By Heather Haddon
Kraft Heinz Co. named a new chief executive, appointing a fellow
veteran manager of companies backed by investment firm 3G Capital
LLC to succeed Bernardo Hees amid weak sales and a federal
investigation into the food giant's procurement practices.
Miguel Patricio, the former chief marketing officer of brewer
Anheuser-Busch InBev SA, where 3G is also a top investor, will
succeed Mr. Hees as chief executive on July 1, Kraft said
Monday.
Kraft hadn't previously unveiled a planned executive change or a
succession plan. Kraft has yet to enter into compensation
agreements with Messrs. Hees or Patricio, the company said in a
filing Monday. Kraft board chairman Alexandre Behring approached
Mr. Patricio about taking the top spot a few months ago, and the
board unanimously voted for his appointment, a company spokesman
said.
Shares in Kraft initially rose on Monday morning before edging
lower, and were off 0.4% at $32.83 by midafternoon. The company's
shares have fallen around 43% over the past year through Friday as
sales have stalled and the company has acknowledged its yearslong
cost-cutting drive undermined the value of some of its best-known
brands such as Oscar Mayer and Kraft cheese.
Kraft's problems are emblematic of troubles facing many of the
largest food companies as consumers migrate to new brands and
products perceived to fresher and more healthful. Many of Kraft's
competitors, such as Campbell Soup Co. and General Mills Inc. have
also struggled to maintain sales growth and keep their product
lines in step with current eating trends.
Mr. Patricio said he would shift Kraft's strategy to focus on
making the company's existing brands appeal more to consumers.
"Some are a little bit dusty and we have to rejuvenate them, Mr.
Patricio said in an interview.
He declined to discuss Kraft's plans to potentially divest
weaker brands, saying his job was to improve growth of the
company's existing products. He said he sees potential, in
particular, to boost sales of Planters nuts, Heinz products and
Philadelphia cream cheese.
"I'm not working to sell brands at this moment," he said. "I
just have plans to grow."
Kraft has recently divested some international brands such as
the Canadian natural cheese business it sold last year for around
$1.2 billion. The company has explored selling other brands. But in
recent months Kraft has focused on improving Oscar Mayer and other
brands, according to people familiar with the discussions.
Mr. Patricio has worked in the consumer-packaged goods industry
for more than 30 years, including stints at Coca-Cola Co. and
Johnson & Johnson.
At Anheuser-Busch, where he worked for more than two decades,
sales of its flagship Budweiser and Bud Light brands grew globally
but sank in the U.S. during Mr. Patricio's tenure. He spent years
focused on expanding the company's sales in China, but the brewer's
sales volumes fell overall in the U.S. as Anheuser-Busch faced the
same problems that have hurt Kraft: the growing preference among
many consumers for smaller, locally made beverage and food
brands.
"The growth of global brands is impressive but the U.S. has been
a point of pain," said Benj Steinman, president of the Beer
Marketer's Insights tracking firm. Mr. Patricio does bring more
outside brand-building expertise to Kraft than is common to other
3G executives, he said.
Mr. Patricio said his work promoting premium brands at
Anheuser-Busch will be relevant in helping Kraft improve. His most
recent work at the beer maker included oversight of its popular
"Dilly Dilly" ad campaign.
Mr. Patricio said the leadership change at Kraft, after Mr. Hees
led the company for six years, was a natural step in Kraft's
evolution under 3G, a Brazilian investment firm. 3G helped create
the firm through the 2015 merger of H.J. Heinz and Kraft Foods,
joining forces with Warren Buffett's Berkshire Hathaway Inc. to
form the fifth-largest food-and-beverage company in the world.
"He was the first one to admit that he was finishing this cycle
with the company and that the company would benefit from having a
person with a different background to lead it in the future," said
Mr. Patricio, who is 52 years old.
A Kraft spokesman said Mr. Hees decided to move back to 3G to
focus on other projects.
"I have confidence that Miguel and the team will take Kraft
Heinz to new heights," Mr. Hees, 49, said in a statement.
The firm's aggressive cost-cutting strategy, known as zero-base
budgeting, was emulated by many consumer-goods companies seeking to
boost profits before falling out of favor recently amid troubles at
Kraft and other proponents of the strategy.
Kraft's spending cuts left its brands in a weaker position to
compete on store shelves just as many consumers turned away from
many packaged goods. Sales fell, and Kraft cut some prices and
added salespeople to compete.
Since reporting in February that it had written down the value
of its Kraft and Oscar Mayer brands by some $15 billion, the
Chicago-based company has made some new investments in its
products.
Kraft earlier this month introduced a new variety of its
packaged meals called Brunchables. It also made an investment in
GrubMarket, a company focused on delivering locally grown foods,
and struck a deal with Farmstead, an online grocer.
Mr. Patricio declined to comment Monday on the Securities and
Exchange Commission's investigation into accounting practices in
Kraft's procurement division.
Kraft missed a February deadline to file its annual report with
securities regulators as it concludes an internal investigation
into those irregularities in its procurement department.
Kraft is also facing lawsuits in the wake of the write-downs,
including class-action suits from employees and shareholders
regarding losses related to the stock's drop. Kraft entered into an
agreement with its lenders to file its financial statements by May
14, it said in a filing last month.
--Jacob Bunge and Tripp Mickle contributed to this article.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
April 22, 2019 15:34 ET (19:34 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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