Kraft Heinz slashed its organic sales forecast for 2024, signalling that higher prices of its snacks and ready-to-eat meal kits would pressure consumer demand for the remainder of the year.
Packaged food companies such as Kraft Heinz, Conagra and General Mills are contending with slowing demand after price hikes over the last two years dampened appetite in the key markets of North America and Europe, particularly for lower-income groups.
"Consumer sentiment remains cautious," CEO Carlos Abrams-Rivera said and indicated "a more gradual top-line improvement" in the back half of the year.
Kraft Heinz's adjusted gross profit margin rose 210 basis points to 35.5% in the second quarter owing to its supply-chain and automation investments, which have aided savings across logistics, manufacturing and procurement.
That helped it beat adjusted earnings-per-share estimates. It logged a profit of 78 cents per share, above analysts' estimate of 74 cents per share.
"KHC results played out similar to what we'd expect to hear from others, which is building productivity... and modest inflation being used to lean into greater promotional and trade spend, to try to drive a better volume outcome," Barclays analyst Andrew Lazar said.
'Selectively Increase Investments'
The Jell-O maker said it 'will selectively increase investments in promotions' as consumer push back against higher packaged food prices.
Bigger rivals PepsiCo and Coca-Cola have also ramped up investments in product innovations and are offering different price tiers to attract value-seeking consumers.
Overall volumes for the quarter fell 3.4 percentage points, owing to weaker demand in North America and other international markets, while prices rose 1.0 percentage point across Kraft Heinz's portfolio.
The company posted net sales of $6.48 billion in the three months ended 29 June, missing analysts' average estimate of $6.55 billion, according to LSEG data.
The Heinz ketchup maker reaffirmed its profit forecast but now expects fiscal year 2024 organic net sales to be flat-to-down 2%, from its prior forecast of flat-to-2% growth.
