Kraft Heinz predicts reduced annual sales; Read Why

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.

Its Kool-Aid Drink Mix:

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.

Quarterly Volumes Fall for The Jell-O:

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.

Volumes will Improve CFO Andre Maciel:

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.