September 19, 2020

Kraft Heinz looks to balance ‘renovation and innovation’ in portfolio

DJ O’Keefe, 12, and his sister Dallas O’Keefe, 13, both of Rochester, NY, pose for a photo with the Oscar Mayer Weiner Mobile at the annual Berkshire Hathaway shareholder meeting in Omaha, Nebraska, May 4, 2019.

Scott Morgan | Reuters

As Kraft Heinz tries to make its new customers stick around after the coronavirus pandemic, the company is rethinking its approach to how it responds to trends. 

“We need to make sure that going forward, we have the right balance of innovation and renovation,” Carlos Abrams-Rivera, Kraft Heinz’s head of U.S. business, said in an interview.

Shares of Kraft Heinz were up 1% in afternoon trading after the company presented its long-term turnaround plan to investors. As its blueprint is implemented, the company is projecting long-term organic sales growth of 1% to 2% and adjusted earnings per share growth of 4% to 6%.

In the past, according to Abrams-Rivera, Kraft Heinz would create small brands in response to new consumer trends. But its new strategy will focus on applying those insights to existing products, such as making its signature macaroni and cheese without gluten rather than kick-starting a new brand. New products and brands will be fewer but much larger than previously. 

“When you stand back, what you’re going to find is, we’re going to be more focused around 60% of growth coming from innovation and 40% on renovation,” Abrams-Rivera said.

Oscar Mayer is among the brands that will be receiving a face-lift after the company wrote down its value in the fourth quarter of 2018 and again in its most recent quarter. The hot dog brand’s planned renovation includes new packaging, simpler ingredient lists and marketing that focuses on its status as an iconic American brand. 

Beyond modernizing some of its brands, Kraft Heinz is also eliminating 1,100 products — or 20% of its business — by the end of the year. Abrams-Rivera said that trimming down the portfolio will make its supply chain more efficient and cut down on sales cannibalization. 

The company also announced Tuesday the $3.2 billion sale of some of its cheese business to Lactalis. Included in the deal are its Breakstone’s, Cracker Barrel and Athenos brands, among others. 

Still, Kraft Heinz will remain owner of Philadelphia cream cheese, Kraft singles and Velveeta. 

“We’re keeping a huge amount of our business in which we feel are places where we can add tremendous amount of value as we go forward,” Abrams-Rivera said.

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