The Kraft Heinz Company Q4 FY2025 earnings call

Key Managerial Messages

• Steve Cahillane noted the company was underinvested and emphasized the exploration that led to a plan to invest $600 million to return the company to organic growth. He mentioned pausing the spin to focus 100% on returning the company to growth.
• Andre Maciel highlighted momentum in the base elevation business (sauces, cream cheese) with 70% of revenue in data elevation gaining market share, emerging markets growth, and Canadian business growth. He also discussed capital allocation priorities, focusing on deploying excess cash to pay down debt to target leverage.

Forward-Looking Guidance

• The $600 million investment will start ramping up in the second quarter, with meaningful results expected in the back half of the year, aiming to bend the trend in market share.
• The company aims to return to organic growth by 2027, with a focus on value market share.
• Capital allocation prioritizes deploying excess cash to pay down debt to maintain a net leverage of approximately three times.

Q: About underinvestment in brands and the $600 million investment A: Steve Cahillane stated the company was underinvested, and the $600 million is to get back to where they should be in terms of investing in brands to return to organic growth, and the spin was paused to focus on this work.

Q: Change in thinking leading to pause in the spin A: Steve Cahillane explained that exploration showed opportunity to fix the business in the short term, and with finite resources, pausing the spin was the best outcome to focus on driving organic growth.

Q: Investment amount, phasing, and categories A: Steve Cahillane said the $600 million will ramp up in Q2, with meaningful results expected in the back half of the year. Half of the investment is on price, product, and packaging across the portfolio, with some brands already showing improvement.

Q: Definition of short term and investment focus overseas A: Steve Cahillane said investment is disproportionately in the US, with an expectation of a trend change in the back half of the year, aiming to return to growth by 2027.

Q: Brands not responding to investment and commodity exposure A: Steve Cahillane said they focus on brands that respond to investment, and Andre Maciel talked about momentum in the taste elevation portfolio and discipline around commodity pricing.

Q: Long term outlook and repurchases A: Steve Cahillane said it's too early to talk about long-term algorithms, and Andre Maciel discussed capital allocation prioritizing debt paydown to maintain target leverage.

Q: SNAP exposure and impact A: Steve Cahillane and Andre Maciel talked about SNAP headwind, with 13% of US retail business from SNAP, and investment in opening price points to mitigate the headwind.

Q: Investment in value pricing and implementation A: Steve Cahillane and Andre Maciel discussed price optimization, with a portion of the investment starting in Q2 to optimize tactics, and a focus on building momentum in ecommerce.

Q: Soft skills and connecting with retailers A: Steve Cahillane talked about bolstering personnel, investing in technology, and maintaining a consumer-first mindset to connect with retailers.