Milling & Baking News Corporate Profiles - 2017 - 104

Company Overview

Kraft Heinz Co.
Cost-savings efforts kick into gear

n attempt to acquire Unilever P.L.C.
failed to materialize, but Kraft Heinz
Co. made good on cost-savings efforts
in 2017.
Pittsburgh-based Kraft Heinz is targeting
$1.7 billion of cumulative integration program
savings by the end of 2017, or $500 million of
net incremental savings in 2017 versus 2016,
said Paulo Luiz Araujo Basilio, then chief financial officer and executive vice-president, in
an Aug. 3 earnings call. The integration program started with the merger of Kraft Foods
Group, Inc. and the H.J. Heinz Co. in 2015.
"In terms of our goal to establish industryleading margins, we remain on track with our
cost-savings initiatives," said Bernardo V.
Hees, chief executive officer of Kraft Heinz,
in the Aug. 3 call. "Our total savings so far
in 2017 have been stronger than expected.
Cumulative savings from our integration program were approximately $1.45 billion at the
end of the second quarter, and all three areas
of our program are contributing: organization
structure, Z.B.B. (zero-based budgeting) in
procurement and manufacturing footprint."
Kraft Heinz had net income of $2,052
million, or $1.69 per share on the common
stock, in the six months ended July 1, which
was up 11% from the same time period of the

Chief executive officer -
Bernardo V. Hees

104 \ October 2017

previous year. Six-month net sales slipped
2.4% to $13,041 million.
While Kraft Heinz was on track for fiscalyear sales of more than $26 billion, the company came close to having annual sales of
much more. Kraft Heinz on Feb. 17 offered
to acquire Unilever for $50 per share, which
included $30.23 in cash and the remainder
in stock for a total value of about $143 billion. Unilever rejected the offer. Combining
Unilever and Kraft Heinz would have created
a company with annual sales of about $83
billion. Unilever and Kraft Heinz on Feb. 19
said a proposal for a combination of the two
companies had been withdrawn.
Hot dogs, soups, sides and e-commerce
sales all shone for Kraft Heinz in 2017.
The company's Oscar Mayer brand hot dogs, in
a "clean label" move, now have no added nitrates
or nitrites, no artificial preservatives in their
meat and no byproducts. Kraft Heinz and Oprah
Winfrey introduced "O, That's Good!," a line of
four soups and four side dishes. The products
marked the first introduction from Mealtime Stories, L.L.C., a joint venture between Kraft Heinz
and Oprah Winfrey.
The introductions of the Devour and Smartmade brands led to strong second-quarter
growth in the frozen business, which had been
declining for years, said George Zoghbi, then
chief operating officer of the U.S. Commercial
Business, in the Aug. 3 call. He added e-commerce sales grew 60% in the second quarter.
Kraft Heinz announced management changes
in September, effective Oct. 1. Mr. Basilio was
to become zone president of the U.S. business.
David Knopf, vice-president and category head
of the Planters business, was to become executive vice-president and c.f.o. Mr. Zoghbi was to
transition to a strategic adviser role, working
with the Kraft Heinz board of directors.
The Kraft Heinz Co. formed in 2015 through
the merger of Kraft Foods Group, Inc. and the
H.J. Heinz Co. The price per share opened at
$71 on the Nasdaq on July 6, 2015, rose as
high as $97.77 earlier in 2017 and then closed
at $77.55 on Sept. 29, 2017. CP

Kraft Heinz Co.
net income

adjusted pro forma, in millions
2016

2015

$3,642

$1,774

2014

$2,333

Kraft Heinz Co.
net sales

adjusted pro forma, in millions
2016

$26,487

2015

$27,447

2014

$29,122

Kraft Heinz Co.
share price

per share
$100

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