Dive Brief:
- The Kraft Heinz Co. released financial results of the two individual companies' last quarter, before the merger took effect in early July. The results demonstrate the issues both companies endured and outlined the challenges they could face as a merged company.
- Revenue fell at both Kraft and Heinz, at 4.9% and 4.1% respectively.
- Profit actually rose at Kraft Foods Group due to cost-cutting efforts already in place before 3G Capital took over and began cutting costs, according to Bloomberg. H.J. Heinz Co, however, posted a loss due to exchange-rate issues, though operating profit increased.
Dive Insight:
Some Kraft and Heinz brands could be in trouble if revenues continue to fall and 3G adheres to stringent cost-cutting measures company-wide.
According to Edward Jones analyst Brian Yarbrough, 3G has a history of "pulling all the money from brands that aren’t performing and putting it behind those that are. But if Kraft’s brands like Jell-O aren’t performing with that investment, think about how bad they’ll be without it," The Wall Street Journal reported.
As for the combined company, Kraft Heinz executives did not detail an outlook or provide updates as to how the merged company will operate. Kraft Heinz executives went outside the norm by not holding a conference call with analysts, though on Aug. 14 there will be a listen-only call for bondholders.
Bernardo Hees, Kraft Heinz CEO and a partner at 3G, said in a news release that Kraft Heinz "is focused on the difficult and challenging process of integrating our two businesses."
Meanwhile, despite speculation, Kraft Heinz will not acquire Mondelez, or any large food company, according to Warren Buffett.