Milling & Baking News Corporate Profiles - 2019 - 92

COMPANY OVERVIEW

Kraft Heinz Co.
New c.e.o. turns to brand innovation for turnaround
raft Heinz Co., Chicago, in its efforts to
return to profitability will focus more
on brand innovation, and less on costcutting and zero-based budgeting, now that a
new chief executive officer has taken the reins.
Miguel Patricio became c.e.o. July 1, succeeding Bernardo Hees. Mr. Patricio worked
at Anheuser-Busch InBev for two decades and
was global chief marketing officer from 2012
to 2018.
"As someone who has worked on some of
the biggest brands in the world, I know intimately they have power in the marketplace
with consumers," he said in an Aug. 8 earnings
call. "Kraft Heinz has some of the globe's best,
roughly 200 brands in nearly 200 countries,
with nearly 20 of them maintaining their relevance for 100 years or more. We are in 97%
of American households today, holding the No.
1 or 2 spots in 50 categories."
Examples of brand innovation in 2019 were
Heinz tomato ketchup with a blend of vegetables
and a P3 Portable Protein Pack launched in conjunction with the UFC Performance Institute.
Yet negative financial news also had the
company in the spotlight.
Kraft Heinz in June filed restated audited
consolidated financial statements for the years

ended Dec. 31, 2016, Dec. 30, 2017, and Dec.
29, 2018. Adjustments were made to correct
misstatements in the prior years. Kraft Heinz
said it continues to cooperate in a Securities
and Exchange Commission investigation.
Kraft Heinz sustained a loss of $10,192 million in fiscal 2018. In August, S&P Global Ratings affirmed the credit ratings of Kraft Heinz
Co. but revised the credit outlook to negative from stable. S&P Global cited "continued
performance erosion and lack of clarity" on
the company's outlook as reason for the shift
to negative. S&P Global Ratings said it could
downgrade Kraft Heinz to speculative grade
within two years if the agency believes Kraft
Heinz's strategic plan will not stabilize EBITDA
and deleverage the balance sheet.
By September 2019, Kraft Heinz was trading under $30 per share on the Nasdaq. After
the merger of Kraft Foods Group, Inc. and the
H.J. Heinz Co. in 2015, Kraft initially traded on

the Nasdaq at a price of $71.85 per share on
July 6, 2015.
Brazil-based 3G Capital and Berkshire
Hathaway, Inc., Omaha, acquired Heinz in
2013 and Kraft two years later, merging the
companies. Warren E. Buffett, chairman, president and c.e.o. of Berkshire Hathaway, admitted to one mistake while talking to shareholders on May 4, 2019.
"With the Heinz part of the transaction, we
originally owned about half of Heinz, we paid
an appropriate price there, and we actually did
well," he said. "We paid too much money for
Kraft."
Kraft Heinz initially embraced a cost-cutting
approach that included zero-based budgeting,
which Mr. Patricio defended on Aug. 8.
"These have been strengths for our company because they have enhanced our margins
since the time of our merger," Mr. Patricio said.
"Without this discipline, we would be in a worse
place today, but we have to do more than that.
We need to change so we can apply strong,
consistent investment in our brands."
Budget cuts still came in 2019. Kraft Heinz
expects to eliminate about 400 positions, and
200 already were eliminated during the sixmonth period ended June 29. CP

Chief executive officer -
Miguel Patricio

Kraft Heinz net income (loss)

Kraft Heinz share price

Kraft Heinz net sales

per share
$60

$3,416

2016

92 \ November 2019

$10,941

2017

-$10,192

2018

in millions

$50
$40

$26,300

$26,076

$26,268
$30

2016

2017

2018

$20
Oct.
2018

Dec.

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Milling & Baking News Corporate Profiles - 2019

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