Kraft Heinz struggling with sales

In absence of deal, company must now ‘fix what they have’

NEW YORK— Kraft Heinz Co., rebuffed in its bid to buy Unilever earlier this year, is struggling to reignite sales in the absence of a deal.

First-quarter revenue dropped to $6.36 billion (U.S.), the food giant said on Wednesday. That missed the $6.46-billion average of analysts’ projections. Earnings also fell short of estimates, suggesting that Kraft Heinz’s much-vaunted cost cutting didn’t do the job in the latest period.

The results crystallize many investor concerns about Kraft Heinz. The company and its backers — private equity firm 3G Capital and Warren Buffett’s Berkshire Hathaway Inc. — have developed a reputation for acquiring companies and squeezing expenses. But they haven’t shown as much of a talent for expanding sales in a sluggish packaged-food industry.

“They need to show that they’re more that just a financial engineer — that they can run a food business in a challenging environment,” said Ken Shea, an analyst at Bloomberg Intelligence. “The jury is still out.”

Kraft Heinz sales have now declined in four of the past five quarters, renewing concerns that the company needs to do another deal to keep growing.

The maker of Velveeta cheese, Oscar Mayer hotdogs and its namesake ketchup generates about 70 per cent of revenue in the U.S. — a market grappling with a broader industry slowdown — and its earnings gains have largely come from slashing thousands of jobs and eliminating other expenses.

With the Unilever transaction off the table for now, Kraft Heinz may have to look within, Shea said.

“They need to fix what they have,” he said.

“There’s more to running a business than just slashing costs.”