Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to The Kraft Heinz Company First 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] And be advised that today's conference is being recorded.

to Global conference Investor like Megela, to now of Head Relations. would hand over the Anne-Marie I The floor is yours.

Anne-Marie Megela

XXXX Thank you, session update. quarter Q&A to welcome business and hello, for everyone, our and our first

may today's including efforts impacts. future, our and make During and to we forward-looking regarding timing for related expectations, our and plans related statements business investments the expectations strategy, expected call, and

see risks results on cautionary Please These see actual call this materially we our information and risk XX-Q based and release, contained the recent filings as most and how today's may statements and regarding for due factors to are uncertainties. today, things differ more as earnings risks well these X-K XX-K, uncertainties. accompanies statements in which and

measures, financial which in non-GAAP to exclude results items our refer may with we accordance from reported financial GAAP. certain Additionally,

today's Please release GAAP Events non-GAAP on the reconciliations non-GAAP our News information a to at the financial discussion available and and ir.kraftheinzcompany.com, of measures. our under and for refer website to measures financial earnings comparable

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

Miguel Patricio

you, Thank you, and today. joining Anne-Marie, us thank everyone,

We proud, proud and are confident.

we are EBITDA earnings. We our guidance that raising and on so are confident

we a in coincidence. that represents They are to not confident our so of marketing double-digit increasing growth confidence. and solid a are We million versus in These year. R&D are results investments million $XXX which by are $XXX budget, versus our previous because

U.S., priority because markets, grow These and of our everything double-digit has grow we'll that behind had portfolio resources quarter, free grew in emerging strategy. throughput are strategy, through because XX% we that and and quarter. not our is grow we where only grew strategy. globally, possible to about but saying to consistently our we'll the of invest Elevation platforms through The of up growth. rest in Easy results been Taste have our service XX% we and We this We'll Meals growth this

we the a have manufacturing, place engaged transforming of where sales, stronger people. agility in future of have in examples me that reducing And waste, our good big supply the Speed. the Today, times. Well, a to Let our is planning, great innovating pipeline much plus that supply, we have Microsoft is in now we or artificial the a pods innovation, a team. and are innovation, we reduced the three of reducing and with improving very that in team with intelligence, for the the of from two usage months, in procurement, start levels, time products and us partnership couple we and years In service for company. logistics. are word through

We are place in different today. a very

a $XXX And lot delivered represented million this that number were When to ago, bar in now people finally, X billion savings, this in we year. years not of efficiencies. $X gross a of a in per but are million $XXX there we increasing announced a years year. row, that skeptical were We X X years only

are for International North Please, our here and our today, ready our President for America; President Carlos I with have that, Q&A. Andre, the Abrams-Rivera, joining With are Rafael, Zone for that me Zone we CFO; me.

Operator

from And Instructions] with comes of [Operator you. question Please America. Bryan Spillane first Bank Thank our proceed.

Bryan Spillane

of underlying. two piece it what like would guess, to kind of and were a out been underneath, I what's between looks look kind One as the data Nielsen I in ask, to dismatch is, mismatch, a foodservice I we U.S. think have should wanted bit and just reported we seeing there's of I questions strip related say, at what or the the

Is specifically, you're some into holidays? of or of it the the talk timing seeing was And big your there just the affected activity about a promotions intensified? then, second, line expectations. you to kind promotional the summer anything kind trying of how in as there Is or to if kind just cadence? have can relative environment of shipments that U.S. little head of it So the promotional in if bit understand we with might

those Just seeing kind summer of holiday how setup, you're please.

Miguel Patricio

Andre, please.

Andre Maciel

look performance, the nothing we there The QX, Look, where at already I was ended when the at end load the inventory as you think normal the before. U.S. said happening of don't given out in of is quarter. immaterial

quarter a in So and the zone. performed in well foodservice, the of sell-out it's the function really which very U.S. the

underappreciated maybe bit little of people impact of a So that.

it do everything was the also that things, with and has to believe something I Omicron down. shut fact last year,

sellout the at in industry helped also foodservice very impacted performance. of strong lot of that the in across a beginning to the the retail So a quarter, but have

to comes promotions. it When

for said have we so in you how That's give in promotional will the of to an over Obviously, on continuing from improve that doing we year what environment. plan guidance in the go. beginning, emphasizing well expect color that have long I been max, well has to way with and increasing to promotional we the on, nothing terms ROI always prudent some that there regard. And As the to see levels. we changing not And Carlos tools a are XXXX pass our place. to the from

Carlos Abrams-Rivera

said you would me to mentioned, what's as little I improve. to give to thing you that. ROI Bryan, a add, one continued as color more what the just The is, I has behind let But guess Andre

scale tools We ownable part Kraft how is to And have creating promotions. improve that that reengineered the us of actually Heinz. allows management of spoken about revenue of the us kind returns agile that has and agile our

is, that provide events. system in-house, data what essentially have we do we simple leverage actually create So real-time digital over gives promotional to access created in we And like, we way. a XX,XXX tools that amount recommendations large for then management insights it of and and very us example, that trade a to

we time sure doing. of and us right to solutions the tactics the the right those what to have discount, figure make us been what is help out the allows year are Now is then that right promotional of depth what

look a it's And about you ROI to numbers, what about this we of if saw XX improvement in points our in that ago. at we if particular year XXXX XX-point QX you QX. versus compare quarter a So saw

our to driving we again, continue ownable are So sure make investment. that that help tools us

So we sure promotions? business business driving you marketing, what as that have those invest in is if we comment make focused want focus and our international forward, in I know you're the that don't stronger to we the with the quality go And really of seeing anything high our on are Raf, that event-based activities continued on renovation ROIs. a

Rafael Oliveira

what Carlos. different than described not very It's you

bit what mentioned, and think, of see increase. Andre I you an a might

an the through marketing and promotional but is some to activity nothing guidance. go in a that see of included increase bit will not in our year We significant

Operator

it the [Operator Please line comes Instructions]. of go with Barclays. the moment Lazar and Andrew One for ahead. from next,

Andrew Lazar

market adjustment? you're long-term that function I necessitates implying a maintained conservatism? think this growth outlook, something potentially I outperformed you obviously, more maybe is of full of outlook planned above I And algorithm? of go-forward the organic on than expectations, guess, this seeing and your appreciate the sort Or the there for. originally sales is fair year trends sort in already in first slower quarter Is the

Miguel Patricio

maybe that Andre, question. answer to you want

Andre Maciel

expectation. changed that nothing is there So

appreciate they zone, holding what still our international and portion They've as over extremely believe the of food look to impact and a market emerging do. I Miguel don't indicated portfolio well, are growth fully portfolio been in on at expecting, markets the -- I we was line. market the well. which if versus quite think guidance lot the We performing service And of people continue in as international delivered I the top they in

momentum solid. So very is

changes U.S., consumers at prudent. might and internal We be special. about nothing expand the this is to see just When interest it It expectations. in on good that, our comes nothing uncertainties our macroeconomic moment to rates isn't but that

Operator

Please of One it from with question, moment proceed. you. Goldman for Thank please. next our line comes Ken the JPMorgan. And

Ken Goldman

beginning And even There's in or in is something see things if anecdotal your about trade if products, well, any down consumers to new doing their you're on mix, I'm informing product I it going mainstream discount. starting been either is evidence way, some more so, decisions the from like are as if guess, just to margin. it's channel to where that? they're mainstream this that grocery of premium shopping, curious terms to

Miguel Patricio

and Andre can Maybe Carlos comment.

Andre Maciel

you year, the last started. migration since seen as has channel have So

don't we accelerated normal a like see over So trend that.

channel We for we phenomenon, have seen the mass months, as other gaining consistently merchandising new and that this ground now And consistently. the prepared there's for for a while. a several not have is been

in the activities anything, panel Carlos I'll doing see are don't channels, we happening. pass If anything So but those abnormal it's we talk expected. to about to

Carlos Abrams-Rivera

means kind And which retailers would I consumers, in been moving What terms And more have as to for retail, this Andre lower-income dollar anticipated Yes. mean there I said, channel. some add or first I color, this. the we into shifting of we expected. guess, channel value-focused of in

that about we solutions more grocery respective actually thinking the to Now what retailers also that the sure do maybe for and means to channels. consumer, are instead can have And we're in looking is specialty are club. it us, for go traditional the of what for making high-income that places those right that

and and Jell-O the packaging are & SKUs, actually are Mac is within more who so So Cheese that able consumers club category. whether more and like to brands adding stay that size stretched dollar

there go about so in being can, that how activities we as fact, we be the solution. earlier, we categories kind overall with consumers right with of then, And in talked savvy about our certain promotional meal

[indiscernible] to singles, a of terms answer what you do else there sandwich able can well. the grilled Kraft of do be can is as about mac-and-cheese for what part if So with think us those solutions do, being of kind cheese in meal families, can what Kraft

foodservice, other at channel thing are sure adjusting, that for one that. if is, making we're same look I too, also say shift would we you that within The

how And that are our grow we're grow us to and to business growing of that continued share QSR as for well. business. that are We doing is business seeing and in continues we

consumers So shifting it's are sure our that to QSR. restaurants from to making certain

to is products drive QX. and for drive We sure in we continue our the it which way are our too, continue to are resulted making to there that them growth,

you thank for question, So Ken. the

Operator

our One Jason line please. proceed. with next English question, Please it the you. comes moment Goldman of And Thank for from Sachs.

Jason English

Two quick questions.

inflation first First, quarter, up. your that lot the like margin see margin year. which it would, a the the It look your to implies to for moving going is of year gross gross Great has for outlook moving to market moderating. like guess given every sequential cost case, be quarter build why the the higher. especially would a be course, that my question I is, what to end appears with been

Andre Maciel

Jason, talking gross of you margin repeat throughout the could about trajectory the the year? the Sorry, question

Jason English

of chart moving margin sequentially, did your Gross higher. slides been showing in one a You right? Yes. building have every quarter has

it implies sideways. of kind guidance that year goes full Your

to very So comparable finish you're the going quarter. a at rate margin the to first year

expect we a little moderates? continue to shouldn't why it So to is, cost my inflation question higher as grind

Andre Maciel

margin, next the throughout a increased bit we've No, gross little the quarter.

So last component we highest that sell well, the costs because be during of as QX sideways little a the will and more But beyond are our products continued a in in goes should one. We mix of see in QX portfolio the that QX December. the the put price no, to lot sold quarter. QX comparison given middle ease. that, of type of in a bit is to

is two we So year. product gross remember next expectation now to bit from will And no, throughout I'm seasonality. increase But which But well, of then of is in have talk a and because the as that mix, year, little the that going right? gradually margin reflection not something to QX.

Jason English

you back heavy those obviously, we normalize bleed usage the Or quarter. of there's think Yes. then course that over working into or much is again that. levels? want a year inventory I last It for flow, to what And we built do we next still communicate the tell of lot kind get And the that. before down. cash terms do outlook That's in to can out however in us and talked a have your How helpful. you full conversion first you level, this of year? free know of you of cash year, about I year can appreciate can

Andre Maciel

Yes.

can that flow, up as the year CapEx year to inventory payback we about close to XXX%. was this What cash tell the robust free to is that service-level in you to expect negative. which is we then, range, go to before. which a capital the bring then CAGNY. close done wind last in a QX this has to line there. I XX% This we with And obviously talk was next XXXX level plan because to XX% very we last have year, with plan. expect X% to is Working drag ramp-up and year our down recovery also very expect mean, and So to in do and mainly robust is We down. I have We said quarter, by plan, a in prioritized the even we

been We with working buffers. have

I the industry But resilience. given clear and mean, volatility break circumstances path a throughout as everybody does, very chain line down of supply in glide year. we other about to the have it

for well as to similar a very is inventory year pre-pandemic at levels the expectation So COGS. level land to percentage the of the

Operator

One moment please. of Baumgartner with line for comes Securities. from next our it And question, the John Mizuho

John Baumgartner

below are branded back U.S. in categories were share where in loss There Carlos. categories promotion that levels think I But U.S., to bulk wanted also of a the promotion come the competitors. few your I QX. seem those to really drove

are reduce promo supply chain? lingering other employed factors supply Or outside is to of to issues? isolate and So fair chain promo losses share and there the it

Carlos Abrams-Rivera

John. No,

I the I But guess, business, have let we with as do about going to very how fact start growing a we approach a that. there's of we're the fair that think me assessment. think disciplined

remind Miguel to going growth consumer the we're make portfolio. the and with of to that And and manage quarter as you, continue have middle as and marketing, said, we in building reinvest they trends, me to going we we And our core margin in that's mentioned, the to R&D. to the a there with we we're the double-digit where efficiency We're our disruptive we're sure too, and innovation business as up the in took the focus slowdown. investments a technology few were to that So let saw adapt growth to pricing catching are kind of platforms categories on going you margins. in

off think advantage Those supply a them. prevented couple time to you are of we couple some from us better those chain in if had position now taking example we of in into will of challenges that We period go as really let see that that a go. me year Kraft categories, things fact, Cheese, are the quarter. for in So the a and about did One, be eastern highlight we the

tell the much a the in by be the with in I'll you again, in one, began complete inventory we cuts we overall a should business. cold cuts Another the of with cold situation end in about we year business. our And low terms of summer, as place which supply in think better

So quarter of sense well short-term supply of that the -- constraint well. as assessment how we the see

there we're one too be The that places going down. where not add thing volume I categories, simply is would to are chasing

So of that a a that at the not be data, but look volume when category think going chasing was if to bacon, probably profitable. about consumer point are we and you it's headwind is about not you simply data

drove how and So looking what kind that business first a gives you about quarter. sense of at the we're

John Baumgartner

been if of with things, reduce price some how that new demand benefit your outside lot business? U.S.? pretty as the impact new structure? of you're you a about transform growth sensitivities about resilience greater you. label economic Thank new I'm And places think I partnership the they volatility and the you food ABI, How has category Are outlets curious, do of do weakness. you they Carlos. like service, the do Thanks, you're international and the think products the private the building sauces, Or net in marginal into and these introducing good But the on of Europe. U.K. doing historically, and the launching in or defensive side, Okay. ramping categories, distribution, your with And the in you BEES products. guess, business terms

Andre Maciel

that want Rafael, do to answer one? you

Rafael Oliveira

happy to. Well, Yes.

markets need international. bit growing across I think we're we developed a in differentiate how to emerging the and markets

the to think of and to and go-to-market been about, probably continues the execution go-to-market opportunity because and has emerging what you lot has market described growing as the mean, be. been we I significant talking significantly having you I applies know, developed markets, across a this are

all On specialty Taste been renovating Easy growing, especially base Europe. been those the in launching [indiscernible], market, we've significantly that we've been only mix. the platforms sauces two that the of products in Elevation. Like And are incremental, our developed mentioned I mean Meals portfolio not the a the I have it's category. mean then

now focus. innovation from comes delivering growth So mean this has from been the and right the the and is introductions. I gains those that we and that expect the results we providing core resources the need that again, the

Andre Maciel

to if marketing that, just markets, again to have emerging right, markets, XX% we business. you by And international our remember, add of emerging zone, developed

we digits We expect doing. grow like have been double to

NDA, distribution, expanding since about you in to minimum plant or saw way. I certain across margin very we might prepared fairly it healthy have remarks emerging quarter. think board a profitable between in a bottom ROIC better the balance be level line. markets, in markets decent we're from of And a but require start seeing to expansion we a As and the top our in has the noticed emerging that significant gross And

And to I expectation with continue improve. to think

very But the feel investments technology across in some at market, sales part has we is cases, and going Miguel of million, said that about R&D, good which So headcount. $XXX lead to in we expansion. the grow here. delivering case Again, our of accelerating returns. always top without we the keep stability the levering We are of go-to-market markets, mind don't emerging want

but not in marketing incremental markets, of developed in in also the selected accelerate the and investments in part the levels we using to developed, on these innovation agenda. restate U.S. cases countries only And are some

allow very So to growth that company. the future the us because of to still continue build good it's

Miguel Patricio

new the I sauce. entering And couple share, you're achieved that Let sauce Absolut continue in me U.K. is with we and a that right. mention in growing. you we being launched months, in we pasta launched We X% extremely said just that pasta of a vodka mean categories that with one market. you Heinz mentioned thing innovation, successful

only past. had But from about in different U.S., just the that very we we if a are really incremental, Europe. what having it's I now right at U.S. national we the launching, you where very just mean market I huge are to we innovation that just which look the launched XX% it's cannibalistic. today. not It's is of basically be a going in past, spices, incremental category going that been not think the the in innovation don't In to we've of it's like play the or lot profile but to it's which -- during we the summertime. is NotCo through direct-to-consumer, spices

Our Tingly & is we year that Ted's Mac Mac will that not that we launching that in are that with globally Cheese. Cheese the a category launching, that a leader are sauces or is we pretty even growing frozen are hot Kraft throughout we & play Kraft

have didn't in very of a will have Bake about & of Kraft And profile microwave, really, of we and frozen, We continue to this company. can Home incremental start the I strong really option innovation our Mac an increased Home innovation portfolio list change Cheese but you that frozen. and tell

Anne-Marie Megela

Operator, we have question. time for one more

Operator

question Thank Deutsche you. Bank. And the moment Powers One from Stephen please. with comes

Stephen Powers

forward couple the first and guess, sounds the improvements the wanted is just quarter cost that, just visibility out to more think you categories? in a accelerate do recovery, in ramp Do topic. about what move I there of the those you? issues think you resume with it to those issues next you supply as I those more good those the made kind supply normal headway up Thank us more as to hole? supply resolved, behind And bottlenecks like have then follow you've for again, over you? prudent about is But gradual as a to dig growth of challenges of you way forward. going of framing ketchup on you. abate. quarters good a Or trajectory It Were

Miguel Patricio

then. Carlos maybe Andre,

Andre Maciel

it's to indicated, should come top-line of we all compensated But Look, review as that some the again, improvement [indiscernible] expect guidance here. we retailer the solutions, and performance. over in our in be together time obviously Carlos inventory expect the at with some the

those is But all expect U.S. first to performed the Elevation in the to growth platforms. and very Easy priority Meals. improve quarter, the well in their and platform priority we [indiscernible] the performance have us. our grow that get problems year the as particularly Remember behind in growth Taste

categories be in going because necessarily meat, we're like strong the to prudent other there. also trying be acceleration In not in to Carlos we're a also as profitability growth about said, having

having So it's the about right yes. balance but

Carlos Abrams-Rivera

Not we much say service to I see minute. in level. to continue Just improvement would the What a add. is,

a of framework year. So last give a just you to kind

year, In quarter. as mid-XXs. of I were levels we to the of of high mid-XXs think at time in the so exit first kind XXs, this actually the we closer the the

we are the way some So I a that to I had feel right we of the as But business the challenges. like we to earlier, right couple do trajectory the have overall, continue sectoring forward. business service isolated categories mentioned go where we

Anne-Marie Megela

will to that turn some it the Q&A over be like session. it comments. to Operator, Miguel closing I'd for for

Miguel Patricio

time right. you you for sharing results the more to I you thank much. and looking us so forward you. information to with All and Thank with want spent more just

Operator

participation. you. Thank call. conclude we Thank with you your today's for And conference that,

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The Kraft Heinz Company (KHC) 3 May 232023 Q1 Earnings call transcript