Kraft Heinz

Grocery & Restaurants

Kraft executives marveled at the success of their price hikes

Kraft Heinz’s CFO: “we have executed a new price increase in the month of August. And the elasticities turned out to be stronger than what is anticipated.”“Andre Maciel, Executive Vice President and Global Chief Financial Officer: So, Andrew, first of all, we — as Miguel said at the beginning, I think we feel very excited and pleased with the results we achieved in the quarter. And I’ll tell you that a lot of things happened in our favor towards the month of September. First of all, if you might remember, we have executed a new price increase in the month of August. And the elasticities turned out to be stronger than what is anticipated, which resulted in strong top line. Shipments were very good. I think our team did a great job in the month of September to be able to ship in a much better pace than earlier in the quarter, which also helped us. We end up spending less promotion also that we have initially anticipated, which is fine, as well that we’re being very prudent to put all the promotions and expense in our portfolio.” (The Kraft Heinz Company Q3 2022 Earnings Call, 10/26/2022)

Kraft Heinz’s CFO noted that while their prices were up 17%, private label prices had increased 16% as well.“Andre Maciel, Executive Vice President and Global Chief Financial Officer: Third, the private label have been increasing the price together with the rest of the players. So as recent as the last 4 weeks, including already 3 weeks of October looking at sellout data, our sellout price is about 17% up, whereas private label is 16% up. So price gaps are widely preserved. You might have seen as well in 1 of this calendars we provided that comparing Q2 to Q3, the price gap with private label remains the same. So we do not see any category where our price gap expanded versus private label except to Ketchup and Lunchables, which honestly the interaction is limited, and we gained share in both of these categories. So yes, I think we feel good about that.” (The Kraft Heinz Company Q3 2022 Earnings Call, 10/26/2022)

A Kraft Heinz executive boasted their brands had “pricing power.”“Carlos Abrams-Rivera, Executive Vice President and President, North America Zone: Yes. And I think what I would say is we have continued to invest in the equity of our brands, which if we think about the fact that companies really don’t have pricing power brands, have pricing — pricing power. So the investments we have made with the quality of the marketing we have improved here at Kraft Heinz and the commitment we have to continue to invest in our brands going forward, also give us some confidence as we continue to manage through the current environment.” (The Kraft Heinz Company Q3 2022 Earnings Call, 10/26/2022)

Kraft Heinz’s CFO: “in Q2 and now in Q3, price was in line with inflation and price plus gross efficiencies was ahead of inflation.” “Andre Maciel, Executive Vice President and Global Chief Financial Officer: Sure. Thanks for the question. Look, we have been — as we said all along, have pricing to protect the dollar inflation, so dollar for dollar, and we have been doing that now for the second quarter in a row. So both in Q2 and now in Q3, price was in line with inflation and price plus gross efficiencies was ahead of inflation. Given that we had in Q3 as we initially said back in September, some incremental pressure in selected places and we took action already on it, there is this continuous lag in effect. So we expect Q3 to be the bottom of our gross margin, and you should expect to see a sequential improvement in Q4 in comparison to Q3.” (The Kraft Heinz Company Q3 2022 Earnings Call, 10/26/2022)

Kraft Heinz said the company was hiking prices to increase their margins, implying they would stick even as inflation decreases

Kraft Heinz’s CFO predicted the company’s margins would increase because “as we continue to price inflation, the inflation events that start to ease, that might put us in a better position for us to continue to recover the margin.” “Andre – Executive Vice President and Global Chief Financial Officer: Yeah. Thanks for the question. Look, this is by very far the highest impact. But other than the need that you have the growth efficiency. Remember that you have the $2 billion that (indiscernible) have communicated and that we are on track to deliver. We delivered the first two years in line with the expectation. And year three, which is now — we continue to be on track. So, that certainly continues. Mix effect is relatively small. It’s now in the quarter, slightly positive as we continue to accelerate the growth platforms where we have higher margins. But the number in the quarter is not significant. So, really in this quarter, it’s about the dilutive effect. But again, moving forward, we should expect to continue to deliver the growth efficiencies. And as we continue to price inflation, the inflation events that start to ease, that might put us in a better position for us to continue to recover the margin. (Kraft Heinz Q2 2022 Earnings Call, 7/27/2022)

Kraft Heinz’s CFO bragged that some of its sales were up 14% from Q2 2019, saying “price also has a lot to do with the growth that that we’re seeing in Q2.”“Andre Maciel – Executive Vice President and Global Chief Financial Officer: Thanks for the question. I think there are two things. One is, I want to highlight that was not in the prepared remarks that our Foodservice now in Q2 is 14% higher than Q2, 2019, which is really remarkable. There is a component of price, right? We’ve been pricing that channel consistent to what we’ve been doing in retail. So, price also has a lot to do with the growth that that we’re seeing in Q2. But the volume continues to grow as we expand distribution. We have been getting market share in the — where we have the information in developed markets in North America, Europe and Central.” (Kraft Heinz Q2 2022 Earnings Call, 7/27/2022)