Kraft Heinz reported a slight (-0.5%) loss in net sales to $6.6bn in Q2 2021 compared to one year ago. For the third quarter of 2021, the company said it currently expects a mid-single-digit percentage increase in organic net sales.
When comparing its growth to 2019 levels, however, the company’s performance is much more favorable.
“In the second quarter, we maintained the lion’s share of extraordinary gains we had in 2020. As a result, organic net sales grew 5% versus the same period in 2019,” said Patricio during the company’s Q2 2021 earnings call.
“By channel, I would also note that our retail business has remained well above pre-pandemic levels. And while our strategic investments are beginning to drive our results, it’s still early in our transformation, which makes us optimistic about how our priorities and initiatives can fuel our momentum going forward.”
Inflation outlook
Patricio added the company is continuing to manage the impact of inflation.
“Similar to industry peers, our cost pressures are somewhat greater than they were three months ago. For us, the latest uptick has mainly been driven by additional costs in resins,” he said.
“We have already offset the cost inflation we’ve seen to date. And we continue to believe the level of inflation we are seeing is manageable going forward.”
‘Nearly 2 million more households bought Kraft Heinz brands’
Kraft Heinz US zone president, Carlos Abrams-Rivers, noted how Kraft Heinz has significantly increased household penetration on a two-year basis.
“Compared to 2019, nearly 2 million more households bought Kraft Heinz brands in the second quarter, boosting an already high household penetration rate, while repeat rates were up 8 percentage points. Additionally, spending per buyer, and per trip, both increased by roughly 10% and 3%, respectively,” he said.
Abrams-Rivera shared how the company is also gaining share outside measured channels as its foodservice sales continue to grow.
“Our foodservice sales growth in Q2 outpaced the industry, thanks to our renewed focus on insights, culinary trends, and distribution,” said Abrams-Rivera.
He also noted that the company has seen success bundling its iconic brands together into a full meal solution for consumers.
“A great example of this is our Art of the Burger program,” he said, explaining how the company customized out-of-aisle sets to merchandise all the elements needed to create a burger (burger buns, patties, cheese, fresh produce) into one easy-to-shop destination.
“And online, we added Ore-Ida potatoes and other grilling favorites to help drive even greater lift for our partners and sold more than 5 million incremental bottles of Heinz ketchup. The Art of the Burger program illustrates how we’re thinking less about our categories and more about our platforms that address how consumers eat,” said Abrams-Rivera.
The company has similar plans to introduce an omni-channel breakfast experience that combines six of its brands including Oscar Meyer bacon and Kraft Singles.
“We activated this with 30 retailers and across e-commerce. And in one month the program generated $8 million of incremental net sales and several learnings for future programs.”
Modernizing connection with consumers
So how does the company plan to keep up its growth? One strategy, said Patricio, is investing in stronger and more creative marketing.
“From the Kraft Mac & Cheese-flavored ice cream you may have seen, to our Olympics partnership in Canada, our teams around the world are showing their consumer obsession and delivering breakthrough creativity to modernize our iconic brands,” he said.
Kraft Heinz will continue to invest heavily in its marketing spend in an effort to update its messaging to become more “culturally relevant” to consumers, said Patricio, who noted that the company has increased its market spend by 10% in the first half of 2021 compared to H1 2019.
“Within this spend, we will put more dollars behind working media, digital channels, and high-performing priority brands and platforms.
"We are also starting to see the culture of creativity we want to build showing through with more consumer-led, more culturally relevant campaigns,” said Patricio, adding the company won six Cannes Lions awards for its marketing campaigns this year.
Commenting on marketing efforts for its core brands in the US specifically, Abrams-Rivera said, "Total Q2 marketing was up double digits versus 2019, and we’re ramping up our digital effort, which is now roughly 70% of total spend.
"In truth, we are still at the early stages of our journey to fully leverage occasion based insights and create new, culturally relevant ways to drive stronger engagement with consumers."
