- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Kraft Heinz Company Third Quarter Results. 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] I'd now like to hand the conference over, Anne-Marie Megela, Global Head of Investor Relations. ahead. go Please

Anne-Marie Megela

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

things These results materially see forward-looking how to in and and During the expectations and risks X-K accompanies as regarding risks its cautionary related release, today, and for to business timing contained for make strategy, XX-Q well this we expectations, filings impacts. earnings related our these plans including may and and factors statements and today's our more due uncertainties. statements differ XX-K, regarding future, uncertainties. efforts may on most call as call, our we see statements are some based Please the and and actual today's expected recent which risk investments information

financial our refer in exclude refer reconciliations on Additionally, which for and certain ir.kraftheinzcompany.com measures, our may earnings website today's comparable our to with the financial from items non-GAAP GAAP accordance and of financial and at non-GAAP release to information we a Events News to the measures available reported results GAAP. non-GAAP under measures. financial discussion Please

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

Miguel Patricio

Well, thank here you, Marie, and thank you, us everyone, for today. joining

are We excited.

and including challenges, living. quarter time, this chain continue another of share. analytic that as portfolio. actually of in and teams And portfolio these we investment Yet And know material At and are we I'm results. time, We adequate strong same transforming paying we demand we're we strong that demand, see able they proud. that modernizing brands continue the they shortages. off. inflation investing supply we the elasticities, our and at improved very our is gained continue of proud to meet to to and remaining adapt brands same and as we continue moment marketing to then the these consumer anticipate are strong where capacity delivered hold. advance and we remains challenging, to seeing realize We iconic for with transformation, our particularly the see we our We

continue we look As ahead, optimistic. we cautiously

providing are with value, our and continue the they and consumers unlock we reinvest We efficiencies that solutions business. to in

happy stronger makes whatever of All and With challenges us your questions. come. us to for very which are to well position that, we still take are

Operator

comes Our Andrew Instructions] Lazar with from first [Operator question Barclays.

Andrew Lazar

had were guidance in its Great. quarter September only I X you expectations when not above as in back those the months well. the third initial quarter. company moderated guess EBITDA the Today, expectations maybe beat X, came start, you to already but about into

of as dynamic the to fluctuations give any aware what into So visibility timing thought? Are that with respect than better a understanding to in came still issues environment. maybe there obviously you And importantly, pause that the might more be impact result? XQ business any you a it's very do these with

Miguel Patricio

Andrew, Andre, this for thank question. may the answer you you one.

Andre Maciel

Sure.

-- and our as that you I'll the think lot very beginning, the month feel we we things pleased a Miguel all, of said of And tell excited September. towards achieved first we Andrew, So happened quarter. the results in of the at in with I favor

increase good. were is price top turned what than very remember, to be the August. you line. if might out all, we which executed resulted And in of the of elasticities month Shipments have in First a new anticipated, strong stronger

the $XX also in promotions And given also we had in pace a We a billion able we're being quarter, end obviously, job play did a mostly the which we're I I initially think in our to in the XX% is okay? have well gains a we're QX. team from which XX% put in did fine, helped That's portfolio. we our expense in that of very the the anticipation finally, one-time able of in all, anticipated, better have than we to and September all right? favor. to volatility, month contingency, as about all QX, that do And SG&A. in our little less have of things lot to what up spending P&L, able in prudent ship promotion And think also our great those to us. But be earlier much are costs, in

and fully we’re organization here maintained the I back speed heard now thought]. reacting I that lever right? when is in in I fast and we’ve transparent that moving about September a a the is And think dialogue reinforcing is the put did with confident like by inflationary think just here in delivered about think you us, diversities. I And And count very felt first the a on QX, we pressure. a [regular to the fashion, friendly we and number it testimony guidance and our so that being true we can all news -- being

Operator

from comes Goldman with Ken JPMorgan. question next Our

Ken Goldman

certainly what that tightness is of your still just are. This hearing I'm this curious, issues maybe help You specific chain mostly suppliers. the upstream supply you caused not understand uncommon is better from an your your peers. from us refrain, by mentioned factors can we're many

can I the some problems, Or I maybe on to the disruptions disruptions, that are passed? there that ingredients They temporary. You have guess, issues and packaging. could longer Does structural are mentioned fade suggest somewhat when take guess, fix? this

Miguel Patricio

please. . you. to Carlos, think I related ahead, that's Go

Carlos Abrams-Rivera

-- Yes. a wave you think I'm environment challenges. terrific challenging. what you What team What I continues the to be of is question. proud is our fact that working And is first can the see I'll job doing for the say would of the that through really that all, thank of say I

quarter to that through sequentially forward. each we as think continue that improving inventory and quarter, are we in have the So -- speak, we going and see I levels, done rebuilding both service we

-- challenges to due I a what packaging take it's same the upstream step XX% At on see supply saying of in what distribution constraints, back certain really think I recovering. overall they're is what asynchronistic very are materials. if I ingredients the time, the of and is about way terms I'm those

our some past are see for have to that in have like that and few moving -- cold tighter towards we overall end point in cream about There's go as ingredients good And year. things and you'll cases, recovering have a recovered the I quickly like the cuts supply we time, little categories, So us things now position of of the we feel same our sorry, in the cheese. and I'm those at affected a even and chain. us. in in lunch kind And been

Operator

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

Bryan Spillane

-- the To what numbers reason be. environment with to laid back you're should what expect dealing in are build you targets, or in you're targets your bit of seeing X that this would and about the for at that too be Is shouldn't looking dealing long-term September are questions, there the previous maybe Or with talked kind current any seeing environment which out we on targets you is what you're with that in volatile achievable marketplace? XXXX? now a still line your back in those expect long-term that we

Miguel Patricio

this may question. Andre, you answer to want

Andre Maciel

new to said as we reason, we unveiled in expect the that for we long-term over our CAGNY, when get the growth Look, back Sure. years.

of So of X terms years it so. think in or

back have feel our the communicated the towards good way our in expect we we algorithm, we in improvement, continue that So continued then. to and performance to move

We are probably not guidance ready any still around volatile. to yes, But ‘XX. is give environment the

hearing been us and in have up chain from public has volatility, you our speed costs. using As on availability which sector about promoters supply the and consequences they

Operator

from Stifel. Our with next Chris question Growe comes

ChrisGrowe

gone your better its few a Kraft categories you one up seems question you categories. store, private label across more you over take deck, as charts of your just categories gaining in so past a although you showed more sense And I a risk in little lesser if your the incremental look we in bit private much label rate has up had in in share the as gains get it's from months, well. quick a more want share to the categories. share like see pricing has doing just been which where at for been It been place? in your also then label it for in showed change pricing, as put relation favorable pricing any you I just your business? to, thoughts private of Heinz your that's slide relation in more on very in And to have your elasticity in

Miguel Patricio

question? Andre, the you want answer do to

Andre Maciel

On for few Sure. label, things. a Thanks the question. private

[diversion] reduced mid reiterating of all, our exposure to as after been have private significantly continuously year. last the we label have First

across wherein market food beverage average in share the is now portfolio is our XX%, about XX%. and So

were that So impacted. not

around we the have of Second, past core. lot our years, part and X been a transformation, directing energy the of during as our effort

So resources have that. moved

been a We our have the very renovating core stronger. portfolio systematic is way, in so

the with Third, players. have label the been together the rest of price private the increasing

weeks private the X is So looking whereas up. data, as already at price recent sellout weeks, up, about of October X including sellout as last XX% our label XX% is

So price preserved. gaps widely are

that X comparing in same. price have remains provided QX, label calendars gap of with You private as we QX seen might to this well the the

these is we share expanded honestly where label do gained private and categories. we which of except in Lunchables, any category to So see our versus gap and price interaction both not Ketchup the limited,

are think as very is I eventually is And back the I want on yes, up, unemployment consumers but very food I today. only from right right things here starts that. don't be over of reality resilient. to good XXXX, we shift to there resilient. proving how behavior, environment, but of we with we behavior feel now. optimistic in to go shift now, drastic XXXX, had that which being in way, be very despite this And So unemployment that see We the accelerated honestly, when change, can about today mean, brands in indication depending all no even The a was far is

Carlos Abrams-Rivera

if say in have the companies really pricing brands, fact have continued think pricing power to -- I Yes. equity that would think what pricing power. brands, is about And the we don't our of have invest I which we

us So here continue give to and the we some the investments commitment Heinz forward, the improved at we manage also we brands the confidence our continue with have current quality Kraft through made going as in environment. have marketing of to invest we have the to

Operator

Our Howard with question Alexia comes Bernstein. next from

Alexia Howard

products and months Pack of Front definition educating tight respect with the and Health on in to they to really food years, of good about be XX importance I first I the what and seem And I presentation, soon, on mean in convenience of may consumer too your labels, of Page happened looking a how a -- think. moment of last of wonder for you just nutrition. health month healthy it coming wondering very But Conference the affordability. professionals thoughts but there consumers is, developments out coming do about of the might time how I'm thinking initiatives and in you're just be industry for and meeting those recent it XX need portfolio how your and that the And the years? over plans at pass innovation lineup And of a the the Nutrition I'll that the going types Hunger House of shape on. And White lot the forward? on on were that terms for

Miguel Patricio

It's It sugar, Let part part our And answering agenda. reducing X very is question specific and a critical wants me our goals have eliminating global start or future. renovating that Nutrition -- responsibility to do. then part to things strategy. complement. I'm we We've have very our reducing are dies agenda ingredients. the since this important of ESG and artificial which Carlos portfolio the on salt agenda, for years, a portfolio our been of we of is a throughout our in glad and long-term to

to We million until this formulation the of We per Sun sugar XX way to year. -- content, perspective, reduced. we the it in to mean you the Capri that that's of are pounds just of that XXXX. that is example, XX% and reduced on just we in our put give changed year place I targets achieve put we an sugar

to make committed continue term to more long products that the We short, nutritious. medium for the our and the

Carlos Abrams-Rivera

do but how not to putting products in improve kind it's to just of of want view our because Every the the point, the But add we a to I are we this the we also that's is is thing for portfolio, I right is do. what term. we're to continue because that would consumers overall, long commitment renovating on, right Miguel's think our us time have do, fact single which

So as I sugar committed continue think this continue improving and security as salt to reduction, you and of go communities very to work that food something we the that and company terms forward. clearly is reduction, a happening can see with we to it obviously, And we'll commitment and is to situation. we are in

Miguel Patricio

doing different heart, of launching see Heinz for We are the by a I announce in investing very in is with And week years U.S., of that been with Protein what here Heinz this Beanz And new launching we and in we buyer in we project And incredible related that. based to beans cheese, client Europe market. an market. portfolio the plant-based beans. of proud cheese very Burgerz, melts are very that we've product, agricultural are the which that mean Pots is our you [Hams], smells to with are its with our tomatoes different in everything and from way, X cheese, what innovation sense the from a in tastes melts, beans Beanz cheese like the in it and the and is base. next like products a it It like company. are we lot

absolutely nutritional committed agenda. on So we're the

Operator

comes Stephen Powers Deutsche question next with from Bank. Our

Stephen Powers

different, expectations the companies I margin of I ahead in recovery, many more is to yet either consumer improving beginning ask starting gross in signs but improve evidence gross across And wanted that you're with position. even or stabilization, every results sequentially not we're portfolio not Across on coming of if to obviously space see progression. year-over-year. consensus margin or to goods an think broadly,

as quarter? into into And curious expectations how going improvement build gross of am 'XX? prospects of I thinking the as progress the fiscal to the So What of kind should you're about we framing for margin? have fourth we

Miguel Patricio

answer may this you please. Andre, question,

Andre Maciel

have pricing Look, protect quarter for doing second row. we said dollar the been the a in Thanks to so dollar, we for been as question. have dollar that -- for now all inflation, we Sure. have along, and the

price in both and QX, was So was inflation QX plus in now and gross price inflation. of efficiencies in line with ahead

had in already in we took and back places lag there in we as QX September, this it, incremental that Given pressure we effect. said on selected in action some is initially continuous

QX. in QX the our in So should we to comparison QX margin, expect gross of sequential and expect to be you bottom a to improvement see

Operator

Our David ISI. Palmer with next Evercore question comes from

David Palmer

the chain Just supply a follow-up on some of stuff.

could want fill slide deck, I -- when do is say was high leaps upstream how that that XXs Your as visibilities case you fill high supplier And was Is wondering in that in I'm effect were in improvement of that's rates? what we the sure -- the fill progress rate a low back getting -- to get you're you're slightly thinking rates that, the about. they 'XXs. in -- But that and talking about the quarter. XQ. expect there. your that than same quarter, you some third surprised and you And to in have better the to the that back? see that was it XXs Is I'm result bigger first fill than to rate

Miguel Patricio

thanks for the please. David Carlos, question.

Carlos Abrams-Rivera

program We we to are that Yes. with that weeks. I'll what way particular now allows couple have better is continue XX% Listen, you to and out-of-stocks can then are have that is to customers allows lead XX%. But improve of us of the we the commitment you retailer about a say from with our right let by tell -- out capacity actually our And our The doing terms our what of a of time, reduce of how more by as the in signals ingesting we in we're availability now I'll of actually are stocks. We inventory started period same inventory it their deploy the continue the situation ingredients directly in what that me green that X that data in to examples we available give X navigate the our at to those the exactly different of expanded you said, customers so plants. reduce of right the to inventory customers you with that upstream. we're the also connected in make from capacity the certain pilot to sure is that. capacity is us ingesting to how maximize right stores that. in production a availability that say the We that and into constraints, amount data a putting allows and stores, I'll then have that we looking we that we that in with see us. our to

working which both upstream we're deploy capabilities overall do. better suppliers, So our to we're inventory being question. Thanks internally to it's to also smarter and us improve with the for but levels, service committed

Operator

from comes question with John Mizuho. next Our Baumgartner

John Baumgartner

execution you Miguel, underlying and of wondering derived rehearsal sustainable relative the the some market the how How like-for-like how the to opposed you shares the versus the from supply of in to between QX share your gains you be your constraints in had as the is think touch down regarding would I branded going on pricing in market do market performance from that nice basis, much can just differentials to brands more a of that that if in chain changes was forward? will you on benefits competition. easing, break

Miguel Patricio

question. Thanks for the

supply. of we on of would be keep lot that a the in good share record this continue rocket Carlos where right? share excited my -- give problems Capri we me I mean, charters supply if in of problems X that share shortages year, we gains can to levels not Sun like on you now market Lunchables, We with then lost be even the let we had gaining would raw are and previous and brands. raw perspective, that So with on facing facing these we go materials. is still quarters, we answer, proof materials of the A are and further on

I actually So please? that optimistic further am share. market move on we can Carlos,

Carlos Abrams-Rivera

on investment some combination our said, say continuing renovating as is unlocking that point, of of then, key the quality brands, have in some capacity this And made would our the brands. the I communication. we a to Yes. in marketing of improving build investments you Miguel's in

example saw the particular Sun and phenomenal our think inventory categories continue on period, us then gave we then a improvement terms Capri CFR result actually to those promotions in grow I for to Miguel market back-to-school around go event-based of was which performance. ability and to Lunchables drive the which then the that allows and in during and into then basically

[indiscernible] the are as doing our As promotions we year And places into now Cheese that as consumption that our like we when that opportunity and to Cold better making challenges have our holidays, event-based of we areas see to terms inventory. you those know ability then consumers also we really we go looking capacity, getting the our go protect were grow go for are we before, And the go those, continue brands. into said of slowly to time into I continue Cream then to as once those that unlock positioning have forward, we in sure the we forward.

last done our go a continue more back, penetration then able benefit time over us is that brands. whole And the take drive see you years marketplace say, the a into to and So of I now, way the consumption improve X.X now for internally combination step to in work of same being the aggressive on at us to back our to equity the we of a the company. when great have will allows

Anne-Marie Megela

Operator, question. we more have time one for

Operator

Our next Sandler. Michael Lavery from question comes Piper with

Michael Lavery

realistically already specifically, a could what's come relationships? maybe distribution to sticky How you back you Can think the how sort just wanted or are half the come for your of many roughly called opportunity you expectations those sense QSRs top opportunities you've accounts? the just foodservice in I of being are to way? from you. And out. said XX of give us of some kept of And those what's those I

Miguel Patricio

I is question, us present that great in momentum this call with we on would International then a by to Rafael ask for food where service, maybe the and answer have zone, Carlos way. to

Carlos Abrams-Rivera

start me comment just But Yes. Miguel with I think the let made.

our think North and the growing at business year-to-date, America you if look in growing and we're market I share.

tell channel you So very transform far. really do that critical good it's have we we we And forward. the thought one It about how to is, will about performance for us, continue we our so feel go as what a is organization internally. I

focus now role have we sure leadership service we the what from as and reorienting So done like a to basically stable a from to advance food America distributors a our operators -- within driver. we done changing is that making has like things North now zone used that growth things have our to different see contributor

in We that portfolio. improved of XXXX. enhance overall we time, same had half I'll renovated to quality. that our we the the tell have reduced finally, And and distribution, have continue then we you At our overall. we SKUs simplified have about

the continue QSR to capacity you part in we the continue have point of unlock the invest how do of made is business. to the we opportunities Now us of in some around that

investments continue in us to foodservice our the support making CapEx channel. also to we're strong So for in opportunity in us order growing for

those Over with now us million have for unlocks QSR continue invested, is $XXX the allows opportunity that opportunities have X last conversations that the we number growing. way in to over years, us so a that to truly

Now of view a North that's America.

give of pass to view you Rafael to me Let on a also it international side. out

Rafael Oliveira

can Yes. see core is our that. in is significant. has last the different. few pillar very Look, and it's no it quarter in results years, you for to not the a The been opportunity foodservice similar And

the size released, see that growing we are the industry. very of actually numbers and rate twice the of industry, the can we fast You the twice

global bankrupt of with happened and a across do but pandemic, attribute the international, it them and coming players consequently we also A the suffer the or lot -- So of of most world, a was that pandemic. to specialize players during mean, the we some you some pandemic lot ahead local them can foodservice compete out slowdown of the in level We maintained of that with across didn't. that it. during of part the went We and had are some their either in the significantly I downsize countries same riding lot investments of operations. the of they

So we continue excited. is the core. QSR mean, to be I

goes products, still especially X% hand-in-hand estimate sauces with I are our sauces within category a mean Our data have that the very the environment with between the about service. long X% the QSR we food available of industry, and of to go. market we and share way

ahead. are driving have And So there that to that, do very chefs room innovations model, have that well significant invested driving we with been in partner where is continue our going customers, chef-led those to we received.

be should for us. it sustainable a growth growth, So continuous of source

Anne-Marie Megela

Miguel to now it some closing over hand commentary. you, going I'm Operator. to for Thank

Miguel Patricio

are But continue building the racer because legendary to cannot." the "If navigate moment a this But we famous adapt been as are opportunity. like raining, moment our Formula through to that future. X I we and term you, at we I same quote. time super of uncertainties it's pass of fast very are car a excited and And rebuild this not seeing would at we've great with short finish the from sunny, cars. quote able raining, XX said, A it's on me it's pouring. I can it's Let when once tell a that

ahead are Thank very what of We excited much. have you with we us.

Operator

this conclude Ladies presentation. and does gentlemen, today's

wonderful You day. may have disconnect, now and a

The Kraft Heinz Company (KHC) 26 Oct 222022 Q3 Earnings call transcript