Dive Brief:
- Kraft Heinz reported a 1.5% dip in pro forma net sales to $6.27 billion for the third quarter, compared to $6.36 billion in the year-ago period, according to the company's earnings report, released Thursday. Organic growth declined 1%.
- The company beat expectations for quarterly profits, which totaled $842 million, or $0.69 per share, compared to the loss of $168 million, or $0.14 per share, that the two merged companies would have posted last year. Kraft Heinz expanded margins to 22.5% from 18.5% in the second quarter.
- U.S. pro forma net sales decreased 1.2% to $4.4 billion, and sales in Europe plunged 14.5%. Sales in Canada saw a 2% uptick, and sales in the rest of the world increased 4.4%.
Dive Insight:
Kraft Heinz's original goal was to decrease annual spending by $1.5 billion by the end of 2017. Because the company has already achieved about three-quarters of that goal, executives said Thursday they may increase the cost-cutting target. That increase will depend in part on how much of the cost savings the company decides to reinvest in its brands and product development.
Kraft Heinz, while pleased with its financial performance, remains focused on improving top-line growth to "set the table for 2017," CEO Bernardo Hees said on the earnings call. That will likely mean more innovations built upon current successes like premium varieties under the Cracker Barrel brand, barbecue sauces and Devour frozen meals. Investments may also go toward reviving struggling categories, such as cold cuts, food service and nuts.
Kraft Heinz owner 3G has proven its ability to create a profitable, synergistic merger of two major processed food companies. Experts are now curious if and when 3G will pursue another deal to further broaden Kraft Heinz's portfolio. One route could be to acquire a more health-centric company to add depth to Kraft Heinz's offerings, which still trend toward ultra-processed products.