Kraft Heinz Draws Customers Back to Familiar Brands -- Update
By Annie Gasparro
Kraft Heinz Co. said higher grocery demand during the
coronavirus pandemic is setting the food maker up to exceed sales
expectations for next year.
Chief Executive Miguel Patricio said Thursday that despite
volatile demand and some production capacity constraints, Kraft
Heinz adapted to meet higher demand and invested in advertising to
make it stick.
"We are holding on to new households and consumers at a greater
rate than before," he said on a call with investors.
Kraft Heinz's comparable sales rose 6.3% in its latest quarter,
excluding the effects of currency fluctuations and divestitures.
Its earnings topped analyst expectations, sending shares up 2%.
Kraft Heinz said that grocery sales accelerated in the second
half of September as cases of Covid-19 rose in many parts of the
The company's U.S. President Carlos Abrams-Rivera said Kraft
Heinz is meeting with dozens of retailers to help them prepare for
the unprecedented pandemic holiday season as they rebuild inventory
depleted in the first couple months of the pandemic.
Kraft Heinz said it has added factory capacity and adjusted some
manufacturing lines to increase production of high-demand items by
about 20%. The company also shifted marketing to focus on products
that it has plenty of, Mr. Abrams-Rivera said. For instance, the
company is promoting its boxed Kraft macaroni and cheese versus the
single-serve microwavable cups that are in short supply.
Fellow food maker Kellogg Co., meanwhile, said Thursday that it
has seen demand for its products at grocery stores decelerate in
recent months from the levels of growth over the summer.
"The continuation of the deceleration is what we see, but you
have to be agile just in case that changes," said Kellogg Chief
Executive Steve Cahillane.
He said in an interview that other companies with more
lunch-and-dinner-oriented foods relative to Kellogg's cereal and
snacks saw sales surge a couple of weeks earlier than Kellogg at
the beginning of the pandemic.
Kellogg's sales and profit were also higher than analysts
expected and it raised its outlook for the year. Shares rose
Since the coronavirus pandemic began, big food brands have
benefited from people staying at home more. Kraft Heinz said it has
attracted younger consumers and drawn shoppers of all ages to its
familiar food brands. However, some of its brands such as Oscar
Mayer and Maxwell House lost market share despite strong sales
Kraft Heinz said Thursday several of those big brands are
regaining ground. Oscar Mayer cold cuts gained market share in the
third quarter for the first time in a year and a half, the company
Mr. Patricio last month outlined for investors a plan to further
cut costs and spend the savings largely on innovation and marketing
for its most promising brands.
Kraft Heinz's namesake cheese wasn't among them. The company has
agreed to sell a major chunk of its cheese business to French
company Lactalis Group for $3.2 billion in a deal expected to close
Like other big food companies, Kraft Heinz has increased its
advertising spending to capitalize on the sales momentum generated
by the pandemic.
Kellogg, which also makes Pringles chips, MorningStar Farms
plant-based meats and more, is spending more on marketing after
delaying some advertisements earlier in the year because of the
"That will allow us to enter 2021 with lots of good momentum,"
Mr. Cahillane said.
Kellogg's net income rose to $348 million from $247 million the
prior year. Its adjusted profit of 91 cents a share was ahead of
expectations from analysts by 5 cents. Sales rose to $3.43 billion
for the quarter from $3.37 billion for the third-quarter last year
and were ahead of the $3.4 billion consensus estimate for the
Kraft Heinz's third-quarter profit fell to $597 million from
$899 million a year earlier, primarily due to divestitures.
Excluding certain one-time charges, its adjusted profit rose 1.4%
to 70 cents a share. Its revenue rose 6% from the prior year to
$6.44 billion. The results topped analysts' projections of $6.32
billion in sales and 62 cents a share in adjusted earnings.
Write to Annie Gasparro at firstname.lastname@example.org
(END) Dow Jones Newswires
October 29, 2020 12:57 ET (16:57 GMT)
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