- Kraft Heinz reported Wednesday Q1 revenue of $6.57 billion, a 3.8% decline on a pro forma basis due mainly to currency headwinds, which accounted for negative 4.5 percentage points. Organic net sales ticked up 1.1%, including 0.8 percentage points from volume/mix.
- Adjusted EPS increased 37.7% to $896 million, or $0.73 per share, which beat analysts' expectations. The company decreased its selling, general, and administrative expenses by 12.8% on a pro forma basis.
- Net sales in the U.S., where Kraft Heinz generates more than 70% of revenue, remained almost flat at a 0.2% uptick. "Consumption trends in a number of our core categories remain challenging and we're entering a critical phase in our North American supply chain integration," Kraft Heinz CEO Bernardo Hees said in a statement.
Kraft Heinz lags behind competitors in one critical area: natural and organic products. The company has made efforts, including the quiet rollout of Kraft Macaroni & Cheese reformulated without certain artificial ingredients and the debut of organic Capri Sun. But those changes have been at the brand level, whereas competitors like General Mills, Campbell, and Nestle have instituted changes across entire product categories or have brands devoted solely to natural and organic products.
Kraft Heinz has room to grow as it either reformulates more products or introduces new products in the better-for-you foods segment. If Kraft Heinz doesn't start moving in that direction sooner than later, it could fall behind competitors.
Then again, it doesn't have to follow the strategy of all its competition. If most of the food industry is tweaking products and following that trend, Kraft Heinz can maintain brand positioning and be seen as a more indulgent alternative in the marketplace, which could play in its favor. After all: Americans still on average consume about 58% of their total daily calories from "ultra-processed" foods, according to a study published in the medical journal BMJ Open.
Regarding the merger aftermath, Hees said the company is embarking on a crucial step — the combination of Kraft and Heinz's overlapping brands in North America. It's currently determining which brands to keep or divest and which to reposition, such as Heinz's new BBQ sauces positioned as competitors for premium regional sauces rather than Kraft's own eight varieties.
When Kraft Heinz starts making brand decisions, companies like B&G Foods could be there with new opportunities to turn around underperforming brands.