KHC - Earnings call transcript Q3 2021 | The Kraft Heinz Company

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Operator

Thank you for standing by. Welcome to The Kraft Heinz Company's Third Quarter 2021 results conference call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]. conference recorded. today's advised be may be Please [Operator Instructions]. the would Head your to like of hand now to conference host Investor over Relations. I Global today, Chris Jakubik, Please ahead. go

Chris Jakubik

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

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

Miguel Patricio

Well, challenges our thank see advantage. to have about time it time, to morning us that would you and a is we for agility the same short-term how for I good by building scale talking sharing start addressing long-term we Chris, leaning encouraging at into and Company the been just like that some everyone. are

that today a seeing. we're inflation better are address are We to much stronger we Company positioned and

and not our procurement. growth our and we time, actions taking value-engineering, for At continued XXXX branching, to our protect just advantage. are has transforming same now actions, also through team the We scaling and pack long-term implementing profitability are our leveraging architecture, business price and

our to occasions. the new taking approach with is platform-based consumer consumer-focused Our is strong, and momentum us

our billion time, to improve are greater, building will that to relevance efficiencies are same investments. X marketing agility and of brands. continue unlock making We deliver we more. And at gross the looking to They invest, creative the more of

our we And expected, while net as to most remarks, have the take in speaks that, debt delivering business. of of continue pay people. with we our our and to previously Well, your in leverage. continuing results improve important down are all assets, mentioned than which to done We And our let's XXXX our questions. invest strength better we these

Operator

question [Operator Instructions]. with line from And the you. Thank our Barclays. first Andrew comes Lazar of

Your line is open. Please go ahead.

Andrew Lazar

I My at decelerating been Europe U.S. elevated, seems so reopen categories consumption at the taking least faster We've actually some Thanks those obviously a markets a key the as Great. trends be in in meaningfully, U.S. some if U.S. could. much. certainly remained And Europe. and question I is in Western a while has trends Rafa, better to look in is we've what categories for seen Nielsen at food for here in than some or and the guess word pace normalizing it

curious great to of so a out maybe set the all compare. of I'm indicator come Company, if data seeing what's KHC to some as leading that to and see fair a of demand. Europe suggesting are U.S. for there in Thanks So if at Or differences you the points not stickiness trends use necessarily maybe around in much. is this certain dynamic if play

Rafael Oliveira

perspective than a quite return to in three growth Andrew. in you a channel. platform, base recall, look and our we to to because to continue -pandemic markets overall of elevation said, Thanks consumers our pillars stickiness the seen us is strategy question. in there is here. bit us, service an we and honest per their on are category, to patterns seeing And That as Hi, the much markets. platforms Rafa, views. other From key food have elevate more developed positive international to for elevation this emerging market have Europe, greater indeed pre we Western consumption quite base our be and if

and these when stickiness consumption, we growth, at. levels see are to the focusing continue and of best base absolute we favorable elevation, we platform. will in the And So do demand terms on

continue food in Europe service in gaining this lot in to of see food approaching particular, very is we've we demand market elevation agree sustaining. It so levels. rebounding every in of we And is operate another service, XXXX So I strength. And Western this, on fast. top is -- a in share been almost

it's for true favorably In platforms, coming is overall, to As has elevation. market I played and the they that back some pre of very us, to strong is this -pandemic. said, continue out most be

Andrew Lazar

much. very Thanks Great.

Operator

Thank you.

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

line open. ahead. go Please Your is

Jason English

you Thanks, bit. lean me a into in. folks. little guess I'll price Appreciate slotting I

or an to XXX, a to is pressure? the carrying rates X, is that's look not with reiterated and at just closer the ingredient XXX as So, points of expect X looking year, around exit comment you'd remarks of prepared and around it up And today plan exit into price Thanks. be that index? real You XXX that by index bit next the XXX? sort of year to supply the that during slide a Can costs price came total catch into the then the end bit say year. average with that or you XXX that a price to but fair you at chain you the you north confirm to the the that's of of costs,

Paulo Basilio

Jason, here. Paulo, Hi, I'm

with try this me question. Let help to

inflation going at 'XX. of expect carried over as inflation is that We for 'XX. the level second now see 'XX of are see beginning of we seeing to to Most the in we're of similar the half

current should 'XX. the protects we're cost. that plan that's We levels of of to levels this expected inflation price cost that executed Current our having in now. 'XX the profitability seeing And enter expect from address

into levels seeing are seeing we're we're execution now cost we of this our the 'XX. profitability our protecting protect given when So should our profitability and pricing, that entering

Jason English

high COGS. That's math to at pricing the next if that closer something looking single-digits probably you're enter of a we on unreasonable? that. as we're percent mid-single-digit just Is that So carrying year

Paulo Basilio

tell Listen, levels. protect I forecasting we're seeing, don't that to I that profitability our inflation the actions this could protect the it inflation a but position And will enter from in you good can seeing the current the to pricing us that into now cost that want XXXX. and these we're get actual taking we're will of put in

Jason English

Okay.

Miguel Patricio

Just complementing Paulo saying. is what

that think more I if well to action. terms, eventually have we'll inflation take

Jason English

It's And makes better the It so sense. I Sure. pricing than congrats success expected. far. on

Miguel Patricio

Thank you.

Chris Jakubik

Thanks, Jason.

Operator

from Kaufman with our Pamela And you. next question line Thank the comes Stanley. of Morgan

Your line Please is go ahead. open.

Pamela Kaufman

morning. Good Hi.

Miguel Patricio

Morning.

Pamela Kaufman

capacity the constraints that been or share that the share and on you And dynamics performance? performance other driven contributing capacity have do softening sequential been constraints to elaborate see improved by then you that guess, share competitive I market going what highlighted, there forward? addressing in is you highlighted? trends Has drove are you what Can primarily the driving how the you

Rafael Oliveira

a few and continue out grew some take in household want there doing. categories, And way demand but back-to-school we our sure while will pressures, U.S. repeat the (ph) rates, first in capacity are share short-term over a I really were the during as which their to say, really we question. of they you it. imagine household me to drive our and and there, I Pamela on were for we strength the guess our are I the we make yes, the I related rates questions is you that. the portfolio Thank had long so through all actually of term penetration how driving about there interest effect I'll repeat for of the to that business I think shows are lot we managed I business of penetration think those X counted, were all,

Miguel Patricio

But for what's be that I matter it on consistent win needs than winning focused is anyone to And doesn't I'm at happening yes else, essentially particular with on by making focus recipe will we the this the that. and very maximizing controls. our say solidifying to exactly consumer moment. much better sure

forward, tell go us I win. you, we're see going I'd three that it's we to be play for specific to advantage which a going As

to with for renovate of recipe for increasing in. our we're the that are buying and that -- portfolio, at optimize for We our best consumers competition controlled to And essentially us -- so equation worth can comes in any our against it's cost that is we the have doing have we value our continued brands the the really withstand what shelf. the we what

have even a everywhere making entry second our we're exposure. is all to is easy we -- rung Mac franchise sure if are an reduce The circumstances so stay if And version we private we third through you our piece about original from our Cheese, change. their differentiated transforming the and mainstream that can might for consumers we've the divestitures to these of actually have think its portfolio at each that premium whether that consumers. also event I will say got then where price within ladder, And are level significantly to the mac

So we renovate have and to manage our continued costs.

continued a platforms. that have this frankly, we mostly categories growth opportunities have reduce have private -- And a making -- on continue the And within we we see matter sure bring to capture to is to We our differentiated no we consumer profitable products consumers that frequent to private are. have our portfolio where going focusing label.

are excellence executing our with that we renovation, creating teams broad and are this is So rest innovation, the leveraging the and doing.

chain a within we're part constraints Pamela, supply question seeing. I you spoke also think, of your that other

at showing I it supplying some the will chain very what look say is, chain I a logistics what has of in of industry advantage that basis. labor, tested give will we're global in taking I across agile, our team think supply mean. manufacturing And on scale. in We're way you and I I the our examples been daily a is would seeing being is agility

hire to increase digital leveraging reducing the of Kraft tools are the amount by We at new Heinz. significantly pool time and applicant

flexibility procurement, manufacturing. the mindset the with of ownership in across reeling that available sales, improving are a We are materials terms and

Carlos Abrams Rivera

then, more by operate increasing across U.S. And plans, weekly warehouses the our XX XX/X And the throughput of and in we -pandemic we've a time. the logistics sometimes how change in those on things on pre basis. of increased shifting them since the actually automations will

team. will that, do the And the said to of frankly, good service And you having entire customer improve we that move forward. and for a sight because customer question, for the thanks service a level our restoring I to your Pamela. focus top-tier have levels is we pre-pandemic line continued of continue So us tell as

Miguel Patricio

You and on Carlos saying, bagel on capacity. everything I we that, [Indiscernible] kid's frozen also add in on about snacks, increased of to on We Mac max and capacity. adding crops substantially been terms of cucumbers, ketchup Cheese, to On capacity, meal, top have just that of and asked bites, moving forward juices. is the Heinz

great capacities -- products our our a this in about in belief proof is investment the So future. for demand on the it's

Pamela Kaufman

Thank Very you. helpful.

Operator

from comes with Bank of line question next the Thank Bryan our you. And of America. Spillane

Your open. Please, go line is ahead.

Bryan Spillane

Good thanks, everyone. morning, Hi, Operator.

my to to if in much also question -COVID, probably still much profitability some of a coming work profitability I But just there or supply pricing be guess, some we're a and could the work in I from going inflation supply disruptions? well, inflation we at benefiting all how look guess and the pre here, about little pretty contributor margins. also peers; of the all offset knowing how you just themes is chain pricing and this pre are terms had So done, of held you've bit anything, and to gross and if that started. We your step margins you've cover your was forward, supply of is, incrementally there's helping through of going to back a better. up in and chain some to thinking tied transformation of which as the relative line, that's gross Maybe chain to that that inflation. of inflation profit

Paulo Basilio

management that, do chain, on in on the focused start XXXX, overtime. put focusing profit this me programs in also then of true. -- you to else maybe beginning supply here What is XXXX A on answer. in when very taking and come terms strategy place. strategy pricing we our to back we many someone were revenue developed when close can When can build new pricing. build efficiencies top our time of And here in on we that and we -- of said terms my these is the of -- Let and gross strategy we -- improving order in

of gap this confidence the had that between You in And inflationary the profit lot with that a can see that in cost forward. that and the we realization all -pandemic. inflation, keeping going gives us pressure today we're the seeing the the having we're gross our pre same we're pricing level margin, brand

say is working. our profitability, gross So I margin that profit will to improve strategy to

Carlos Abrams Rivera

our in of think in some earlier. add What Miguel overall things about of both heard our that to -- and transformation, from the I progress you would in terms

fast-track a We on in making projects fact, are capacity. significant our in portion on critical

you we Mac and our capacity third you give have next and increased of actually that Miguel the have second snacks, as also in you the we nearly areas squeeze year, by next we've in a about year, think XX% about even half capacity Frozen is I of by kind of like in couple and some mix. about a half small you by Cheese, a think So capacity -- our increased second next of about if cups' will by daily which year, the our give of and if examples, fact end shares Heinz doubled will package, dip of more, ketchup,

across that we to projects of and to the earlier more the do so fast-tracking this that, We some And are in ahead. made things both examples we work saw pandemic. -- of of continue do

more versus smart The It also our of other getting that are for 'XX look improving things I and have investing our utilization 'XX. ways, your how the our sorry, assets at of going that to which 'XX as And assets it we make 'XX done for question, get of -- of 'XX, in 'XX, sure our we Thanks we making go our we're like our we forward, in we're OEE, in versus attack do to make in through me, capacity. is sure and -- now improvements Bryan. versus more that terms being is we I'm sure both our we way OEE. continue about way

Bryan Spillane

All Thank right. you.

Operator

you. Moskow the comes question Suisse. Thank with Robert line And our of Credit from next

Please open. go is line Your ahead.

Robert Moskow

up to pricing slide to Hi, pricing really just square EBITDA comments is your XXXX. wanted divestitures to that would imply try the to in with able should XXXX be core the a thanks. that up on for catching I if your outlook catching growth cost about Because costs. basis grow

So points if to it slide you up, I'm stronger core talk thought and, the on step the outlook? going quite that the post-pandemic confident says yet. really it not It your is sure enough why pretty and a is that take in extra pricing about but basis than growth not catching to As things you're are general. strong, stands, be it EBITDA

Paulo Basilio

Rob. Hi

that comes. to margins a to profit saying that we we'll not start far that and go again, me and more say QX, providing as the confident confident guidance we outlook if our bets we rate you retain that, today. as we our We ability that strong we're very -- in with improve the margins having sustain here confident also can say providing we any that 'XX in QX, color lower for and for shared ability we have are 'XX can consumers that to we not XXXX. our Let and you we the shared. we But we're -- also as and ones we're very in a We're margin space. We with fact in retain discussed at this in is the that And time are protect inflation mentioned percentage and margins we we're we besides that dollars to give expect bit have that very to volume have. and also better confident our these is focus are these from realization as about little

short confidence space debt consumption seeing. a with ability to and price that are inflation our better we're in Company stronger in better with We the a

Robert Moskow

I Okay. appreciate you. Thank it. Well,

Paulo Basilio

you, Thank

Operator

question And line Growe our you. with Chris Thank the from next Stifel. of comes

is line Your go open. Please ahead.

Chris Growe

talked question Hi. in Good promotions relation in you've US. morning. about a in I to for rebuilding business, your how you just had especially promotions you're and the

I normalized think promotional a you talked environment. about

would degree gets were on especially year to recover ago where around maybe the related bit the lower, you're or taking achieve back a and an that So I understand, Maybe that, net inflation? pricing to period this to realization in retail. a as you XXXX? you just rebuilding And can pricing, a that against price half want they of promotions, continue a the recovering to promotion promotion basis of first in offsets offset

Carlos Abrams Rivera

me So to and answer explain. try Chris, that let

I are in think there you a of mentioned couple things your question.

invest our First, context think is you to to where let are of here a for all we've into even looking -- Heinz. of is windows mean, I critical at put me consumer us those actually during that our which the why aspect solutions. that we Kraft approach first consumer is if t just transformation to plan our do a behind platforms been so having consumers transformation back, essentially

So we we that is so and done brand far, we if have we have that. fact exactly because the made continued it penetration drive that gains about think to the have rate, household repeat

better continued growth. XXXX, have We able year make expect been have products windows, can XXXX. we active we -- execution scale moments are deep than a to our way were we the the solutions, satisfies that this we needs those as with but be as clearly that specific see looking as to look during that XXXX else. better anyone And to during consumers than critical not in in into and opportunities what sure we that offer, frankly, essentially, And we capture for to in of more of the their been

sure with making we that going else, [Indiscernible] focus satisfies our do, we needs as anyone by platform on consumer we our are renewed again, and diligent consumer-first everything are sure transformation, forward, as our that better Thank is making approach. on far than guided as to you. move remain So going to

Chris Growe

you. Thank

Operator

Alexia Bernstein. next with the line our from of question Thank you, Howard comes and

please ahead. open, is line go Your

Alexia Howard

Good morning, everyone.

Miguel Patricio

Good morning.

Alexia Howard

Okay.

prepared So for in you appetite to your in more emerging markets. remarks, an acquisitions alluded the

the something far. think talk you say Foods it or Can or anything you potential where categories, you've I little referenced there be regions of at? so particular Are deals? at sized? terms looking Thank and about a bit that I'll Can you're you of which looking that you're and [Indiscernible] medium deals you of kind of pass the potentially in particular in done what just terms tuck-ins future additional would focused on. FM the about scale pipeline you. the more

Miguel Patricio

can Maybe to comment Sure, I other for word Alexia. then responsible markets, among things. emerging since to he's the Rafael, and give

of have, portfolio that had and a sheet. with comes more right. better a today right? you We years are ago And course, is balance And we than much X that stronger flexibility,

one we'll strategy I think opportunities. acquisitions, strategic pillar the place a critical strategy like of zone the and food for taste our at lot if consequence, which opportunities price of international for is And we're helps them that the is to really with of where the we elevation, and that looking follow discipline. always business. service We look have also in a as the

that in yes, place that the give the that grow color you we give is Turkey retailers we in so leading Turkey with carriers service. the to business in at. Rafael acquired word So I for the will food can he Company micro And to looking expect more well. to some we're about And as

Rafael Oliveira

build elevation are But strategy are it's they margin you. short reason XXX and about as Assan we're to only Hemmer, approval. They distribution, Hemmer, can regulatory the brand you bigger of And can in not our the much food each. but have Assan the two is The the waiting businesses, really just much only to build in our all able service us said, No. to in and enable but I will service, the Taste especially, we'll and about of Hemmer. mean, the we right leverage participate those their are be you announced, we the Yeah. so It emerging now Elevation. with and mentioned categories and we'll the be those to able mean, of markets exactly countries, food East. the Heinz Middle I our each a faster south gradual for I have grow strengthen chain future. Assan in in said, are strong Turkey, not million Brazil, faster They And within will capacity as Foods, portfolio have across pillars we scale we a Thank what for strategy. base ladders channels. excited being [Indiscernible] more Hemmer as of in with

strategy exciting definitely So they opportunities. see that most to markets grow. makes like, and [Indiscernible] what are lot emerging on it within we again, and a Taste want said, the as I is core the Elevation of that's

Alexia Howard

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

Operator

Goldman and the you from with line of Thank our Morgan. Ken JP comes question next

Your open, go please ahead. line is

Ken Goldman

recently. relations should some about just Heinz based through this A perhaps morning. is I Good I'm Hi. facing at labor couple about the you're your how Kraft how of suffered moment. worker think producers, food the general U.S. feeling incremental And in there investors challenges on of guess curious they've some if any, front? strikes risk,

Carlos Abrams Rivera

not going focus Thanks business. else's our making I workforce. you continue our What we have anybody I shown is I'm obviously of fact, will that engagement as for teams, mentioned on agility question. that to are tremendous have of earlier, sure your to in speak a tell Okay. to

tell you seen some focused locations. of terms a they I'll pockets some labor what have on today, shortages, here but of sit also much challenges had very have and is been we that where we isolated will As in we've places few

for on that move forward, continue shortages. basis us been we have had we and move through in an on as able some But a regular actually where labor I a have situations we ongoing manage some actually confident way isolated we basis areas actually in been that to forward. have specific or not a we'll am which there it's concern As to

up, we and -- to Miguel? agile good very don't this continue feel way. how in I I where actually, manage we are So to else went build about anything an you

Miguel Patricio

moment, us the improve that that overall we doesn't confidence strike, thing the that's not Company that's about hard I we future. to engagement -- this No, possible think that. is risk working that more see the At would brings I and add the about been that only for any of don't we've confident labor of but are mean issues a possible. But the

Carlos Abrams Rivera

No, I said. think Miguel as

position and agility a in we're it have our have think during the handled really really about teams with feel difficult I and time. good they to the -- shown way good this our

So thank you.

I think we're time there. about of out

it So thanks, you end will -- Thanks have we'll anybody for us and your for be Kathy who day. to available for questions, follow-ups everyone has joining I'll a take media, so available Krenger questions and for team and there. be follow-up your today everyone anybody in the and great her

Miguel Patricio

Thank you.

Operator

disconnect. That today's you may day. and have great Thank a concludes you for conference Everyone, call. participating now

The Kraft Heinz Company (KHC) 27 Oct 212021 Q3 Earnings call transcript