To stop the cold cuts volume decline, Kraft Heinz
Kraft Heinz will keep working to increase volume and market share, especially in its meats division, following a 0.4% decline in net sales in North America during the third quarter that concluded on September 30.
Net income for the entire company decreased by 42% to $262 million, or 21¢ per share on common stock, from $432 million, or 35¢ per share, in the third quarter of the prior year. The decline was mainly caused by greater non-cash impairment losses and higher tax charges in the third quarter of this year.
Organic net sales climbed 1.7%, bringing net sales up 1% to $6.57 billion from $6.51 billion. Volume/mix decreased by 5.4% during the quarter, while pricing grew by 7.1%.
Net sales in North America were $5 billion as opposed to $5.02 billion in the third quarter of the previous year. Organic sales fell by 0.1%. According to pre-recorded remarks released on November 1, Kraft Heinz President Carlos Abrams-Rivera stated that the rise of organic net sales in North America was negatively impacted by the meats category by 1.2%.
Recall that the meat category is a component of our reinvigorate platform. We are committed to restoring profitability, behaving sensibly, and safeguarding our adjusted EBITDA dollars,” the speaker stated. “We produced higher adjusted EBITDA on lower organic net sales in meats in the third quarter, demonstrating the effectiveness of this approach.”
According to him, Kraft Heinz aims to offer cold cuts at the proper pricing points, which should boost share performance.
Furthermore, Mr. Abrams-Rivera stated, “We intend to keep concentrating on enhancing service in our value portfolio, where case fill rates are still in the low 80s.” “By the year’s end, we anticipate improvements.”
According to him, sales of frozen potatoes, mayonnaise, ketchup, and Mexican sauces all rose in North America during the quarter. The US Department of Agriculture’s Supplemental Nutrition Assistance Program (SNAP) benefits have been reduced, which has put pressure on the company’s market share in single-serve beverages for children.
According to Mr. Abrams-Rivera, Kraft Heinz has rebounded from the low points in its US dollar share that it hit earlier this year.
“Earlier this year, we faced anticipated challenges following the pricing of 75% of our portfolio and the reduction of SNAP benefits,” he stated. We anticipated that elasticities would revert to more typical levels, and this is precisely what we observed. We reached the lowest share levels of the year in July, during the peak of cold cut volume losses.
John Oh, an analyst at international research firm Third Bridge, claimed that although price increased Kraft Heinz’s margins, it did so at the expense of volume. This was after interviewing executives.
He said, “Even though the volumes have improved sequentially, our experts have previously indicated that Kraft Heinz needs to keep a close eye on their pricing relative to the competition, including private label.”
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Net sales for Kraft Heinz’s foreign division rose 6% to $1.58 billion from $1.49 billion, with 8% growth in organic sales. According to Mr. Abrams-Rivera, organic net sales increased by 10% in emerging markets.
Nine-month net income for the company as a whole was $2.10 billion, or $1.71 per share on common stock, up 42% from $1.47 billion, or $1.20 per share, during the same period last year. Nine-month net sales increased from $19.10 billion to $19.78 billion, a 3.5% increase.
Kraft Heinz has revised its fiscal year outlook to include constant currency adjusted EBITDA growth of 5% to 7%, up from 4% to 6% previously, and adjusted EPS growth of $2.91 to $2.99, up from $2.83 to $2.91 previously anticipated.