Kraft Heinz “Contemplates” Base Price Actions As Q4 Sales Drop
Kraft Heinz’s top four segments each underperformed against category averages as net sales fell 4.1% and organic net sales dropped 3.1% in Q4, according to an earnings report released Wednesday. Full-year sales fell 3% alongside a 3.5% drop in volume even as the company bumped pricing up 1.4%, on average.
“We are committed to making the necessary investments to drive top line improvement, while remaining disciplined,” said CEO Carlos Abrams-Rivera during prepared remarks. “While we have much more work to do, I am confident in our strategy, our people, and our unique ownership-centric culture to drive consistent long-term profitable growth.”
Kraft attributed the poor performance to the challenging operating environment. While it was able to improve gross margins by about 120 basis points during 2024, it expects margin growth to be flat in 2025 as it works to add 40,000 new points of distribution across its emerging market segment and invests in price, product, marketing and tech-led solutions to “drive the efficiencies that lead to improved margins,” Abrams-Rivera said in response to an analyst question.
Pivot on Promos
Promotions have long been a key piece of its strategy and Kraft leaned heavily into discounts over the past year, but Abrams-Rivera signaled a need to revisit that strategy when pressed by an analyst, who noted that the strategy no longer appears to have a positive impact on volumes. Abrams-Rivera said not all of the company’s promotions are working “as they used to” and acknowledged that Kraft is “contemplating” changes to both promotions and base pricing for select products.
That primarily focuses on brands within its Accelerate segment, which includes Lunchables, Mac & Cheese, Kraft Mayonnaise, Ore-Ida, Philadelphia, Heinz Ketchup and Taco Bell. Kraft Heinz is focusing price investments in this area because of the potential to improve U.S. retail performance, Abrams-Rivera said.
Benefits from a now-resolved supplier issue are expected to help return its Lunchables brand to growth after it faced an ingredient challenge in Q4. The company claims the solution brought “better quality [and] better ingredients,” to Lunchables, which will see more innovation and marketing efforts in 2025.
Abrams-Rivera pointed to Capri Sun, one component of the Lunchables pack, as he worked to dispel the notion that all of Kraft’s segments were operating below category averages citing that the business grew dollar sales 5% in Q4. Those improvements were attributed to taste improvements as well as the addition of multi-serve packaging, single-serve bottles and an expansion into the convenience channel.
Kraft Heinz is also looking deepering into non-commercial channels for higher margin opportunities, including sports team and venue partnerships as well as a new deal with Hilton hotels, which contributed about 70 margin points during 2024. Increased penetration of its Philadelphia brand in away-from-home channels, such as via Dunkin’, have contributed to high-single-digit positive sales growth.
Lastly, Abrams-Rivera noted it has not seen any meaningful impact from increased use of GLP-1 drugs on its business, but emphasized Kraft’s awareness that these consumers are looking for more protein and hydration alternatives. As it looked to increase innovation momentum in 2025, these could be motivating forces.
