KHC - Earnings call transcript Q2 2022 | The Kraft Heinz Company

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Operator

Good day and thank you for standing by. Welcome to the Kraft Heinz Company Second Quarter 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] Please be advised that today's conference is being recorded. hand over to today, your like Megela. Anne-Marie now the to conference speaker I'd ahead. go Please

Anne-Marie Megela

to and you, of the and our Relations Head This business XXXX Global at session update. welcome second Company, quarter Heinz Thank Kraft everyone. Investor hello, is Q&A for our Anne-Marie Megela,

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

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

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

Miguel Patricio

us thank very a Well, wanted results. congratulate lot thank under sense, to the and in the Anne-Marie of living for thank to team external another you, for delivering uncertainty you to in team what my today. that are I that of And acknowledge my and regards I fact we world. quarter joining want everyone solid

inflationary are that solutions benefit our current we customers, Although, mindful it continue of our to develop our environment affects but retailers. how and the consumers and we and our consumers

are to we more happy we continue questions. and can service to have retailers Well, now so Our strengthen, programs. your take with mutually have execute inventory with optionality improved we relationships to levels, strategic more that, and

Operator

Bank Spillane is your line now America. question Thank will you. first And And [Operator come of from open. Bryan Instructions] from our

Bryan Spillane

just Good morning, Thank one then and you, had right. a All second question. clarification I everyone. question operator.

you margin it in Andre, or margin as shows about clarification. gross at XX.X%. there's about slide think I it's the just and XX, there one, portion a first The section deck, talk slide where the in a a gross

your make Just gross margin. want that adjusted, to not that is just that's sure So, right?

did we it as XX.X%. calculation, think, adjusted the margin gross like I was

wanted So, put that that, is in margin you're -- just that reported to not slide you clarify adjusted. deck that

Andre Maciel

Bryan. morning, way. by Very question. the for good, Good the Thanks

are you yes, So, right.

margin. the gross this So, is GAAP

So, need number to points hedge the to we to get XXX on adjusted, basis this of by increase change due commodities. realized

Okay. margin in is pretty And for the our in in in much line if we fact, QX. that, adjust margin with QX

Bryan Spillane

Okay.

Andre Maciel

year, to were the you And margin prior an if for would expansion if offset not inflation. you repricing of impact compare of to see dilutive

Bryan Spillane

that. prepared year the the last you chain recalling is supply for then, the for especially pressure to Thank supply in you part issues talked had U.S.? supplied think where in are a and more the be and of be currently the at that there's fully happened I some that I there are being suppose. the or U.S. pressures -- holidays holidays? service does affected -- can guess, Or going in sort and you merchandised -- merchandised in I Are there's still and the they the assume be holidays. levels, you guidance fully some won't question And you my just you if still I the back where of half a in And bit Okay. what remarks, year little Miguel, about, of was, chain we around position

Miguel Patricio

more question the it of Okay. pass I I think will Carlos. that is since addressing U.S., Bryan, your to

Bryan Spillane

you. Okay. Thank

Carlos Abrams-Rivera

Thank you, Miguel.

are and they're terms right in service on retailers. inventory to to that kind of our levels of all, of of driving of question. the production going that service first as improve allow now have QX, levels presentation. And saw kind reality the focus service and both think, our in The to continued your you we continue for with I in approaching XXs you our we thank low to is the

don't and us, have, important to see that anticipate progression against we it's for continued we the to So, actually that forward. as going go we us

in In and of see our we to where improvement QX saw to go in as continued for both fact, those Ketchup, as record both the fact, into have like fact, businesses. we ever QX, expansion kind in within, higher had brands QX of the or what of our continue opportunities is service. share, in result, in going which a shares, Heinz able unlock terms to of that they performance. we example, We Philadelphia are had continued And of

position. going we to think always our as go I improve continue to we So, forward,

Bryan Spillane

Okay. Thank you.

Operator

next you. take from your we'll line Goldman, Mr. Morgan. Thank JP open. our Goldman And question Ken from is

Ken Goldman

you. Thank everybody. Hi,

you the You called have I that now the think, mentioned retailers. prepared more, execute programs to it with optionality mutually remarks strategic in

driven good discount. I your a you. is kind a part any is there just service a difference I position just wanted strength, of then, better promotion. something creative promotion? right? than to doing doing you that And more wanted a clarify in from you're a it. to usual them more you're able to that where is ask are or if one, the Now position it, major programs, of you're just if demanding a implement to from themselves Thank I wanted that Maybe really do maybe clarify, that in levels them, consumer a place, just these second Whereby mutually because position versus just strategic That's and number they're program definition. weakness of depth you're it's the confident a because being of than between that in

Miguel Patricio

Okay. because service these we can better Ken, we programs levels of two have. much give that, now examples have you I'll

we a customers. examples. our another give of are with our customers, barbecue the well bonds now is value in -- teas, of of we by you supermarket give I'll exploring the cheese. can we the more. put grilled together Burger, good you very propositions, been people with what when that successful two our Art very together So, has a I'll And during been I'll One accepted call example chains, together give when sauces, it example you this, like especially summertime has very and program, with moment

You well, programs proposition, are that value bringing their a value can value with together is This well. do life about of bringing than this together So, extremely creativity bit cheese, the and our and putting thinking of bringing with right? as of two our products $X. brand less our a the or customers. never customers customers the for cheese little used And receiving. is had to the these with And grilled mayo, have examples our value, just we are

Ken Goldman

second for that. you -- then part thank the And

bit. just doing a it's just where make -- the second, from than this, guess, it sure value you I maybe -- talking demanding I but because The proposition feel to a rather that, little that. promos, thoughts of position about from answered is for about there. you that maybe a And part wanted the I consumer strength second your bit little the curious with

Miguel Patricio

the for … would I'm productive continue conversations say Ken, stickiness thing sense not a us. here, customers that of we on is to makes with But in way both I -- other our have very

Ken Goldman

Great.

Miguel Patricio

feel We positive about very it.

our the that we customers consumers. momentum are have with with We and our excited with

Ken Goldman

Understood. Thanks very much.

Operator

And Lazar, Lazar Thank from you. line our from Barclays. is take your question Andrew And Mr. we'll open. next

Andrew Lazar

to categories Thanks are that very price and breakdown slide private you sensitive label. with sort In the less of gaps much. deck, a of more provided

protect the are businesses protect categories share to guess, Do are gaps just of to sensitive Thanks the where sales private price the segment guess or so do from I'm these take profit confidence necessary share you deal can the if another of manage pressure XX% those increasing. in curious, were in share stable. sort profitability? think sensitive your terms sort of And you much. take I with this expand that growth here, that you profit level short-term balancing I XX% more I And to on of of but gives bigger how are talk gaps, and currently And approach in short-term what and and hit? context you algorithm? about you are

Carlos Abrams-Rivera

shot. so I'll Andrew, take a to Well, let this, question specifically the think, me the I start U.S.,

I our that is more we there exposed the about businesses, as label. a private you to reality think saw, even is portfolio think may be, just very of part for us as those small

things the spectrum across solutions in terms moment doing of actually consumer development a that different we economic differently for how in we the consumers. offering choices is looking of of working in One of which they're

ranges actually actually of our Mayer So, me the our we is one as of like across of to years, things of stay allows that fresh -- of to many looking something which example, in we for, and we're behind been brands over we've is to which allow let because brands consumers products have option at renovating whether our in investing Knowing Mayer, you last within number and natural the regional give the from an Oscar that have deli iconic actually that to ladder, iconic actually our pricing in brands. an it. how consumers Oscar actually stay of to our couple

improved So, have the quality. we

for & across you Mac us like of renovation see even And valuable way have those share product of array well. makes a you in ladder to QX products full portfolio that we that we're kind saw brands that, the a Cheese have more in which play improved that in We have gaining already example, Kraft seeing out. as also pricing of brands frankly, We now consumers. our that

being about entire about offer strategic a of think to it's allows the to approaches in portfolio continue how us, we terms us way leveraging we for that different that So, in have about options. consumers

Miguel Patricio

expanding, are good cuts, very have even really a are instead right? do in ladder. price the to And where So, similar stories it's very different. the we the category-by-category, prices Like XX% cold cheese,

private priced floor have VELVEETA at license label. and effects or We the below the even

more in we now us. in for been and is actually starting us so a Kraft do gaining we promote later working lot brands, which to quite months, unlock allow these Ore-Ida, for And that of share, Deluxe. capacity able we're the start that We have so to which the the manner partnership well consistent several to the Singles to and year, with haven't a In last Simplot have of for in will we have years. it's example, the

category-by-category. and for both something So, top that bottom sense we doing that monitor We close it's really makes this are makes -- very line. and sense

Andrew Lazar

you. Thank

Miguel Patricio

Thank you, Andrew.

Operator

is line open. Stifel. your from make not Thank you. will sure line please Growe next And from Growe, our your Mr. on now mute. come question And is Chris

Chris Growe

Can you me now? hear

Operator

sir. Yes,

Chris Growe

outpacing you, I for curious could, Thank the channels growth question just had you. quick strength, actual that I quarter if much Foodservice and non-measured revenue in example, a of maybe the for the just rebuilding. inventory versus was consumption. was I around how

us behind an and constraint for the question Thank is performance a I'm product as to kind you. half, earlier this or is third fits I that around, in think the availability quarter to? of now with see get you do fourth what trying ultimately second

Andre Maciel

I think combination sectors. a the it's of

So, Foodservice, our as you of north is have presentation, seen growing in XX%.

we XX% in for actually prepared shift we that two because a have In of revenue. guiding already club So in channels. -- QX U.S., those what those and very and share month gaining channels we in to non-measured are And the been doing in in roughly we have gradual are very total fact, been dollar, well represents date in QX, our channels, was toward minor. announced been

think first two. I the it's not So, for attributed

the Regarding level service in levels, is low have in XXs. still seen, are ideal high the XXs, you where the as we

in. still of the Obviously, average the portfolio virtual. have we it's got So,

of much working the look closer levels Some to appropriate still it. to in historical others availability, even historical some we shelf shape, categories levels. are to are services, great through on back And the

think XX, industry like see are So, to XX. shelf availability, going you think you about if the I

now are XX, in We the XX.

some to still So, There's we're room getting grow. there.

Chris Growe

be there some your you still expect retail levels? continued build at would And service as inventory you'd improve

Andre Maciel

we Obviously, forward. don't to how moving cannot measure going how might. -- the on know We we're inventories we comment

levels, If some yes, there further historical be you were room for to inventory could look buildup. capacity

Chris Growe

Okay. you. Thank

Operator

Bank. you. And from Thank Steve Mr. now next open. your from come our Powers, is will Powers question Deutsche line

Stephen Powers

Good morning. Thanks. Yes. Hey. Good morning.

there volumes negatively the impacts your a and is cost I'm way through per -- of in there point. many volumes if of the in of P&L lower the about to impacting equal, at for mix, just you the I you year. where I'm price guess, think Clearly, how fixed fixed this parts. us margins elasticity outlook Is are help sold? else contemplating move lower balance this talked material just point? You greater other how is versus volume over asking on all places to structure anticipate, that variable cost deleverage really terms But unit are at moving

Andre Maciel

Remember, our drag a this are not building still really Thanks the in for the XXs. services At it question. because is point, inventory. we low

very So, monitoring a at than is moment. the as more effect And continue are produce this little sell, demand positive curves we we we actually to what it closely.

an we'll sure that an and the now, road So, not don't make production down adjust on step than we you're of start also our we is accordingly that needed to make to about. But have then, that as we overhang don't this talking down have labor have labor to when this right effect more sure issue.

Stephen Powers

that Great. gave have presumably some outlook if and year hedges hand, receive looking currency. XXXX. I could, hopefully the the Okay. obviously roll-off I we're you mentioned you on cost on a guess, maybe of for and to good into just some guess, to other you rolling on if peaking hand, you. how year-over-year. the out still lot I'm And I starting Thank will the remainder positioning see, costs commodities you on higher curious color XXXX. in both possible, But some early the And cases. one

bit maybe on visibility if have of a early XXXX. looking out first on currency just part So, positioning, little you color, of to the constant any,

Miguel Patricio

costs They there's of high. a there. still [Indiscernible], are received have volatility very still it. Yes. out The lot

working carryover first have I the have but for effect half need that year, throughout to that. a to about next See taken of wanted price talk into we with year, like next year. the different that especially we year We the in are senates been

tell. will to that help, So early but

Stephen Powers

Okay. Very good. Thank you.

Operator

you. Thank

Credit Robert Suisse. next will Our from question from come Moskow

Your line open. is now

Robert Moskow

Thanks. Hi.

I on then more your at follow-up. hedges your necessitates on any assume right, that in if some imagine now that's Your we that a this commodity And inputs in are derivative XQ. And shows losses falling. income quick should statement point specific existing products? counts

Andre Maciel

Yeah.

So, thanks question. for the

couple of a So, things.

the -- First, So, to you maybe on or We thing on the on unrealized change right? the what P&L it commodities, question clear. we're typically answer not second made But see okay? change the It this changes, our price need there Hope on based position, on the is in was in that this little that's in just doesn't our based one. internal what the seeing pricing regarding the are. hedgings out market to prior We is know that mean hedge So, bit hedge that. you not positive hedges price period what period. this important market, you negative. what on a effect, is is over

this had we're But we still our portion. and decisions. at that's gains market hedge But realized We effect So, hedge of and on that both is having QX. in prices the we again, part price QX gains. how is important because negative materialized, make we what thing the see look

Robert Moskow

My I XQ? you as follow-up. is, [technical be Okay. much how give you just you'd think Maybe shift in in I might any And to Can above I'll you in XQ. number that follow-up refilling did that consumption said XQ. shelves difficulty] be us think

Andre Maciel

small. is very The inventory in QX effect

is XQ know small going are we to inventories. retailers how manage a the don't very again, their So, yeah, number. And

look levels still is availability, room pre-pandemic, our before, we the a have give indication to which historical level, little this it shop our at And grow a the to inventory were below you still retailers. might I as net-net, further If possibility. that is said

Robert Moskow

sales. get But Andre, said it. you're Yeah. you producing your above I also

is. just And or? amount? are retailers own I material then know, So, your rather than inventory is don't refilling it are you Or -- a it you

Andre Maciel

want eventually, inventory do something We else? to to -- are will Carlos, think now because refilling don't levels. our know, retailers. historical the I add the own we this go And you

Carlos Abrams-Rivera

XXs a levels can leverage entire inventory in way we we're the of to a that in I look the supply XXs, our I many the our the service and now chain Andre At it's service. us of mean, Yeah. time, same the provide XXs. you in that low that with still as that being able we to result from are if right said, the low to low provide actually at able would fact say presentation categories

by able can opportunity we So, that to continue for right us service the of customers. internally, be that so actually to level there our inventories is pushing high drive better to to the XXs

Robert Moskow

you Thanks. clarification. Thank the for

Operator

we'll take open. from is Howard your from our you. next Alexia, Thank question line Alexia And Bernstein. Alliance

Alexia Howard

Thank everyone. Good you. morning,

Miguel Patricio

Good morning, Alexia.

Alexia Howard

And ask seems the remarks we the prepared Can the It expansion to in on hole your some Zone made kind those the dig How distribution other material how the But will us of guardrails Thank don't as you in though just critical want those expansion. expansion find themselves areas, seen much I profitable do new about money? you in you those you you that we've have whether very pass data of sure got know distribution to go-to-market can of and as how of on. comments making about got points? International of that in some profit some points on are you're in a been that ensure very to that trying expansion. I out outlets markets. make I you've companies emerging mass give a there's do and you regions. they're it

Miguel Patricio

view? your Carlos,

Carlos Abrams-Rivera

make No, with thanks start because proud for we it's we the very with Alexia, go-to-market money. extremely question. happening you, where to that It actually by and starts are model honest comprehensive I Yeah. a by mean, model, analyzing. with our happy what's we be can

region So, mentioned. -- by say, channel either depending the as in of let's countries you the multiple mean, it submarket, starts at gross looking or just you modern I trade, traditional like individual profit each on

significant so -- China, are and very achieve that different can started, vast can in different. you you be have different significantly is profitability If we pick up countries the where Brazil they they regions channels Russia,

going flowing the way to by all the store. start to we execute analyzing we're that, through how So,

with very a detailed comprehensive it's analytics very model So, execution. of

end we the to saw started to XXXX to then -- this year, we you for itself. this speaks and result expect you to markets have XX% we go-to-market on the slides, to in alluded adapted as And and model. and copied And Brazil, our copied, the up China. model now in Russia, scaling into of numbers the the by are -- of So,

So, implemented emerging above significantly growth the also everywhere other markets growing. been are model, we the that the has that

execution keep lot to we distribution lot of lot out. a that So, still to but be regions profitable, a a again, kind that at time, It's discipline roll of begin. requires will to same a the that, those model of on analytics to have continue expanding in of

Alexia Howard

Thank you.

Andre Maciel

So, the which don't to make payback side, profitability We of there out put of sure that. important, right? also we I very sales On lot very hypothetically points give know, on a could We're is we an obviously we it, X Brazil, right? have on we want a serve. that example, million have cannot people don't in and about, to disciplined don't that

We XXX,XXX, are the and in still XXX,XXX. XXX,XXX

is because that -- So the part right? our limits of So, and that's of important. very scale,

should halfway alternatives, markets. increase are penetration partnership potential exploring We the some actually in

maybe future. yes, be there But the So, important also is in consideration. profitability more come an will to

Miguel Patricio

Brazil, that strength bigger Hemmer in Southeast, the with to talking is this very the even distribution now expand us Heinz opportunity acquisition are of brands. we is the Since our I -- and a our strong think that the about strong of and South very gives in

have the place now great we how with business the plans are happy there. is We Brazil for this going are and in in we acquisition very scale really that that with

Alexia Howard

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

Anne-Marie Megela

question. one for more we Operator, time have

Operator

our we'll from David take question Thank you. with Evercore Palmer last And ISI.

open. is line Your

David Palmer

was profit of Thanks. that you're about protecting you gross sense. In and that not maybe to regard chain, there's to and friction and regard on was I'm sure fact going that margins. XXX the some versus underneath the margins, But your makes cost points causing remarks decline basis talked about sure a input. and with pricing there's margin with math I'm dollars more Supply prepared timing gross surface

thinking that out anything a even a comparison? can factor into as would that in XXXX gross So, call also about be that you was we margins

Andre Maciel

are on the you we impact. efficiency. with on Yeah. the that three, billion deliver. highest Thanks the you is We continue for that other track. $X need this delivered the two year that have now very growth first the the in than which Remember the question. to far Look, and line to expectation. track be But [indiscernible] communicated have that have we years -- And is by

positive platforms relatively So, certainly that It's number is But we small. the the significant. continue quarter now in the we have growth to as the is higher Mix continues. effect slightly accelerate where not in margins. quarter,

dilutive So, better inflation us forward, ease, the effect. events to growth really in to us price continue to that moving the that position continue efficiencies. recover we as should to But this quarter, And to start it's continue to expect a margin. we inflation, for deliver the again, might put in about the

David Palmer

there. sound is happening sustainable? the What's The growth Thanks just Foodservice, And view? for share global QSRs some market And does driving something's XX% citing the impressive in imply America big over that. and that then, on big that? very -- as in there, international, does growth that for your And wins. you're sustainable that the North momentum driver guess, I

Andre Maciel

question. for the Thanks

We've there channel One component in consistent which was There in prepared I retail. price, is been is doing want I to is that to XX% our what a QX, that remarkable. of higher right? QX now is, think pricing really in highlight than XXXX, Foodservice been that two not we've things. remarks the are

to distribution. also volume the growth the has a lot we that But grow with that seeing continues QX. we're So, to in expand price do as

-- We getting in have we where developed Europe the in market been America, the Central. in information and markets share have North

Rafa the QSR, talk we bit Zone. let International Regarding on our little a doing strategies, to are what I'll

Miguel Patricio

part was Foodservice was a was didn't about a company, that compared attention. transactional of small it's talks Zone, company And XXXX, the you, we in put area I Before that just Rafa for not lot of really to want Andre, the very since strategic. a -- with say XXXX, International it

penetration that ambition critical our I is this part think looking across having in of our great globe. markets in a the consumers we we're emerging and as because touch channel channel momentum really have generates brands a in of great with getting If strategic a in are with our brands today at lot team Foodservice.

And a that's in very different consequence, please? entirely since think XXXX. so I a And changed, as team the Rafael, mindset. yeah, change

Rafael Oliveira

said, the on for The model And made limited-time thing this those -- you mean, are especially define what I on them to extremely We is the Yeah. QSR, own reflects chefs for to would here the we the in you on chefs, that's with QSRs, products a complement, the Foodservice. how into because we have only because build the door say as we alluded, we global that developing call use And I chef, important, we LTO, own -- kitchen, customer. their develop Miguel investments recipes offers, innovating into put or stores. own customers.

we've brand, peak invested is mean, price And competition. a relationship with with the we continue takes then get you terms time, as well build this to off That build channel a of innovate, I commodity fantastic use level, capability, you paying to you to brand to the those allows impressions. So, to channel of and this on to in that, because customers. different develop a to out that better impressions,

investing this our the parting U.S. in is with product across Foodservice successful customers on a And Carlos of model in with International, But complement for can that. growth both chefs well. been we've core but and very the So, as pillar development.

Carlos Abrams-Rivera

we're at looking here fact basis. just it model the add is would the Rafa, have, global a thing at I that we I Yeah. say, also only would that the

away a SKUs number -- have concept tell our ourselves having of cycle portfolio capabilities our simplified over something paying That build to kind Foodservice, same two type leveraging in as years, the and in right also only can Rafa the that years, our of have same U.S. us. us Foodservice the but I reorganized of order brands home we and out, for and in quite expertise our able you we going the of focused kind So, virtuous kind being by reduced see time, to last continue from the that distribution of in being have we're points with since to couple for iconic of last retail. is and team the we us we of pointed Miguel At bit. not app. in the of -- up

us to to to of actually great home. that So matter And help with service they closing let for that and a the allows from pivot terms in value customers great over our it in things providing can with really the to some me Miguel in away way that, that both remarks. pass

Miguel Patricio

Okay. your thank you for Well, questions today. all

As a of company the transformation. you a midst are are we seeing, in

proud, done what We started. and we've getting of day, so just to we each proud continue are very and far, but are evolve, we improve to

us, Kraft are to you about We much, very in have all so what's and Heinz. of many excited you come. opportunities ahead interest Thank very we continued and thank for the

Operator

participation may conference have and now day. Everyone, today's concludes This Thank call. your disconnect. for you a you you. wonderful Thank

The Kraft Heinz Company (KHC) 27 Jul 222022 Q2 Earnings call transcript