Philadelphia, Primal Kitchen Drive Gains as Kraft Heinz Weighs What’s Next

Kraft Heinz didn’t dive into rumors on today’s earnings call that it may be the latest food conglomerate to divide up and sell off certain business segments, but it did make an effort to reassert its confidence in the company’s long-term value creation strategy.

“Our board is working with urgency on evaluation of those strategic options to unlock… long-term strategic value creation,” said CEO Carlos Abrams-Rivera, in response to an analyst question. “I’ll remind our investors that we will operate with the same financial discipline you have come to expect from us. So any actions, if any, will be consistent with that goal of unlocking that long-term shareholder value, and that’s essentially all I can say at this time.”

While the company’s organic net sales dropped 2% during the second quarter, that is a marked improvement compared to the 4.7% year-over-year decline reported during the first quarter. Prices increased 0.7% year-over-year while volume/mix declined 2.7%. Kraft was hit with a $9.3 billion impairment charge in the quarter as well due to “a sustained decline in our share price and market capitalization,” the company said.

The company’s International and Away From Home segment posted growth for the 17th consecutive quarter, though it continues to face pressure due to tariff headwinds. Emerging markets, including Latin America, Africa and the Middle East, were a bright spot on its balance sheet with significant distribution gains for core product lines like Heinz ketchup.

Abrams-Rivera emphasized that the company is confident it can “drive long-term profitable growth” as he spoke about its future and momentum it is building across business segments, including improvements among its sauces and condiments brands as well as Philadelphia and Capri Sun, which tracked a dollar sales increase of 6% in the quarter.

Both Philadelphia and Primal Kitchen are tracking strong year-over-year growth, Abrams-Rivera said, which helped offset declines in Lunchables. The company pointed to how macroeconomic factors as well as rising consumer awareness around high-protein, clean label foods are feeding those results.

“We have great products that enhance protein, no matter what type consumers choose. Even in today’s environment where conversation centers around value, we are also seeing consumers prioritize better-for-you options,” Abrams-Rivera said.

Protein interest drove dollar sales improvements for Kraft Heinz-owned sauces and condiments such as Worcestershire sauce in addition to both Heinz and Primal Kitchen brand ketchups; the latter two brand portfolios have seen dollar sales increase 17% and 24%, respectively, during the quarter, the company reported.

Additionally, the company’s “brand growth system,” which has prioritized improvements across four North America brands – Capri Sun, Lunchables, Kraft mayonnaise and Kraft mac and cheese – is on track to deliver 40% sales coverage by the end of the year, a 30% increase compared to 2024.

That system includes a heightened focus on marketing and innovation with new launches like Capri Sun multi-serve bottles already beating both velocity and distribution expectations. Abrams-Rivera also pointed to the debut of Lunchables peanut butter and jelly, signaling it may be looking to pull some share from Smucker’s hero product Uncrustables, which shares a similar use occasion and target audience.

“Let’s face it, if our product is not the hero of our story, we’re not telling the right story,” he said. “We have created a playbook that helps us get it right every time – it is all about crafting creative that makes your mouth water, ensures our brand stands out and reminds consumers of all the moments when our products are the perfect fit.”

Those efforts also include a new partnership with Live Nation which will expand its ketchup portfolio both through new points of distribution and innovation opportunities. That leads Kraft to renew its focus on “higher margin channels,” Abrams-Rivera stated where it can see clear opportunity for profitability. The company is also ramping up its media investment by 75% and aims to bundle complementary brands from its portfolio within those marketing efforts.

Lastly, the company is also investing more into its pricing strategy with a focus on realigning optimal price gaps and driving trial through product improvement within its namesake mac and cheese segment as well as Lunchables.