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Kraft Heinz's (KHC) Cost Savings Strong, Currency a Drag

On Jun 23, we issued an updated research report on Kraft Heinz CompanyKHC -- one of the largest consumer packaged food and beverage companies.

Though the company's net sales have been relatively soft, cost savings have led to higher profits. Also, strong brand portfolio, product innovation and marketing efforts enhance its prospects

Positives

Kraft Heinz has implemented many cost saving initiatives to boost growth amid tepid sales. The company plans to save $1.7 billion in annual costs by the end of 2017 (up from $1.5 billion earlier expected), primarily focused on workforce reduction along with factory closures and consolidations. As of first-quarter 2017, the company realized cumulative savings of approximately $1.3 billion. Other productivity improvement initiatives include programs such as zero-based budgeting, modernization and capability building within the manufacturing footprint and building a performance driven culture in the company.

With growing awareness of the nutritional value of food products, responsible and sustainable sourcing of raw materials has become an important issue for food companies like General Mills, Inc. GIS , Mondelez International, Inc. MDLZ and B&G Foods, Inc. BGS . Keeping that in mind, Kraft Heinz launched several organic products without artificial ingredients. It also renovated products like Kool-Aid Jammers with fewer calories and no preservatives and added a new line of Classico Riserva branded premium pasta sauces made with no artificial ingredients or added sugar.

In 2017, Kraft Heinz is focused on improving the performance of three of its key brands - Heinz, Kraft and Planters - and five global product categories, which are condiments and sauces, cheese, meals, nuts and baby food. Management has outlined that the company will make significant investments in marketing, go-to-market capabilities and product development.

Concerns

The company has been seeing top-line weakness over the past several quarters. Kraft Heinz's categories have slowed down due to soft global retail and consumer demand. Consumption trends in a number of the company's key categories like ready-to-drink beverages, frozen meals and salad dressings remain challenged.

Again, foreign exchange is a major headwind for Kraft Heinz with a considerable percentage of its revenues coming from outside the U.S. Foreign exchange dented the company's revenue growth by more than 5% in fiscal 2015, 2.5% in 2016 and 0.4% in the first quarter of 2017.

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General Mills, Inc. (GIS): Free Stock Analysis Report

B&G Foods, Inc. (BGS): Free Stock Analysis Report

Mondelez International, Inc. (MDLZ): Free Stock Analysis Report

The Kraft Heinz Company (KHC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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