the of was and much meaning still as question. get flattish way environment the inflation know this the guess sense excluding too to to talk this to a Investor benefits that divestitures out last business, of, to I strip 'XX trying all?

Miguel Patricio

to and Let you precise me more numbers then Andrew. Paulo, maybe can answer bring that

transformation budgets, continue are We plan. our presented the year XXXX We've that? strategic been we our our investing to be of beating our and is why future. plan the expect think optimistic the ahead and is that than we I and in plans And to you. better

it all think too to to think I further the is the guidance that. give about and in present I market, XXXX. go or it's volatility you be for to early talking still not us on With

Paulo Basilio

'XX. of continue of progresses Andrew, manage actions in all see today, these ahead discussing complement how but the a the just as industry mentioned, year, is the expectation we're that are we that revenue clarity year doing will We're can initiatives on more those management initiatives Miguel we we be we here, And not as think seeing to about providing in as and based into maybe XXXX. consistent I later seeing inflation we're next will us year. inflation, inflation terms theme for and the that an to the say

billion together $X that we're brands. be improve with initiatives for our with of to relevance savings program those program making think our will that I savings investments sufficient the together

are support we to and inflation our confident are entering and again, very So around ability as behind the the manage a exiting we 'XX turnaround investments 'XX. to

Andrew Lazar

everyone. Thanks,

Operator

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

begin. may You

Bryan Spillane

everyone. Thanks, Good morning, Hi. Operator.

channels a Rafa the quarter all and comment currently, year-to-date, this. or are for for up. even got you both In could seeing I've question, we're on Carlos So basically, I both guess if

of one as I channels as 'XX been has service at-home elevated. away relatively is think also surprises move improved, consumption that's home that, the in-food have from stayed the through we

is guess how this of you of begin accelerate a at-home channels, to and trying question consumption? both simply, somewhat normalize, I I my expect expect just long thinking So right X you those would really foodservice piece they're how you just guess, do offset get of about and as to continue you're more especially both the to things it since up. the So, to sense now for

Carlos Abrams-Rivera

question. the of first for all, thanks Listen,

I fair. it's think very

give start and international. then me perspective [Indiscernible] on Let a

trends Channel the how have are share ultimately, say think to an tell normalizing. it's to also going away-from-home and But at-home, perspective, I out. [Indiscernible] too early industry between still I right. from of hold you're to it

like our built that's seem growing, are does probably that's likely into and it channels to remain case recently, but old no the expectations. not Now the

a retail optimistic have of are terms what that growth the see foodservice. retail the and about distribution culinary of put can and And our sustainable fair insights have because service we can actually help in say the focus also from We is Now, it's of away-from-home of on think plans we drive both channel to the generation we is capable outsized both our And big side actually a business, actually is believe ambition the also innovation we food actually business. in reduced that growth that driving business. in and expansion. we I

And all stronger essentially going while it's normalizing some I trends, versus those little to pre-pandemic, it's now. and exactly channel bit still that whether going But reasons. to what do believe say say I be still do for early of saw to a two predicting key we we're happen

And capacity because First, QSR. gained mix up. to be on is culinary by I made our more foodservice was took also rest sauces, post-pandemic. so been see seeing already let are we working. the service that more growth. X step-up be a most now a bet lastly, and stands recover the give recovery then a a pandemic, new growth to just our package channels. consumption color of and and fueled that foodservice that and sacrificing are me see the away-from-home. XX% small strategic the that mentioned, secondly, actually seen expense you that of channel. categories to in to necessarily we also resilient ketchup of of recovery we paying we the areas little we at bet more and other I actually, begins, QSR in actions support share, And comes that And in of without favors food market have food in-home actually that distribution the service that And brands the early in durable faster that that mentioned and We than And more has point frankly, and we

we X executed co-branded QX, offers in So with culinary limited-time partners. actually QSR

in those permanent is part And that limited Now think so if of drive QSR, was going XXXX 'XX. one of we've now with because able our been we the had actually fact be successful of about that kinds those item it just and of menu of you to became offers to time none context those. in

So, a level QSR. we certainly of driving execution are different with

kits, And our to grew is of they second this the and they Now, which including actually use the we distribution, XX% Quarter. then account that over equation. cook continue meal part we're Heinz how as eat key brands by that, evolve and finally, inserting Kraft actually consumers delivery of into

our to So, their we all-time are the working recipe a an by ordered Cream main develop ingredient was partner. with consumers times over one product popular Philadelphia things Cheese as products. record really like direct-to-consumer for specifically XXX,XXX sales are Company for of And that actual that

So and away-from-home you optimistic going to drive for us is it I feel retail about very growth. holistically, it look springboard business continue to a actually at that our when to be

see terms Rafael a want U.S. and how that's to business, do in international Now perspective you something the (ph), in add you it. the of

Rafael Oliveira

foodservice trends on service to in U.S. Yes. very similar Canada. markets Bryan markets their developed Then developed stronger countries stricter experiencing Thank that shorter rebounded most the in and markets. on open you, actually overall. during retail has other lockdowns, Emerging our even Carlos. and economies the that and or And than balance, had in (ph). hi, are either kept Look, pandemic hand, food

will giving after will seeing in lot the of the tell channels all the lot well-positioned confidence the it's delta said, improvements a best the country, -- availability that us given changes the a And pandemic in-home, the country So The pandemic. channels variant retail lockdown to right out of pandemic second of I But the a by how lot. consumption stabilize early channels that and a mean, obviously approached where bit vaccine we come of differs half. on out-of-home. and now the we're

side, mix and foodservice is the is is this towards weighted On than recovering format even our more QSR the quickly. U.S. very

the the gains in of potential overall across distribution that I'm that still quite and optimistic still with pandemic So the have after we quite hence, the be positive. markets our emerging will international, net foodservice

Bryan Spillane

Okay, Carlos. thanks (ph). Thanks, Rafael

Operator

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

begin. may You

Ken Goldman

say, it's a Would results. Company not bar or let's good I sales quite expectations. imagine quite guess in print a outsiders to against for some guess I good about And could But time credit I of to if as had in I rare annual much. your except been not do in realize avoid which a way confusion to and thanks. we policy not you more you compare basic you that of EBITDA. give Hi, when ever policy cases reconsider could guiding you long give ahead come

nothing slightly makes and life if curious ' I easier possibility it, probably to else too. a guess there's Chris Just that's

Paulo Basilio

the for thanks you will -- will know. Again, we this discuss the let and comment. for Thanks internally we

Ken Goldman

you. Thank

Paulo Basilio

Welcome.

Operator

of Our the English next line question Sachs. Jason comes from from Goldman

You begin. may

Jason English

for questions. And in. morning, good couple quick of Hey, slotting folks. thanks me A

you actions, prices. some mentioned pricing on price vary implemented quantification raise through to So that what give and across can products? you've you that Can you're the how you it the those began guys average, us -- pushing us increase is does there? Overall, different give

Carlos Abrams-Rivera

just let compete little which a peers more say, you about let think me of me we that context, the if Well, really than diverse most bit give more Jason, of with. our portfolio, is, that we're

is unique just solution. pricing So, terms one our approach in having of to no

to so quite majority pricing have more you categories a an across has than to portfolio. wide specific a of our that increases, you percentage we strokes really certain it's answer. and precise of range say be bit broad the portfolio taken But entire covered in have actions We of I have that give the hard can in actually

that feel we that Now, continue we monitor managing, what actions the that take good we are to those about and things have mitigate approach, is that further we're tell necessary. feel very to for Thanks comfortable actions inflations I Jason. and at if taken going to that you question, we we're how will our seeing, incremental

Jason English

Thanks. But weighted you is average Portfolio? across increase price don't know your what your

Carlos Abrams-Rivera

us we're think we're from is but isn't conversations happy going feeling I for about how much something to mean, and moment manageable that that to we in us. I it that how discussing are this responding and a to solution continue something be have very

Jason English

to the more high-end. what I'll in half? just a in of the quarter quantification give for expect you. one us And the a the mid-singles in can was on on term. Thank I see little year what and the total going from back the inflation, near low-end you to Okay. bit thing you zoom just the rate

Paulo Basilio

Jason, the that's Jason, our low-end in to in was that you achieved first that pressure the the specialty commodity an QX, that And saw experience of in also that on the that quarter need higher Bacon. inflation range. we too. can the including we we tell remember of mid-single-digit I meets year, X have Big range for the component. half in rate this the range in

Jason English

it on. pass Okay. Thank you. I'll

Paulo Basilio

Welcome.

Operator

Our line comes Casella question from Carla next JP the of from Morgan.

may You begin.

Carla Casella

Hi.

at changing either lower given you activity? leverage your maintaining target it below you the just that outlook or M&A mentioned to either that that You for you're leaving ever Would and target business think times four are other flexibility, your three. shareholder-friendly of you're potential, currently or or

Paulo Basilio

question. Thanks are. the for We

We keeping. are

We are leverage consistent a target X be in way. not below of to times changing that

keep same date to forward. us our and closed at times the body pro X.X the lose and with right to more we was we also that to remember is again, this adjust would Let's we idea policy accelerate lost, go EBITDA, the going that operate forma divested. that of note But, give this flexibility adjusted that our that to going going strategy, we to if flexibility that we're to EBITDA by X.X that we're yeah,

Carla Casella

Thank great. you. Okay,

Chris Jakubik

just question. more Maybe one

Operator

from the question line And Robert of from last Moskow Suisse. (ph) our will Credit come

begin. may You

Robert Moskow

a grow. you you think the the media to question. that the Maybe in then year you XXXX? is, shares And One for Thanks is, expecting question Xnd think increase again will do two-parter. I entered market

back in have outperformance go also your category specifically back those XXXX. Xrd and expecting drove a as to So maybe work for Xth, categories and performance Are things retail? people American go And in then resilient. been X to you you which as second half back consumers could decompose drop-off in those school, guidance, the quarter pretty to North of really

Miguel Patricio

and in talk let me and pass media. second will -- the And categories specifically Carlos about to first U.S. me Let regarding answer one more marketing -- I the to part

have capabilities. we Let let -- excited brands first, in been are our programs in in about but changes making investing and our been also our not say me that, we marketing We've people. the only that

Miguel Patricio

about, is state an our and This important has to area passionate that the growth. drive very I'm given

are actually is in couple we of driving put. one that Xst a marketing dollars We The more ways. improvements

million XXXX. more in want marketing in we that $XXX have forward. marketing we And we We moving increase had than to said

intention. our it's So

with really I only think about same our marketing, it's However, media. not but achieving We're marketing, by marketing, better and doing increasing more only spend better it's the not better XX% also about today efficiencies. consumers of

in markets than world. better, creativity year creative. for because Company. to the Third, we is Today, really very these And have that to more efficiency need marketing the covering much on faster, I And last Canada that. agency XX linked hubs can about be culture critical marketing on and have our XX and we fast we're in it's think more in excited internal in stepping May in around up places an media and digital today, internal started different of we

may for overall, second answer my So, would the Carlos, marketing. answer one. be that you

Carlos Abrams-Rivera

of solid just rates, on and than can to market saw household growth presentation, XX% are regaining actually is and higher business from and very we we share an I pre-pandemic Sure. are I the are penetration point, improvement off last performance, And levels. you but the seeing the share quarter, repeat we rate, year. and start your (ph). to to a Specific our And Miguel say build in would

Carlos Abrams-Rivera

XXXX platform all and what saw and renovation, overall resale that at look take innovation performance, you consumer marketing, they're we from on step When you proving back certainly we activations, a are think working. what I our pre-pandemic. our and our our and approach, in is focus

continue will going agenda. this we forward, Now as we

around price holidays We [Indiscernible]. while support key going increase promotional are using to

earlier, all inflation. management mentioned manage the I tools revenue to As

and future, will factors performance, important share, the I category your total continue for Now, in question. position to we most several business think strong balance the Thanks the profitability risk point about deliver believe asking to about a we're you to that there's impacting tell our for the is returns. but strong I

Paulo Basilio

on on that, to to one you're just here build and comment what saying outlook. on question Just the the

representative I think what it's that of that when price also they while as second and lower we implies levels back relevant normal enter the our EBITDA don't XXXX said, rate to say and EBITDA in outlook we in short-term, up our to to run realization half we into catch QX improve our think to that margin the and expect that in is a and the results. margin is starts

Robert Moskow

to sorry, do question going is work This Like about pressure want in press quarter a you of little expect school. quarter? third will think more. really because your categories. of categories students I compared to back a to and more bit half, face fourth to your do What I'm similar to people to going the more because and you second look first quarter

Chris Jakubik

[Indiscernible]

Carlos Abrams-Rivera

Yeah.

monitoring, consumer are the the perspective things people that higher purchases, particular at seen home, home behaving, fact and level how that at. preparing of for we and across were actually about schedules. There U.S. home factors the in there we case in closely are are things the preference have X delta of upcoming categories certain mentioned consumption thinking counts is rising now the think important they working in because around in a the past. see also that taking factors We've new keep the to looking and to are that likely families I give U.S., we're are the that are piece. those particular, renovations, the also hybrid We've and are and me Let variant at year. the just into and seen consideration I the how least that several that that are there in school would there terms a

going difficult control. we out. it is that us can you we at on things to is are all I focused this things say can very for What are there think point to shape is are that tell all exactly making going this how those I to

on see we platform-based invest that our to this said, as we focused So those for happening, to behind and are approach, through our relevance continue our we brands and locations unfolding. regardless we agility making Miguel of consumer build and sure compete execution how improve

pleased far so we're showing are up. how we with And

So we our to And I that mentioned drive ratio continue that we channels as in able see. second And call, the believe not now we see is growing, repeat go rates. the can now helps all are half. right fact the realistically but to you operates right earlier expectations we through

Robert Moskow

you me. for indulging it. Appreciate Thank Okay.

Chris Jakubik

us Great. Well, thanks today. joining to everyone for

teams If follow-up be Investor media Relations questions, us today. you your the available and have any thanks will for follow-ups, but everyone for joining

Operator

call. conference participating. today's concludes for Thank This you

disconnect. now may You

The Kraft Heinz Company (KHC) 4 Aug 212021 Q2 Earnings call transcript