- Kraft Heinz reported net sales of $6.7 billion for the second financial quarter, up .7% from the same period a year ago. A 1.9% decline in the company’s U.S. business was offset by an 8.7% gain in Europe, the Middle East and Africa and a 13.5% increase across the rest of the world.
- “We believe we are now in a position to drive sustainable top-line growth from a strong pipeline of new product, marketing and whitespace initiatives that are backed by investments in capabilities for brand and category advantage,” Bernardo Hees, Kraft Heinz’s chief executive officer, said in a statement. “And while cost inflation on many fronts has been holding back our bottom line, we expect our profitability to improve by year-end, with further momentum into 2019.”
- Separately, the New York Post said the company has taken a preliminary look at Campbell Soup, but would not offer much of a premium if it decided to make a bid.
Kraft Heinz expects 2018 to be a tale of two halves. During a conference call this morning, executives said they anticipate the slower sales momentum of this year’s first two quarters to give way to stronger third and fourth quarters in which new releases and marketing initiatives gain traction.
This includes splashy new releases like Mayochup and Just Crack an Egg, which rolled out with great fanfare earlier this year, as well as build-outs in established categories like condiments and nuts. This spring, Kraft Heinz launched a line of Food Network branded salad dressings. The company’s new incubator has been busy too, with investments in egg white chips, meat snacks and fermented foods.
At the same time, Kraft Heinz has been in a “renovation” phase, according to company officials, as it revisits its legacy products and operations. It recently reformulated and rebranded its popular Boca Burger, with new packaging that highlights protein content. Then just this week, the company announced it will make all of its packaging reusable, recyclable or compostable by 2025.
These are steps in the right direction for a company that, like many CPG makers out there, has fallen behind consumer demands for innovation, freshness and health. And along with the operational savings achieved through a marquee merger in 2015 — $1.7 billion so far, according to the company — Kraft stands to move the needle on top-line growth.
But innovation and renovation may not be enough to satisfy shareholders, who have watched Kraft Heinz’s stock price fall 25% this year. The company likely needs to land a marquee acquisition, too.
Could Campbell be that company? The New York Post reports that the two manufacturers have been in talks since Campbell announced its undertaking a strategic review of its business. But according to CNBC, Kraft Heinz may be looking outside the battered CPG space for a deal. The company passed on an opportunity earlier this year to acquire Pinnacle Foods, which ConAgra ended up buying for $10.9 billion.
The acquisition could still happen if Campbell ends up putting itself on the sale block. But that company’s struggling soup business and misfires in fresh foods are burdens Kraft Heinz may not be willing to shoulder.
Kraft Heinz’s failed takeover of Unilever last year showed its interest in making a big acquisition. Whether that pick-up will come this year or not remains unclear. What is certain, though, is Kraft Heinz’s need to transform its business, and fast. As many consumers seek healthier options and turn away from processed Big Food products, the company needs to shake up what it's doing to meet current trends.