Kraft Heinz Expects Slower Sales Growth Due to Weak Demand

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Kraft Heinz (NASDAQ:KHC) has projected a slower pace of annual core sales growth following a larger-than-expected decline in quarterly sales. This indicates that demand for its sauces and meat cold cuts may remain subdued as consumers adjust to previous price increases. Shares of the company, known for products like Kool-Aid, fell 5% on Wednesday, with analysts describing the earnings report as “underwhelming.”

The company has experienced declining sales over the past year, impacted by lower volume in its North America meat business and a shift towards cheaper private-label brands by budget-conscious consumers. CEO Carlos Abrams-Rivera noted, “The industry was more challenging than we had originally anticipated.”

Kraft Heinz’s peers in the packaged food sector, including Mondelez, McCormick, Hershey, and PepsiCo, have also reported softer volume growth in their recent quarterly results. In the fourth quarter, Kraft Heinz saw a 4.4 percentage point decline in quarterly volumes, particularly in its meat business, while prices increased by 3.7 percentage points.

According to Insider Intelligence analyst Zak Stambor, the drop in volumes suggests that many consumers are opting for high-quality, lower-priced alternatives over name brands.

However, Kraft Heinz CFO Andre Maciel expressed optimism that volumes would improve in the second half of the year. The company expects organic net sales to be flat to up 2% in fiscal 2024, compared to 3.4% growth in 2023. It also anticipates adjusted gross profit margin expansion of 25 to 75 basis points in fiscal 2024, driven by increased marketing and promotions, compared to a 240-basis-point increase in 2023.

In the three months ended December 30, Kraft Heinz reported net sales of $6.86 billion, slightly below analysts’ average estimate of $6.99 billion.

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.