Kraft Heinz plans to lean on marketing and innovation to drive sales and restore volumes but 2025 is set to be another year of depressed growth.
CEO Carlos Abrams-Rivera described those two inputs as “key enablers of our growth” for the new fiscal year after reporting a 2.1% decline in organic sales revenue and a 3.5% drop in group volumes in 2024.
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“We have significantly increased innovation as a percentage of our organic net sales from 1.6% in 2022 to 2.9% in 2024,” Abrams-Rivera said this week in prepared remarks to accompany the final numbers for last year.
“We are focused on creating and providing consumers with products that are worth paying for – whether that be through cuisine and flavour exploration, high-quality convenient solutions, or expanding options and functionality through unique benefits.”
Finance chief Andre Maciel suggested the loss in volumes was partially linked to price, particularly around four under-pressure key brands identified by Abrams-Rivera as Lunchables, Kraft Mayonnaise, Kraft Mac & Cheese and Capri Sun.
Maciel explained the potential fix: “As we think about improving overall competitiveness in the market, we are leveraging a combination of strategies.
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By GlobalData“We are focused on growing our base volumes in a sustainable way. This includes through consumer-driven innovation, portfolio renovation, marketing that matters, as well as selectively investing in price.
“Looking to 2025, we are planning an increased level of investment in price. Remaining mindful of the consumer situation, we plan to make investments to adjust price gaps in select categories – primarily across the four key brands Carlos discussed and in US away-from-home.”
While the CEO pointed to an improvement in the top-line in the new year – already more than a month in – organic growth was guided within a better-to-worse scenario of flat to down 2.5%.
“Looking ahead to 2025, we are seeing key successes that aren’t yet showing up in our financials and we are expecting to see improving top-line throughout the year while preserving profitability,” he said.
Brand investment
The two executives were posed with the suggestion from one analyst that Kraft Heinz’s brands – beyond the four pressured lines – are underperforming competitors.
“Our portfolio is about over 200 brands in over 40 countries,” Abrams-Rivera responded when asked what might be needed to drive organic growth.
He added: “If you think about today where we see our challenges, they are concentrating in four brands and only in the US retail business. It actually helps quite a bit for us to make sure that we are being focused on our investments in products and pricing in order to drive top-line improvements, in particular, those areas that, again, are a subset of the large brands that we have in a number of countries we participate.
“At the same time we’re doing that, we’re also being conscious of making sure we manage through our margins so that we don’t go backwards in our gross margins.”
Margins did improve through 2024, by 120 basis points reported and 100 points adjusted to 34.7%. However, organic sales revenue was down 2.8% in both North America and the international division, with emerging markets bucking the trend with a positive 4%.
Volumes were down too – 4.2% in North America and 2.8% for international, with a better 0.5% in emerging countries.
Maciel sought to explain: “I think given the different categories that you play in, different dynamics, the approach differs a lot. There are places where, yes, it’s affordability. And that’s where we are going to invest the price the most to ensure that price gaps are established.”
Abrams-Rivera suggested there will be a different level of brand investment behind different categories but said Kraft Heinz will “invest in those businesses that we believe have a bigger tailwind”.
A so-called brand growth system is designed to inject momentum behind the four under-pressure brands, while Kraft Heinz plans to also invest in what the CEO called accelerate brands.
“Across each of these brands, we have kicked off the brand growth system, running deep, forensic-like assessments that will uncover the most meaningful opportunities to drive brand superiority,” Abrams-Rivera said.
“Our accelerate platforms represent the most-attractive spaces within our portfolio where we have the highest right to win, and in turn where we have been prioritising our investments. This prioritisation has contributed to growth across several of our iconic brands, including Philadelphia, Heinz ketchup, Ore-Ida and Taco Bell.”
