New Kraft Heinz CEO sees ‘ significant work’ to stop firm’s decline
Heinz ketchup is a bright spot for the Kraft Heinz Co., achieving an all- time high U. S. market share of 70% in the second quarter, according to the company’s new chief executive.
But the food giant formed four years ago in a merger of Pittsburghbased H. J. Heinz Co. and Illinoisbased Kraft Foods Group has not had a good year overall and needs to do much better at operating efficiently and jumping on opportunities to grow sales, said Miguel Patricio, who has been in the top job since mid- summer.
“The level of decline we experienced in the first half of the year is nothing we should find acceptable moving forward,” said Mr. Patricio, in the company’s earnings announcement on Thursday. “We have significant work ahead of us to set our strategic priorities and change the trajectory of our business.”
Kraft Heinz shares have been sliding all year and investors weren’t thrilled early Thursday either, sending the stock down around 13% when the markets opened. The shares ended the trading day down more than 9% at $ 28.22.
Mr. Patricio’s arrival came after a rough six months during which the company reported a massive $ 15.4 billion write- down of assets and an investigation into its procurement practices. Officials said Thursday they have corrected misstatements in filings done between 2015 and 2018, and have imposed a new disciplinary plan meant to address such issues.
Meanwhile, the write- downs continued Thursday, with Kraft Heinz recording non- cash impairment charges over the first two quarters of the year totaling about $ 1.2 billion related to the value of various segments of its business based on new five- year operating forecasts for how they are expected to perform and other issues.
In the first six months, the maker of Oscar Mayer weiners, Heinz ketchup and Lunchables reported net sales of $ 12.4 billion, compared to $ 13 billion a year ago, a decline of about 5%.
Net income attributable to common shareholders fell to $ 854 million from $ 1.76 billion a year earlier. On a per share basis, earnings fell from $ 1.43 last year to 70 cents in the first six months of 2019, reflecting the impact of the impairment charges.
Mr. Patricio said the food and retail industries are clearly at a transformative moment, but he’s not afraid of that. There are opportunities for those who can
understand what’s coming and what consumers want.
Kraft Heinz has missed some of those opportunities in the past, he said, noting that it was an early entrant to the plant- based meat market with its Boca Burger but far behind the new products in that area that have been rolling out.
Mr. Patricio said he has spent his first 40 days in the company holding numerous town halls with employees and about 300 individual meetings and visiting offices across the company that serve countries around the world.
He called for more investments in media and marketing, especially that which is directly visible to consumers.
Whether that means retaining the naming rights to Heinz Field or not didn’t come up in a conference call with analysts Thursday. Recently the company issued a statement saying it was committed to having its name on the Pittsburgh football stadium for at least the next two seasons and is in ongoing discussions about the future.
Looking back over the past several years at the company, Mr. Patricio said management had done a good job finding ways to cut costs after Heinz and Kraft were merged in 2015, but did not smoothly pivot to the work of creating an efficient organization and a corporate culture that hunts down places to grow sales. As an example, he said Kraft Heinz hasn’t done much to tap the growing market of Hispanics in the U. S.