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Kraft Heinz expects its annual core sales to rise slower after reporting a steeper-than-expected dip in quarterly sales, indicating that demand for its sauces and beef cold cuts will remain muted as customers digest previous price increases.
Shares of the firm, best known for its Kool-Aid drink mix, fell 5% on Wednesday, with numerous analysts calling the results announcement “underwhelming.”
Kraft Heinz’s revenues have declined over the last year, owing to a volume reduction in its North American meat sector and a shift in customer preference to cheaper private-label goods among cash-strapped consumers.
“The industry was more difficult than we expected,” CEO Carlos Abrams-Rivera stated.
Mondelez, McCormick, Hershey, and PepsiCo, all of which produce packaged foods, reported slower volume increases in their most recent quarters.
The Jell-O manufacturer saw quarterly volumes fall 4.4 percentage points in the 4th quarter due to a faltering meat sector, while pricing rose 3.7 percentage points.
“The decline in volumes is a sign that a significant portion of consumers are no longer willing to pay for name brands when there are high-quality, lower-priced alternatives available,” said Insider Intelligence analyst Zak Stambor.
However, Kraft Heinz CFO Andre Maciel predicted that volumes will improve in the year’s second half.
In fiscal 2024, the company expects organic net sales to expand by a flat to 2%. In 2023, its organic net sales increased by 3.4%.
It expects the adjusted gross profit margin to improve by 25 to 75 basis points in fiscal 2024, primarily due to increased marketing and promotions, compared to a 240-basis-point increase recorded in 2023.
According to LSEG data, Kraft Heinz’s net sales for the three months ending December 30 were $6.86 billion, compared to an average estimate of $6.99 billion among analysts.
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