Kraft Heinz is anticipating a return to “historical activity” volume levels in the latter half of 2024 after posting another volume decline in its fourth quarter.
CEO Carlos Abrams-Rivera said during an earnings call with analysts that the US tomato kethup and soup giant is “already seeing” a bounce-back after disappointing “volume/mix” results in the business’ 2023.
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He stated: “So, we are expecting volumes to turn positive in the second half in the year because as I mentioned, the idea of us continuing to invest in innovation that actually will give us the right tailwinds as we go into the year, plus we no longer will have some headwinds associated with both pricing that we took in Q1 of last year as well as the SNAP [Supplemental Nutrition Assistance Programme] benefits cycling that as we go into the second half of the year.
“So that all together gives me the confidence that we can see us coming together with a better performance – we’re going into 2024 in a way that actually allows us to exit the year in an algo[rithm] for us as a company.”
For 2023, Kraft Heinz posted net sales of $26.6bn, up just 0.6%, with adjusted EBITDA of $6.3bn, up 5.1% on 2022.
In the fourth quarter, net sales fell 7.1% to $6.9bn while adjusted EBITDA dropped 5.3% to $1.7bn.
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By GlobalDataThe US business has forecast annual organic net sales of flat to 2% growth. In 2023, it posted organic net sales growth of 3.4%.
In 2023, price increased 8.9 percentage points versus the prior year period while “volume/mix” dropped 5.5 percentage points. In the fourth quarter, the company ramped up promotions significantly in North America to encourage demand, but pressures from higher prices kept volumes lower.
CFO Andre Maciel told analysts that he expects gross margin “to expand again” in 2024 as it comes under the company’s “long-term algorithm”.
Commenting on yesterday’s results, John Baumgartner, an analyst with Mizuho Securities, said the “assumptions likely deemed aggressive by bears focused on deflationary price risk and industry volume pressure”.
In a statement following the release of its results yesterday (14 February), Kraft Heinz said it expects a “positive contribution from price throughout the year” in order to turn around volume declines.
But Maciel added: “We have always been pricing to offset inflation in dollar for dollar, and that’s what we have done in the last two years. However, in 2024, we are expecting to price approximately at 1% level, which is below the inflation that we’re expected at 3%. So, the main driver is really coming from the gross efficiencies.”
Despite pricing being a major component of Kraft Heinz’s strategy in 2023, the US major is conscious of consumers trending towards affordable products and seeking “value”, the chief executive stated.
“What we’re seeing in the data is regardless of the income levels that consumer is looking for value and they continue to be under pressure,” Abrams-Rivera said.
“But mostly, we are seeing them looking for overall, smaller trips to stretch their dollar further. So for us, it continues to be about how do we continue to deliver value in different ways to that consumers who are very much focussed on value through intentionally investing in our brands making sure we have longer value offerings and increasing the distribution in different channels to be what we have done in the past.
“So, we are making sure that we are in the right channels with the right assortment and continue to invest in our innovation in order to make sure that we could absolute consumers looking for value independent of where they’re looking for different occasions, different formats, different shopping behaviours.”
