KHC Kraft Heinz Company

By Heather Haddon and Micah Maidenberg 

Kraft Heinz Co. replaced its chief financial officer and made other executive changes, the latest attempts to address accounting errors and weak sales that have slashed the value of the food giant's brands and shares.

The Chicago-based company said on Monday that finance chief David Knopf, 31 years old, will return to 3G Capital, the private-equity firm that worked with Warren Buffett's Berkshire Hathaway Inc. to create Kraft Heinz through a merger in 2015. Berkshire Hathaway and 3G remain top shareholders in Kraft Heinz.

Mr. Knopf will be replaced on Sept. 1 by Paulo Basilio, 44 years old, who became finance chief of H.J. Heinz Holding Corp. in 2013 and retained that title for Kraft Heinz after the merger. In 2017, he became president of Kraft Heinz's U.S. commercial business and last month became chief business planning and development officer.

Kraft Heinz's shares, down 41% this year, were roughly flat on Monday.

The company has struggled to generate sales growth in its stable of well-known brands, such as Oscar Mayer hot dogs and Kraft macaroni and cheese, that in many cases are out of step with trends toward more natural or healthful products. A big cost-cutting drive after the merger has also diminished its bandwidth to promote new or improved products, some former employees say.

Chief Executive Miguel Patricio, a former executive at Anheuser-Busch InBev SA who took the top job at Kraft Heinz in June, has said that he wants to revive sales growth in well-known brands without straying from 3G's focus on keeping down costs. Some 3G executives are also invested in Anheuser-Busch InBev.

"We have many opportunities ahead of us at Kraft Heinz as we chart a new course and rebuild our business momentum with a focus on driving long-term profitable growth," Mr. Patricio said in an email Monday morning to employees about the management changes.

Some investors have urged Kraft Heinz to look beyond its own staff and other 3G companies for new leaders. Mr. Basilio has been a partner at 3G since 2012, and Mr. Knopf has been a partner there since 2015.

"3G is again rotating talent," John Baumgartner, a food industry analyst at Wells Fargo, wrote in a research note.

Kraft Heinz has marked down the value of its brands by nearly $17 billion this year after reporting slowing sales and a federal investigation into the accounting errors. That investigation remains ongoing.

The company has restated financial earnings as far back as 2016 after disclosing that it had understated costs of goods sold across roughly three years by $208 million. The understatements were related to how the company booked rebates and expenses related to contracts with suppliers, the company has said.

Mr. Basilio was CFO during part of the period when those misstatements were made. Kraft Heinz has said that top officials didn't know about the errors at the time and that it fired some employees that were responsible.

A Kraft Heinz spokesman declined to comment further on the procurement problems.

Mr. Knopf, who worked at Goldman Sachs after a graduating from Princeton University, joined Kraft Heinz as a vice president of finance in 2015. When he became CFO in Oct. 2017 at the age of 29, he was the youngest CFO of a Fortune 500 company.

Mr. Knopf faced pointed questions from investors during the company's delayed earnings reports this year. Kraft Heinz earlier this month reduced the value of assets, including international divisions and its U.S. refrigerated-foods unit by $1.22 billion. Those impairments came on top of $15.4 billion in write-downs on the value of its Oscar Mayer and Kraft Heinz brands in February.

"We are dissatisfied with our financial performance year-to-date," Mr. Knopf told analysts earlier this month.

Mr. Patricio told employees that he wanted a seasoned veteran in the finance job and that Mr. Knopf will work with his replacement to help in the transition.

The food giant reported net sales fell 5% in the first half of this year compared with the first two quarters of 2018 to $12.37 billion.

Sales of older brands including Maxwell House coffee and Velveeta cheese are also weak, according to Nielsen data cited by analysts at Guggenheim Securities LLC.

During the four weeks ending Aug. 10, retail sales of Kraft products fell 0.5%, according to Guggenheim.

Kraft also said Monday that Nina Barton, currently the company's top executive for Canada and digital growth initiatives, will be promoted to chief growth officer, a new position. Carlos Piani, head of strategic initiatives and mergers and acquisitions, is leaving Kraft Heinz to pursue other opportunities, Mr. Patricio said in his note.

Write to Heather Haddon at heather.haddon@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

August 26, 2019 12:24 ET (16:24 GMT)

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