Kraft Heinz forecasts slower annual sales growth on weak demand

Consumers shifting way from name brands towards quality lower-priced options, analysts say

Shares of the company fell over 5%, with several analysts calling the earnings report 'underwhelming'.

Kraft Heinz forecast its annual core sales to grow at a slower pace, after posting a steeper-than-expected drop in quarterly sales, a sign demand for its sauces and meat cold cuts would remain muted as customers digest past price hikes.

Shares of the company fell over 5%, with several analysts calling the earnings report "underwhelming". 

Kraft Heinz has witnessed weakening sales over the past year, hit by a volume decline in its North America meat business, as well as a shift in preference to cheaper private-label brands by cash-strapped customers. 

Kraft Heinz's net sales were $6.86bn (€6.39bn) in the three months to the end of December, compared with analysts' average estimate of $6.99bn.

"The industry was more challenging than we had originally anticipated," chief executive Carlos Abrams-Rivera said. 

Packaged food peers Mondelez, McCormick, Hershey, and PepsiCo, have all flagged softer volume growth in their latest quarterly results.

Kraft Heinz saw quarterly volumes dip 4.4 percentage points in the fourth quarter, stemming from a struggling meat business, while prices were up 3.7 percentage points.

"The decline in volumes is a sign that a significant share of consumers are no longer willing to pay for name brands when there are high-quality, lower-priced options available," said Insider Intelligence analyst Zak Stambor.

Yet, Kraft Heinz chief financial officer Andre Maciel said volumes would turn positive in the second half of the year. The company forecast organic net sales between flat to 2% growth in fiscal 2024. It posted organic net sales growth of 3.4% in 2023.

It expects adjusted gross profit margin to expand in the range of 25 to 75 basis points in fiscal 2024, owing to a ramp-up in marketing and promotions, compared with a 240-basis-point increase reported in 2023.

 • Reuters