KHC Kraft Heinz Company

By Annie Gasparro 

Kraft Heinz Co.'s revenue fell in the fourth quarter, rounding out a year of torpid sales for the food maker's biggest brands.

The maker of Oscar Mayer meats and Jell-O desserts reported $6.54 billion in quarterly sales, short of analyst expectations and down 5.1% from a year earlier. Shares fell 7% on Thursday to $27.99.

"Our turnaround will take time," Chief Executive Miguel Patricio said on a call. "But we are seeing the beginning of stabilization."

Mr. Patricio, who took over last June, has shaken up Kraft Heinz's executive ranks and has said he would substantially reduce the number of products the company develops this year.

Kraft Heinz will spend more on marketing for its flagship brands, especially those that are big drivers of the company's profitability, Mr. Patricio said.

To help fund these investments in its most promising brands, he aims to make its supply chain more efficient and reduce the complexity of its sprawling operations.

"We are sweating the budget," he said.

Mr. Patricio came to Kraft Heinz last year after the company disclosed accounting errors and a misjudgment of the value of its brands that caused it to write down some $17 billion in value from some of the company's best-known brands.

On Thursday, Kraft Heinz lowered the value of its Maxwell House coffee by $213 million. The company also recorded noncash charges tied to international businesses, including one in Latin America focused on exports.

Kraft Heinz products including Maxwell House are battling an influx of cheaper store brands that are enticing cost-conscious shoppers, while newer and trendier brands steal more shelf space.

Higher prices deterred some shoppers from buying Kraft Heinz's items in the fourth quarter, the company said. It also lost some distribution and ran fewer promotions than the prior year. Kraft Heinz's market share in cheese, cold cuts and coffee declined. But its condiment sales remained strong.

3G Capital, the private-equity firm that controls the company, has stripped out nearly $2 billion in annual spending since the 2015 merger of Kraft Foods and H.J. Heinz. But the company has fallen short of its sales goals and big new deals haven't materialized.

"We cannot have a culture of cutting," Mr. Patricio said. "We have to change that culture."

Mr. Patricio has a new leadership team, including executives he tapped from Campbell Soup Co. and his former company with ties to 3G, Anheuser-Busch InBev SA. He said the top jobs are filled with more experienced people, but that Kraft Heinz still has a people problem.

"The turnover is still a big problem for us, especially on the lower levels of the pyramid, and we have to stop that," Mr. Patricio said.

Comparable sales, which exclude currency fluctuations, mergers and divestitures, declined 2.2% globally in the latest quarter, including a 2.7% drop in the U.S., its biggest market.

For the fourth quarter, Kraft Heinz reported an overall profit of $182 million, or 15 cents a share, compared with a loss of $12.57 billion the year earlier. Excluding certain items affecting comparability, its adjusted profit of 72 cents per share beat analyst estimates by 4 cents

Micah Maidenberg

contributed to this article.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

February 13, 2020 10:42 ET (15:42 GMT)

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