The Kraft Heinz Company (KHC) 15 Feb 232022 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to The Kraft Heinz Company Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

hand over to today, your like Megela. Anne-Marie now the to conference speaker I'd ahead. go Please

to and you, of The and our Relations Head This business XXXX Global at session update. welcome fourth Company, quarter Heinz Thank Kraft everyone. Investor hello, is Q&A for our Anne-Marie Megela,

are expectations and uncertainties. may impacts. business factors call, see expectations, plans regarding we our these strategy, differ filings forward-looking on related materially release, as due including to uncertainties. today's expected recent future, based efforts and in risks statements make today's the our see statements related cautionary and investments risks timing which we and risk X-K These and XX-K, and and results During as more this and actual regarding call and Please well for statements things information may for how earnings to our accompanies the contained today, most XX-Q

from exclude the of refer may GAAP to to we at items discussion financial non-GAAP Please release GAAP. accordance today's financial & Additionally, results information and measures, earnings refer measures our News for and Events non-GAAP which reported ir.kraftheinzcompany.com on non-GAAP to website with the a in certain our our available reconciliations financial under measures. financial comparable

hand begin, over Before for now to opening to we comments. some it going I'm CEO, brief Miguel Patricio,

you, and for us joining thank Anne-Marie, everyone, Thank you, here today.

how of proud first am Heinz say, me moment I to Let take a team. Kraft

quarter have no journey. quite exception. We It's amazing. And on far was the fourth come so transformation our

are trends across market positive. are volumes our Base You business, can service share building see and the improving. momentum levels

allow And a over teams, for to again, invest have our consumers. tools growth. we this this and We our us efficiencies emerging are foodservice continue to competition invest outpacing innovation new markets for importantly, for and million in and new unlocked capabilities and a we year, Once product by $XXX the lot. in

been already pricing XX% all perspective, of pricing announced a for needed has From XXXX.

in to Europe, plan look America we I'm positioned am most the growth. about are no and we North optimistic. we how America, rest the of I year, have deliver sustainable pricing Latin long-term very Asia. excited very current As new announce to to of

and With join that, Rafael to Carlos me. Andre, ask I’ll

the Q&A. the open call let's So for

Instructions]. [Operator

Andrew Our Barclays. first question comes with from Lazar

morning, Great. Thanks. Good everybody.

Your excluding EBITDA when fiscal reach to guidance long XXrd this I term level would line of 'XX And ago, your sort of week impact it the actually year for you the guess I years from detailed with think is this, said CAGNY growth. multiple a algorithm. you take at in

a guess ahead to I of So schedule? regard, this level it Like, trying are most to? in now whether you. this I than in And what's I'm get growth faster I of you right, guess you you if this where what gone so, see more importantly, as of you are better you anticipated? attribute if or sense whether maybe place And a Thank have -- sustainable?

for Andrew, question? you you, could this the Thank Andre, answer question.

and the morning for a lot it. Good Hi, Sure. And Andrew. noticing for question again. thanks thanks

we we we the in week. rate. And long-term as sales best foodservice XXrd deliver we think also all above the double-digits another what we very on markets currency algorithm Still that's but a U.S. XX%, see and improving, results, achieving about continuing on show effects the is that if have finished is a the And at on high improve. already negative way XXXX This transformation think is in XXXX. a are we company. how that momentum, working how proud fact, translating In from from right? into to strong good in been And strong net EBITDA, the we stronger in notice, and I remove this will our very in I emerging it's XXXX, as a And feel as performance. in through step-up share market our of to to growing at continues consequence to performance mark

these, our in are favor. So all terms working growth, in of

efficiencies XXXX, business margin have is might in to as continue you XXXX are expanding levels, back our guidance, the in we see to growth. happen. investment increase and chain continue to Supply to go in And gross us allowing path which noticed the to for

increasing the critical in which to levers we technology XXXX So behind people, of are fuel the for company. marketing, are us and investments growth

where So we still but will. we we are moving. about, want to We feel good do,

our One next moment for question.

Our comes with next question from Bryan Bank of America. Spillane

more prepared guess, materials, of, it decision I service level. inventory just that. free us goods I Andre, give have I a and morning, Is it Is questions is the in guess terms couple My it's Good question to the in the everyone. I first remarks, of cash can you a little flow, operator. bit is inventory? the simply, the build? that? about to finished Thanks, related just do insight guess, to tied raw And

are carry to going So inventories my question. Is you first to through elevated 'XX? need

we throughout the inventory. Thanks question. have had as we said, for Sure. Look, rebuild XXXX, to you as seen

Our which is in end low. low fill the rate at extremely XXs, case the of was 'XX

a So of to we had lot recovery do.

that the you still in of XXs. in low throughout seen we year, have us finished XXXX build So inventory. the the effect mind Keep is

expecting should it still what expect we should be. be ourselves not what are it's So retailers and

normal levels, that, raw we also trying the said inventory historical build materials, given buffers is have, all which average to package and compared and do to in because volatility higher uncertainty. coverage we're also, the in Being

expect XXXX. inventory service of opportunity inventory increase finished we decline though to spots raw have still even including lot those our a So network. rebalance across need we certain low, where we and inventory in still are the in in package should levels materials goods, to the that over time, And starting

out, of shipping the straight across because the started think itself we and warehouses inventory the sort right, the takes demand the actual have pandemic, that time network. I to of cost demand. of wrong is to volatility items one consequences to the in of that meet And product

of and have planning. effects forecast, to these that investments years we better supply of lot a are resources demand in because in the all past made investing the two So we automate

We are -- simplification. starting -- to already that we a network started big project have

the package of raw going these the or -- the of plus should historical recovering averaging we more future. materials and rebalance network, levels 'XX, plus of to back So but start combination the investments, starting the to inventory system into

free I to should this free 'XX. conversion cash thinking how guess now working Or tailwind? normal it flow a or a I be subdued somewhat, inventory be Can get in flow flow still So on, of previous for 'XX? you Like guess, cash conversion maybe little Will spending? that give was to capital guess, capital years? of free back to kind to bridging is about and perspective relative cash us we be can going we more bit I

XXX%, free going So algorithm CapEx not to the cash of were will still in flow be than that's great XXXX. be of part long-term better because in and We investments.

As we unveiled we have we have growth. And stepped for during said long-term up investing when the we well -- are investment as algorithm, in CapEx.

in little past. increase a seen XXXX, big are is that million, than in million, million $XXX $XXX which the more have You versus spending were $XXX a we

should as part are this closer X.X% to XXXX and perspective. current net we to go sales That's starting the our of back And up then ramping of We in down XXXX XXXX. plan. long-term again

will back change to when help us starts said the come go we to the achieve as outlook. the that to down, So the give step-up to long-term CapEx XXX%

addressable to you So so have I about like if expect is it going or this this year, year, -- something mean line. back XX% want to be should in

next with question from Stifel. Growe Our comes Chris

And yes, to then a to you promotional now. better branded some rebuilding -- throughout that want some I that. You've it had decline spending? think the Can more get what also just spending? portion kind bogey good had data on to promotional relation to I just that since get service XXXX is but what's levels spending. just the in you as should of understand data year? of you and improved a of your And a than you XXXX more that some sense efficient was X% down competition. that in Is of got answer those little increase more charts So show capabilities want expect the and promotional level that? I be for question appropriate and to color to for with do down you showed rebuild? tied

Andre, Carlos can and you comment Maybe, then start specifically U.S. in

Yes.

So -- question. thanks the and for

trade States alone. increased investment in 'XX, a have XXXX We significant more United from $X way than to the in billion very

high we organization. management created restarted very late a centralized a We XXXX. from base. We So have revenue increased

fruition than of put more have started that our the sales that that way and a have discipline a you results we now in alone, in behind North dedicated of the and We And of making promotional in to seen years. to fully of lot gathering three decisions us retailers. lot benefits a power science have to and America organization. coming last people We XX

That in XXXX, our to service than just competitors past, volume on percentage at sold still was on sold XX%. promotion, point well. XX% if an branded in the of above the is than QX But had impact lower in promotion as level we but 'XX. categories. in QX put from volume in as obviously That's you But higher XX% it XXXX, look perspective, X about a

that's So too much.

promotions investments, we are we negative have a still look ROIs. that of And amount right if have terms at significant where of you in promotional now

So it's deploying about it's not cutting it in way. smarter about promotions, a

but and for go we results ahead. seen the we that, of So a there's the in from are us have opportunities to lot journey, still

give to precise with But close number can it want tell going to this and I it, is get we're that confidence It to for deploy will going a is you of you anywhere what XXXX not to me not We where step-increasing. levels. land. is

Yes.

Let Listen, is comments as event-based mentioned them going being is we making surgical we how some what activity just would Carlos forward, invest about building about Chris. it here, dollars. just it's say that is about around activity. I of on me promotional really Thinking those through promotion that Andre think -- the

and driving from are think not And that as are particular heard utilization I XXXX, through make you how price-based we allows we that from then positive ROIs. -- think what back. we're thrive happens to we going that are of event us if it a went do huge thinking I way, we is the sure best And in Andre, you activity. So a actually made have sure to versus make we focused terms where we driving of

ROI ago. three when some ROI on XXXX, the actually average, the today, tripled on of think returns you level of our our programs, focus promotions from of you versus at years of XXXX our we've fact, In improving look of if

and data is agile of our revenue the of in better every it terms actually signal ROI how doing. doing in specifically how funding utilize are funding better again, we're the to terms management driving we're investments is work a to So in understanding that all still read that

comes question Cody with next from Ross Our UBS.

quick organic a sales Just your around guidance. question

wraparound growth organic from X% so, down to low the that throughout your for sales elasticity assumption what X%. low You you will pricing to growth if you guided the XXXX Based as correct? confidence that Is flat the year? incremental XXXX, of move XXXX so price And single we that then we estimate on discussed is and volume that gives digits. remain

Andre?

Cody, question. thanks for Hi, Yes. the

price So XX%. And as round have noted, implemented. of about we QX are a just that we we growing finishing well new just

effect in has half the certainly of first positive year. a that So the

up last for on year gradually expect algorithm, circulate be closer -- growth our in the that we the landing as price second from us half to something to long-term okay? the We throughout end increases we year

that, is driven all said by in XXXX the Being growth price.

line next the think that it's to And balance We at start balance the volume. and year, lot end that lap will about volume we good the want. as improves talk That's Obviously, the still prices. something we the it top throughout want growth as the week between even as So the But we in still not about think of negative. future, a a be we're price to going negative quarters we negative. about is that CAGNY.

we still levels. what in not have saw the level historical guidance elasticity the increased and way to We XXXX, of to contemplated up the but compared

what of gives terms In confidence.

So sell-out the industry the you QX was still very to saw for our strong.

and the price better if fact, the at sell-out, QX in any based was you sell-out looking quarter on In look at just year. elastic, than other volume

we this keep the can because throughout need obviously will need actively and to -- we see monitoring to consumers we year, we change maybe are behavior. Now

comment to want something do Carlos, that? you on

our price I formats there, the the been and -- years. are in The that one over offer would fact we couple that with we continue last of thing to maintain the of number sure we making us also we add is in the within points categories that to that terms Cody, sure expand of make have consumers

you consumers, is that sure XX% are club data, going stores, the at means that as in terms -- we and we're if consumers are the increasing and And we Mac those number have that for that So we QX, actually of to making actually & grew going whether in SKUs over to over at with of offerings, group, improving dollar that them. of consumption. look club, actually $XXX,XXX time, the in earnings Cheese of example, terms number to same we're JELL-O in consumers it's actually those the available particular

also sizes, which who to there's they and are point at those in choosing formats. of a we value club So come those way, in look that category can the have into terms

to about offer us terms to been having and best the provides continue that be in regardless change, situation. consumer them of the is for we So the agile of an for value think socioeconomic how we've it

comes Goldman question JPMorgan. next from Ken with Our

hoping better any Just a of of of magnitude get there's should the if about sense we the quarter-to-quarter timing besides in considerations to expecting have gross this And ones maybe improvement the cadence year. margin obvious terms of the you're the inflation, improvement? that from of

please? Andre,

Hi, Ken. Thanks the for Good question. morning.

we QX, us relevant -- that in said margins. have the in that which seen XXXX with in would gross line we a have have to sequential QX happened You improvement, put we

are we and a QX inflation to getting year, some affect contracts last basis. margin passed us. but flattish over expect And should But see go year was to as that maybe down We not we to renewed had year-over-year then on you expansion now gross guidance. in compared to bit that that contemplated in from in to us have to close our there -- is the to going prior a expect should QX start and somewhere you little

bps terms and people, magnitude bps, of are expansion, allowing you investments a which In to on ballpark, important XXX is what's about technology margin to that should XX gross increase to marketing, so think us of which us. behind so

question next Morgan of Kaufman Stanley. comes Our from Pamela

private that the Can that categories? coming remarks, you you the indicated talk dynamics label your prepared branded but is primarily In competitive from about is share competitors. within your increasing,

be helpful. elaborate That So if what just could maybe you on you're there? seeing would

and Andre Carlos can that. comment Maybe on

Sure.

for you Thank by start. question, the me Let way. the

our invest is continuing making sure terms we're and in making perspective in in what paying for continued marketing, continue and that of invest at actually products, over North market saw, when you key it As that bet misadjusted December, the make to speak basis share go terms Andre in do in see seeing is in maybe by us. flat. you that share look let actually is can me sure renovating innovation, We mean, the other points. now I And our his And XX give first, share that America we're company. saw that you was in business you then QX, we businesses misadjusted we're we to the improved the our invest improvements forward. of as actually

drive to in you and places So those is like particular of to to when drive Ketchup, you fact, in at & continue places Kraft as whether our Heinz driving look Mac like see terms those actually going growth Cheese, the brands all that are, share we that as Cheese, shares like that well, improvements places in in Lunchables, QX. in platforms positive want

in couple built the still the us a on we we also that So have to chain some categories. constraints are we we is, how that sure At sure continue same of we're have do supply potential for relatively make making time, those.

unleash we of retail it's the can, as now in are terms growth that making challenged that in transferring for still we of are and the are continued a that brands the sure continuing into brands, already that we're bit environment. so that fact, we to making fact, support So us, little chain those investments in supply making in driving the that are, sure our improvements share

you international would from want add Andre, about on do question? an anything to like there is to you this standpoint talk

price a we where right? Because example, an price I from the label more. to relaunching mean, in initiatives the like in label HP the the thing value gap look situation are category. tougher the only indeed, to been have didn't different being -- in put a fast been has we been perspective, same, is private has widening, mean of of Europe, like gap bit like Probably that but that have put process a not mean is a regions, brands I growing I the we lot is widened. place although in private have we the bit has

do architecture. then of So -- price spec in and a also lot activities

this us competition. emerging like keeping don't private really markets, versus continue especially So issue that in to of it's then -- But and of gain the branded strong, is see in rest we the label much share. specifically, you world,

Okay. Yes.

it business, put I markets from coming X% was growing share perspective, very, to from Europe our about. to a And positive that's in our these is want talking in double digit? on just retail gaining and that in and add continue these two are points Rafael to of Just channels, emerging we X/X about growth of foodservice. very what and way,

question Powers comes Deutsche from next Our Bank. Stephen with

Two questions.

you the within the I the first aspiration an you rates. fourth is guidance? high relative -- into XXs. The that fill in this On how continued 'XX an has on outlook? improvement in base as really getting back quarter. fourth on just case what that really is, to have in more seen quarter, of some that assumed Is is goal of allowances the to got And the Or one have show of every is assumption less you've and month -- number Slide one than question service XX, the improvement ultimate the levels guess for sort to far? you 'XX thus

Carlos. It's

comment. Let me

So you North in way you in supply America, perspective, guess, are, to our of fact, see give and a kind seeing in we as I service said, we it the level. our chain progress

In service the had look the at levels year. numbers, I we those entire highest December were fact, across when

materials. we industry ingredients particularly at Now some the same about still the packaging and seeing see challenges, are you having to some continued upstream when time, think

fact, go and of we our in towards the of as is, Now our end goal did the the we levels forward, get customers that service to kind to year.

us, in for recovery are think seeing it very ingredients I that what and packages, the in we is of some comes the asymmetrical.

the So if and are in flu business you we those a some there in so the in soft our cheese more where, to about like type -- cream in stable where the some think of supply those had are our of that still of are come with things some seeing the we're [indiscernible] remnant avian of that have in the fact, couple while chain, a us, things of and challenge. in impact for working the of of terms terms those been materials business And through. packaging still places places places most It's of that, we're industry, beginning challenges. where in now are kind

make that which eggs. saw, eggs go we sure time, that is, our of that, situation same price need adapting adapting that is the so making are the that's the happening. At are as And you also with I'll an high, to we example every we of you go products give team to sure

actually of consumers the not So we that make having understand need a reduced on an product. Just sure that a to down inventories that like make Egg, to sure Crack demand type may be brought we product

sure exit improving levels may that, that that is continue short we how make then as we our do both in So service which making we be significantly that we XX%, that the we to responding term on agile XXXX. in as do we towards are is term, to the goal. And we secondly specifically focused those drive ingredients but are see challenged sure

also Okay. sorry. could I If Great. follow up --

ahead. Go

been I could just going elasticity talking ask follow the to if on about. point was that up you've I

elasticity their just data kind You also of at going year sort favorable exited the point, off Slide of the with most on X.

talked normalize ultimate back those 'XX. is the guess of pacing assumption the about And obviously the case through normalization? I of way what's of sort of of about not just directionally historical base all elasticities assumption to assumption that going you your an elasticity. You've question talk

of any do of Or elasticity about 'XX how just we color 'XX great. be would the sort to you So that think an image expect be can we that as around offer more from mirror standpoint?

Andre?

Yes.

contemplated QX, back a want the end guidance for that. are think levels that has go like is close be keep right, we year. again, So you historical ready guidance that put we and and linearly obviously And place in implications the worse now happening established in levels to that a expect be the on, when we little was its we subsidies, net if look, to going contemplated fully the on expect towards the QX and we elasticities of the and obviously are historical eye it to to than that of are aware actions the be the towards the reduction which have as we There -- in back about said, historical things have to the levels, way it gradually that we to year. we in end goes

plans. So graduate I historic believe of mean those will to things, we right? each back are we the But monitoring normally that elasticities

say want taking? the Carlos, to you do about actions that you're anything

Yes, I seen this said, coming. think for we us, have Andre

sure we in that investments also of looking in for consumers which full can about it's the whether levels, architecture the So holidays terms are size price us, and so we that to of talked terms provide earlier, forth. they're for situation And for promotion certain sure of make And in. key us, use the of particular of that making options rigorous to continue way that so regardless them events, as maintain it our ROIs the franchise. we think I kind for it's I is great so we we sure consumers mentioned consumers in we're value understand using that in more making much

a We way actually the in but to positive ROI more in are in a us be past. that much present allows than

see. is the of Andre So we now North of part stance year, as by right we we what our go And think our in way that like back of it are And to levels. end kind we seen XXXX. is about America, the that's have we'll said, -- the guidance rebuilding -- historical

one question. Operator, we will take more

One Sure. moment for our next question.

Our next question Sandler. comes from Piper Michael Lavery with

new I And relative it those I'm accounts? there? some in little what's is Is how driver just with -- outperformance new wanted more. foodservice gaining the maybe is drill or your XX bit unpack items share to existing But there's -- guess broadening of gaining share? components it it into I distribution primary Slide bit your pillar few are of little In some Can Is sure growth a a of different you customers? here. XX, you're into to customers interesting things. a it competitors? color just

Michael, great -- we foodservice a America having in and North zone. the across globe, on both momentum and or U.S. the are international

will ask comment. then Rafael and So to I Carlos

would that items you would -- is say, all Yes. of in them. North I America, it's And the I mentioned, say

have And in put us. we XX%, gained at are grew look actually paying the about place QX, the almost share. in So of we than me, and that kind way we I grew it more is the for investments we

place. So we leadership new put have in

years SKUs we the almost of significantly, had that simplified a have reducing couple XX% portfolio of ago. number our only of We

sure growing to more We sure our we bolstering distribution of also renovated in they portfolio. the our make investing foodservice capacity importantly, have we're kind drive to make places. sales in that And support team demand. We're right

just look and top U.S. So XX a here forward in the QSR of to the -- in we opportunity give you only is or XX we are as sense still

know we drive everything we're doing growth. continues that to to for opportunity an be further that So us

foodservice. areas going is are then specifically across your expanding of we is question we distribution And fact in what all that have already back to seen

We with are winning distributors.

we're key actually We're expanding accounts. So no with actually with present. also at distributors expanding commercial

those, who an hospitalities and service working. against of have So effort if are you made also think distributors we kind businesses, about particular those non-commercial those and

with Pollo the new things that that into sell are -- SKUs And restaurants from to us in them. restaurants, of QSR, of we which type actually company. number are a actually Fast a expanded places have is have to Papa like as now the focus We think increased we Casual, items Tropical we we for now of expanding which into. continues John sell in From number be about a

So continue we we that we if and I with globally. an you area to one on why we feel the... be it's to be want of places and mean -- can Rafael, the bullish that that winning on, And that, build

I'll Before, just on build Carlos thing mentioned. Rafael, one

foodservice, improvement capacity. our continue do and of throughout to reasons growth well on capacity the of as so. in One is We've investing been on we these years

pouches XX% extra which squeeze, foodservice. and are the U.S. we'll an items capacity have critical capacity will in we XX% on paper May, for and the more have in now on growth of So absolutely

please With go in ahead. mind, Rafael, that

foodservice. to would up adding bright CAGNY, two I growing go on spot has are week deeper success. the guess been for winning Carlos, timeshare international front And of big where our Sure. already But and we a I that say reasons said in going we're you'll lot are on they see next are on foodservice. about the things indeed, winning. And

replicating local partnerships. global insight big having with but been across model really our working many test scale a when and partners and consistently leveraging times, building and customized the like global players, we market this us and really for scale to this global well. globe One compete successful difference we're is Remember, solutions. to innovation up And we've makes capabilities on and it’s to markets. additional our offer We're more insights then

the partnering say, second of model. discussion let's mean point be discussion on around like is mean, with the don't chef-led what’s that really our be I in chefs. of price-led when needs the what evolves to the sauce, identifying we talent chef projects. foodservice. concepts basically called easy specific The it's those foodservice. if sometimes their basically, transactional perfect our I things, strategy to a menu is although fit secret chef basic, And very The it we're like driving a bring the conversation, customers two And execution only. call in you could have different we for the execution,

And growing in foodservice of U.S. a it's very still, faced percentage just international X/X as remind the within although than to smaller attrition strongly, the

So size although business we comparable, grow a in of of we we have like mean lot foodservice. to room say the like

going this next we're the to definitely, with hope within quarters So success we and to good continue strong years. see very

Thank define nutshell, with say strategic transactional, excited that Anne-Marie? think off. on I people, very talent, been and you, I for on one on mean investing growth, Rafael. as this very On the portfolio are on we've the us it's would I paying we technology, for were of past, we with a we and pillars and foodservice, in that.

Yes.

Q&A up turn for wrap you will that call. over going to am So it Thank session. for all to our I your closing Miguel comments. some

is especially and what the day. platform see continue markets and far evolving. see evolving are we very share say market doing. about finishing but our every up, market great because And excited are why in very are I emerging want We momentum just that growing. are The growth we journey from building we a to share, Foodservice are excited? so We level gaining service we momentum. be transformation to excited with still we the

company. of see in very Second, our a level we agility different

agile much adapt, in better past. very change, that than the a able to today have organization predict is to to We

in Gross feeds grow. in investments to investing in people, margin R&D. are in expansion marketing, We technology,

XXXX all pricing We as announced. we of are well excited today, we have our for and because anticipated already pricing XX%

our already We and we accepted, have pricing XX% about implemented. XX% have about already of

see it, we we'll quarter-after-quarter year-after-year. way continue the so And delivering

thank next week. and expect see for you to that, much I CAGNY you your on so With attention,

of I you. think we share with have a lot Thank to excitement you.

Ladies does gentlemen, this and conclude presentation. today's

may wonderful You have day. and now disconnect, a