Grades at Berkshire Hathaway Company Kraft Heinz stand form a reporter on shareholder shopping day as part of Berkshire Hathaway Annual Meeting Weekend in Omaha, Nebraska, May 5, 2017.
Rick Wilking | Reuters
Kraft Heinz wants to capitalize on consumers’ rediscovered interest in purchased mac and cheese and Ore-Ida french fries as it unveiled a turnaround plan Tuesday that will shave $ 2 billion in costs through 2024 and invest some of it in marketing its products.
The company also expects long-term organic sales growth of 1
Shares in Kraft Heinz rose 2% in early trading on Tuesday. The stock, which has a market value of $ 40.1 billion, has risen 2% this year.
Billions of dollars in savings are expected to come from integrated business planning for more efficiency between its manufacturing, purchasing and logistics operations. Its purchasing department is only expected to have a saving of $ 1.2 billion over five years, in part due to closer collaboration with its suppliers.
CEO Miguel Patricio, who joined the company more than a year ago, said during investor presentations that the cost savings will burn its investment back into Kraft Heinz. For example, the company raises its marketing and advertising expenses by 30%. This is the first long-term turn plan under Patricio.
“We are committed to bringing Kraft Heinz back to constant growth on both the top and bottom line,” CFO Paulo Basilio said in a statement.
In recent years, Kraft Heinz has struggled as consumers shopped more around the grocery store in search of fresh food. The decline in sales led the food giant to report billions of dollars in write-downs on some of its brands, including Cool Whip, Oscar Mayer, Kraft and Maxwell House, and to change its leadership.
However, the coronavirus pandemic has boosted sales for the company and helped it during its comeback. Kraft Heinz updated its third-quarter outlook on Tuesday, saying it now expects organic sales growth in the mid-single digits. The company announces its quarterly results in October.
The company said it has stopped thinking about its portfolio in terms of its product range, an approach that executives said slowed its innovation. Instead, Kraft Heinz will look at its products for how they meet consumer needs. A new category groups, for example, Ore-Ida, Kraft Mac and cheese and bagel bites because everyone can be part of a light meal.
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