KHC - Earnings call transcript Q4 2021 | The Kraft Heinz Company

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Operator

Good day, and thank you for standing by. Welcome to The Kraft Heinz Company Fourth Quarter Results Conference Call. [Operator Instructions] Please be advised today's conference may be recorded. [Operator Instructions] I'd now like to hand the conference over to Chris Jakubik, Head of Global Investor Relations. Please go ahead.

Chris Jakubik

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

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

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

Operator

[Operator Bank first with from of Bryan America. Instructions] Spillane question Our comes

Bryan Spillane

X questions for me.

The first Miguel. one for

I the an in well all Just how execute? would is guess, fluid you words your ability as you using, environment And seeing or to up given we're I Paolo's as like, that to are just the given not the the that just pressures impacted executing guess, and organization, pressure? has how as market, macro

Miguel Patricio

But day. are the and the macro I'm I think now. normal, for adapt. the here the for was that the every And it new that macro a embracing confident this the we at pressures I personally are path thanks about change Bryan, question. to forward. pressures hard while mentioning, mean, is you they've been absolutely the very of beginning,

people. our of because First,

from years which engaged and is ago. a have We very a with very team, low great today turnover, X.X different a

way X ago. we gross sheet cash and brands, enabled stronger and inflation than relatively has much, and our is strong despite talk a our us years seeing, are business is the we've which keep to almost in been in much Our investing about growing that we flow margins when balance

moving even next accelerate we that what path to Bryan. more for CAGNY little to Thank have is greater speed I Now week. growth leave I one, to efficiencies. the the on forward, for profitable unlock the do a accelerate speak the to us for bit you and think question, will that and But

Bryan Spillane

in All the inflation quarter in don't flows? wanted right. And then, thinking more pricing consider? are how a there just in should the is also that we're we're about was offset to Paulo, for chain. us year. inflation help discussion I if earlier there And guess could or first bit the terms give I specifically, looking I with more to ask we more about bit guess I quarter of, the supply know, you remarks, some first little you like at versus talked phasing And as a anything about prepared pronounced year, second impact the of help half,

So chain the may or the are year pronounced the than some more of supply half first earlier in in back disruptions be earlier half. the

really be give you of would help us can the in of the helpful. any shape just terms quarters So

Paulo Basilio

Sure, Bryan.

-- little if very XXXX a So like back strong. stepping closed we bit,

billion. $X.XX we million number, So from there. start okay? And was EBITDA Our divested of in had business, approximately $XXX we this

as are assuming benefit HX, closer mitigating And reflects seeing. that inflation and levels we of of curve we to the efficiencies in elasticities to plus that the that see we as combination support and are We versus are we the supply shipments are what okay? QX also going That's growth, to some you going the have have relation here curve, we to have half government from expect expect that conservative consumption plan, will implementing. volume and inflation half. XX, also the this we're currently chain this year expecting we we we this price our are are because we you mix, magnitude higher on see stimulus terms inflation, are states, the mentioned, to of HX, the expect pricing Also, XX, inside and are in the we said, -- of in pricing. the recovery, year the and in of sales more And where and the as expecting in a again, of QX we of have headwind our $XX timing million QX terms week the expecting. first going constraints is to that our to executing improve that we softer million. And first the of be that There we also the through between this the of $XX to timing QX, Easter QX to that are XXrd we're benefit our

Operator

Our Barclays. with question next from Lazar comes Andrew

Andrew Lazar

being losing get with one-time And reasons and respect to the hoping demand in market bucket, were you've supply you and on I bucket the the constraints fourth supply other a supply bit specific necessarily not the share issues constraints Is fixed could that what the second supply be why of prepared the than for remarks you was share. and are mentioned you got of the then outstripping I QX. the quarter are simply assume to constraints. a on execution-related? brands more various out in broke visibility Maybe sort by end more bit of chain clarity buckets to this third

a can if us buckets, helpful. you those little on maybe give X So that more really of clarity would be sort just

Carlos Abrams-Rivera

to Thank you, Andrew, and take and happy it's Carlos it. I'm

this remarks, prepared a those. the more of me you each in on out, but said you I color little let give broke as So

was, and case whether materials the of saw some said, had the Cream come supply in packaging we our in visibility of on where Mayer recover mean Cheese, XX% for have to due firstly, that one-time able and whether as like more seems back those, and that, example, Oscar share was are Philadelphia to we packages of I we you issues we Cheese, in with we So Bacon, case so QX in challenges. happened. Those what QX. in similar places Cream what And we given it to know that know loss labor that was are related actually it by

The to of to really the production in that good as them more -- the second is the production was was XX% resolve expect we are where bucket things as driving half due exit that to think place And actually actual end around constraint. more those those in a the constraints we QX. first

capacity we places again, we the in high some much we're -- on sure we can it we're ongoing they we all now like plans we ways to to we'll to year. labor when to have done, are actually new actions and able seeing, that in And categories those of strong this make was is And and of essentially to, constraints and think launchables deliver game categories frankly, demand way. those as needs better that think then have solving they're actually work tilted as able a which clear it to tell that So essentially you I were but in where well what put looking doing to third in a clear in are be whether execute service as creative Heinz that the bucket, where you happens. towards capacity is some demand. the in be can implement order where growth limited, visibility have free we together, we in and are Gravy things new And

recover this. exit very as both QX So QX we we to and good feel

you. thank So

Operator

Chris from comes question Growe next Our with Stifel.

Chris Growe

that of follows just I XX% think a Carlos, how understand, around what help quick had the then think -- much on your just that this losses. quantify on opportunity like that. you also answer there, of Can weighed for in listing Andrew's sales, The you -- constraints the question. had, to I'm I the I curious question and production said like quarter? what kind share you you I was And on

did prepared share about your market real in on remarks You the about talk pre-recorded focus remarks a XXXX. -- in

how coming of volume could there want a that sense and kind that just I the year? of efforts, and say, kind affect, pricing get for So of expectations and promotional to your thing, then better

Carlos Abrams-Rivera

a say consumer that What we it's can to those for stronger all, to volume. I are I categories, of see share the difficult the a First quantify in again, think continue for is the you would thank opportunity are question. tell you the way. bit little those service the I to to demand XX%, last us in

focus the absolutely. creative going ways point So And are forward. reality around in is through that thinking focused for we on actually And satisfy we are very which -- have -- actually we that our we we can been demand share, your that have something to is us.

forward, we big within to bit share. seriously. as grow very take first us able great to to For something fact consistently exit our perspective. is that the iconic recovery, us, have and us a QX deal we sure we spots continue help growing the want being across to make and going in company businesses of been as that both business, it's that in about brands bright a quite QX half have as going we think with that actually that we mentioned it's We But our

Chris Growe

just could -- ahead. sorry, any add I If go

Carlos Abrams-Rivera

ahead. go No, Please.

Chris Growe

Okay.

those like market more product share things. a heavier Just new imply that generate got a to of consumer share. kind fair real that of advertising, to promotional innovation, kinds many times spending quickly Is just focus can pull consumer market those on than sounds more those at or It say? you've push

Carlos Abrams-Rivera

in share, for as way. years. sure to a think about is profitable no market talk it think there I proper whenever it for -- of number I me, we about market make company working to substitute I've Listen, has food of done market a be think we that share. whenever in And been share,

in-store everything We have with share profitable we always online, sure on focus to making -- consumer-first we, do is approach that on sure fact, do consumer make with that whether in that we'll market growth. sure solutions, we make and it's a done drive a location-based, to is bringing

Operator

from Howard with next Bernstein. Alexia question Our comes

Alexia Howard

you of were fourth year. billion. the a came $X.X think, at it through the step-up about talking ask the about billion adjusted couple in October, we at in quarter. than for That's expected of EBITDA, $X.X range, reported big came of Can last end you $X.X what and through months the I billion better the to When

those what positive through us walk the to just you whether surprises and likely were are could So continue?

Paulo Basilio

Alexia, think Paulo here. -- I

can think this I I one. take

sold and we than better initially. we promoted operate in volume also but we expecting more, even to with And than constraints, would we we able able produce saw to, we -- able capacity, we think many fair we're -- more I have to if better. capacity were even came able less of better had if planned. were in It's strategy than say our that terms were to promotion were to we

over-delivering to I with those efficiencies, this I quarter. point were strong our third in fourth X the think would areas to together add terms in the performance factors of main

Operator

Dickerson next Jefferies. question with Our from Rob comes

Rob Dickerson

stronger as back would Just points, you to at trade and follow-up. you half consumption be it bit that's those curious, I'm pricing a said question I as in trying just to and the the internal respect better commentary volume positioned price at-home sounds around of sense come say, to as the little why with like channel. I'm in more side might forecasts, year, better And a expected consumption maybe despite we up when you're on think get up 'XX. the let's position higher risk? -- actually that or quick a have being bit a just conservative, forecast. you to least just little then you with a think be down like is somewhat you feel the look your Obviously, about given

Paulo Basilio

are Right. have we start complement feels again, I What greater if we said, and -- embedded can in going have. single-digit contribution low in -- outlook can that year organic as need. are is we we expect, growth sales growth platforms we Carlos to we this the he our with here maybe the that from

seeing our constraints year was that And the in But 'XX we forecast, because distribution. terms chain in way more gaining our the and we the volume outlook. some that we of are assumptions that but from consideration the happened are performance key are in all expectation, -- today, net-net, channel emerging and as -- before. foodservice fact in is taking we're recovering I into in government before, stems have levels consumption headwinds to discussing, share were we more we a go appropriate conservative that are and continued -- that as in of is progresses. also than supply the of markets some volume relief mentioning going our we we as the elasticity conservative having strong we fact, and elasticity it we performance embedded that our is support saw and are so also, in be to also also that think through Our But in

Carlos Abrams-Rivera

what in-store, improve Yes. our we're The make doing today's consumers' online And that through also we're occasion-based our would brand whether add one to make Paulo and continue that investments thing, I just continue renovation as said new to sure disruptive we for guess, I doing to to of that, solutions, is that's for proposition. value brands, service innovation driving needs. we

for the even progress continues to we that So question. year. Thanks throughout as are continuing the

Rob Dickerson

we use year Should still you or nice 'XX? of just your Super. kind just thinking would cycle job a forward And of positioning improving the cash as of the end at smaller be decent get deleverage a then for done very cash balance. of with add-on leverage that quickly, Paulo, an very acquisitions kind as either through That's of of it. be go you ongoing kind you've

Paulo Basilio

-- level And today. Sure. we below expect is that leverage below forward. are we our consistently remain well Xx, below target going that and to We

point we X and our we remains to terms investment company in accelerate that our are feel in now But in way with to highlight closing for have us in to enough today in strong way and continue really flexibility balance that really structure accretive the strategy flexibility to discipline. an a price sheet, important capital want our grade here, sheet are Just opportunities we today evaluate we balance strategically the position. very we in of the have

Operator

Our from next Kaufman Pamela question Morgan comes with Stanley.

Pamela Kaufman

overall inflation you're the costs in And visibility on for Can And is your guess, of cost how your outlook? for just the I inflation what in what came assumption XXXX? covered you year where then for are comment on and much 'XX? making

Paulo Basilio

Sure.

So let me take that.

hedging inflation inflation when since are mitigate okay? hedge position, full expecting We we than to end second in normally look total XX% hedge more inflation we expected in ended the these first a for our than this the complement for has in low or our Our teens are inflation half. year, -- year to call. we've the our be October -- to around last near XX% come we the to today although And only QX we took we But And discussing. actions double with significant necessary likely hedge terms of actions inflation low -- commodities, when in And next the like digit. higher taking the as we in of about the you just you half talk of more we higher and we to a we of additional the were 'XX, XXXX, expect COGS, we COGS. were seeing. the -- And then, see been -- part are up of about by

not commodities because lot cost. in -- there of are are our that only a costs other So

is the range have So that that ahead. again, we

not material much COGS. when today situation that we're inflation all it's that seeing in having a we lines So our have of are pretty the we

Operator

next Goldman with comes question Our Ken from JPMorgan.

Ken Goldman

there consider curious bake your in, would In guidance other little stretched any as in much outlook a as rise words, the little I I XXXX, gets are as more your that I'm bit what the some from guess, behavior maybe competitors? for prices or stance some a consumer baked require a in rational be trying does about bit just how of competitors maybe talked there, any certainly your from also yes, rivals. an your Is -- aggressive what's that but little expectation add there for might being I'm of bit elasticity to capacity. sense there more a get to built of in. their assumptions you

Carlos Abrams-Rivera

not The what thing, -- business. run other how they're going comment I'm I think to they're on to that their going doing,

I business way feel So see going a think and us let our forward. the kind why of about little you me bit about I how we good about tell

way we where doing the to product or because important And provide Mac are Cheese, stay premium this continue the it's into category, an places is to Mac that make entry portfolio. able from us, sure in a in product acquire For to you like we're differentiated which actually a the from in products, Kraft consumers mainstream Easy see of thing consumers it we whether actually investing Heinz. Cheese. it have to an original version & a And & goes Mac to

as of to we to some historically private more portfolio been places where reduced continuing our have have label made you strengthen because, important know, exposures have kind competitive. that and are divestitures our also really other We

XX% In XX, I fact, to XX%. which its industry -- private of from gone around now exposure to think is label we've and average

we also So we we only -- making investments. -- are

the we We to sure come We're that quality we're into in less which have consumers continue place products level can make private historically consumers can exposed afford. prices a at And category. businesses. offering great to

great are that focused doing focused Heinz. in sure is we're everything we're Kraft products what around that value, That's delivering quality way making consumers. to we accessible a here and is meaning on So

Ken Goldman

Makes quickly sense. And thank then very you. Paulo, --

gross down reminder the this than especially guess, margin provide profit 'XX. margin, aiming in the morning this that not a modeling For fair flat? percentages? is line pretty to dollars, light of, Street it figure gross you're just I is is inflation, of recapture more in be guess, that directionally, you item, XXXX guidance likely context gross necessarily the to Just I in versus specific Recognizing your for to don't say flattish

Paulo Basilio

we As dollar and in the profitability. we margin you when efficiencies actions expecting are mentioned beginning have price margin this of rate costs run year our protect the our percentage continue, to realization okay? and normalize, Yes. here lower about stabilize Listen, are will levels think and percentage as before,

are we we the year-over-year. So That's are thinking margin here. protecting dollar how

Operator

Our next Bank. with from comes question Deutsche Steve Powers

Steve Powers

Yes.

you the about, of Following context geographic across about more year variation across in should in regions? elasticity, your how terms is very or and thinking topic your we about thinking up of assumptions provide your on just that wonder if any maybe be And any the platforms really, anticipated you're coming regard. I could for elasticity to

Carlos Abrams-Rivera

that think, you're our U.S. to I'm business. guessing I mostly referring

take So let me up first. that just

earlier, far, conservative. so think little proven to I this a bit for Paulo elasticity to expectation and have spoke be other

we're forward, clear, XXXX. I to go elasticity So the our of as levels be just proposition. brand to our And impact of those levels more, and contemplates some of say, elasticity those we outlook expecting normal on value in would continued both investments elevated

Now demand when that look we you much the look the at overall really of pretty at kind how has remained is business way intact.

inflation, and the as one everywhere being of broad-based which to is, specific not similarly. really So impacting is you kind know, category

you in time. Now give a more deeper, or to Mac Cheese, I quality personal products if spending you it at can to a even if & on you about that per mean categories than I over just income look at we which Kraft reality And at mean, serving. consumers. you Blue discretionary food in affordable earlier, price look think is is as when has even is have, been you said we spending specifically, Kraft compete that Heinz $X.XX Box further, when sense, go about disposable I stable the

dogs, a If about you Mayer $X.XX think piece. about it's Oscar hot

about it's an Ketchup, ounce. Heinz about think you If $X.XX

because products more quality to we which that than a feel way strong we're a have in afford. continue great that But we things consumers taking that. way can also to create are actions about those So in

fact, way sure thinking for we're not making in exactly don't essentially matters in continue us sure sure that in today. to better are to investing while that that looking communication the and consumers innovations a and that our creative to we quality how cost, give using need. products making so designed better we we we're to lastly, sure boost renovations, also make stronger of brands they And We looking we're relevance that in also our our what helping things around we actually they're for consumers that are do drive value are have, that what reducing make

Steve Powers

in those Great. different to think investments of topic expand I should as relates accelerated the just markets? emerging you about it I in a just the emerging investments markets. the versus emerging that your could thinking strategic push actually. Okay. the And follow deal up you’re we guess on you’ve growth your a of be as If Can talk good markets we year? the about ‘XX your new about strategy sort embedded discussion developed an and There’s plan. drive of about how in about thinking of much And to markets towards allocation the and

Rafael Oliveira

emerging -- Maybe organic go-to-market live continue of the continue And Rafa operate speaking. leveraging we and I the to can been and in be our take future continue repeatable on about our to we expect Taste for it in in mean, markets, XX% optimistic gains we of focus model. here, on I we very look growth, we mean growing share our Elevation. today market it’s to this this go-to-market strategy boosting further of emerging right, XXXX. – Look, markets, in I and has the countries double-digit

us same. opportunity we’ve markets to Taste So different we enable as the remains growth. and been expand strategy add-ons that – Elevation the did I in that specific see countries our focus We’ll big within a acquisitions X we mean, doing, play for in XXXX the in

So strategy off is should that remain will and continue. we paying

A –Miguel Patricio

the these day I brand consumer standpoint, would better and an Heinz Rafael, growth just which growth that shape every the from to Ketchup, opportunities add that gives And but a of really for other products. further, markets unbelievable engine emerging is not in expand us Heinz only is lot for getting a

engine growth. a being of continue great So emerging markets will our

Operator

question-and-answer call remarks. I'd concludes Chris today's closing for to back pass the Jakubik to like session. That

Chris Jakubik

Well, today. thanks, everyone, for joining us

CAGNY the team us for next thanks the and joining additional available myself week. again will questions. questions, for of follow-up any be IR For you and see at rest today, But we'll

Operator

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

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The Kraft Heinz Company (KHC) 16 Feb 222021 Q4 Earnings call transcript