Kraft Heinz names new CEO after rough start to the year
The signs that Bernardo Hees wouldn’t be chief executive of food giant Kraft Heinz much longer were there in government filings.
In late February, Kraft Heinz disclosed to the Securities and Exchange Commission that it would miss the deadline for filing its annual report and then laid out its reasoning for taking a whopping $15.4 billion noncash impairment loss in the
fourth quarter, including $4.1 billion related to the value of the Kraft brand.
In mid-March, the company noted that the Nasdaq market had warned it was out of compliance of listing rules because of missing the annual report deadline.
On Monday, the food giant presented the SEC with yet another filing — this one explaining that the CEO who had been there since the creation of Kraft Heinz in 2015 would be leaving.
Miguel Patricio is taking over for Mr. Hees, effective July 1.
While it remains to be seen if Mr. Patricio’s resume as a savvy marketer will help lead to better results, the impact of Mr. Hees’ determination to deliver a more efficient, trimmer food- processing corporation are undeniable.
Mr. Hees was a former Burger King CEO brought in to lead Pittsburgh-based H.J. Heinz Co. when it was acquired in 2013 by a joint venture of 3G Capital and Berkshire Hathaway.
He quickly disrupted a corporate culture that had been established over more than a century. Reports surfaced of new open-office seating plans and long hours. The implementation of zero-based budgeting — a system that requires every expenditure to be justified annually — drew groans. Plants were closed and office positions cut across the company.
In April 2014, management sent voluntary buyout offers to nearly 800 workers in the Pittsburgh area, giving employees a chance to decide if the new strategy wasn’t a good fit for them.
Mr. Hees was doing what had worked before for 3G Capital — taking an established company, making it leaner, then merging it with another business. In 2015, Heinz was merged with the Kraft Foods Group. More plant closings and cost cutting ensued.
But despite some creative product twists (Mayochup got a lot of attention) and marketing (Remember the weiner dogs at the Super Bowl?), Kraft Heinz sales didn’t take off. After a bid to buy Unilever in 2017 failed, shareholders waited forlornly for improved results.
In February, when Kraft Heinz reported its massive loss, cut its dividend and then disclosed that the SEC had been looking into its accounting for a few months, the stock slumped hard.
Mr. Patricio may be inheriting a trim organization that just needs the right marketing smarts, although some analysts have speculated the company cut back too hard and damaged its relationship with retailers that carry its products.
The new chief executive could also be yet another optimistic boss who struggles to solve the problem of how to reinvigorate a consumer goods company that has a portfolio of household brands seen as iconic but dated.
Mr. Patricio, a native of Portugal, has spent two decades at Anheuser-Busch InBev, including roles as global chief marketing officer and president of both the Asia Pacific and North America segments. AB InBev also has 3G Capital investment.
He has worked at consumer goods giants such as Philip Morris, the CocaCola Co. and Johnson & Johnson.
His time at AB InBev includes work with beer brands such as Corona, Budweiser and Stella Artois, where sales growth accelerated and accounted for more than 20 percent of AB InBev’s 2018 year-end global revenues, according to the official announcement of his appointment at Kraft Heinz Monday. The company’s brands took home awards from Cannes Lions 2018, a high-profile marketing competition.
Mr. Patricio’s background also includes international experience. The Kraft Heinz announcement said he set the foundation for growth of AB InBev’s China business by setting a strategy focused on the premium market and growing Budweiser to become the leading brand in China. Revenues of AB InBev’s Asia Pacific division rose from $1 billion in 2008 to $2.7 billion in 2012.
On Monday, Mr. Patricio, 52, told Bloomberg he has been based in New York but will relocate to Chicago. “I bring fresh eyes to the business,” he said in an interview. “It’s a big opportunity.”
Kraft Heinz is officially co-headquartered in Chicago and Pittsburgh, although its Pittsburgh presence has steadily gotten smaller.
Mr. Patricio declined to say in the Bloomberg interview if his talks with Kraft Heinz started before or after the company’s most recent earnings report in late February. He said Mr. Hees initially approached the board with the idea of stepping aside.
Mr. Patricio told Bloomberg that one of his first jobs will be laying out his beliefs and his strategy for the company’s thousands of employees. “I need to almost be an evangelist in the company,” he said. “The CEO’s first concern has to be people.”