The company, which owns brands such as Heinz, Philadelphia and Capri Sun, is being “savvy” about how it deploys discounts and promotions in the current inflationary environment.
By Niamh Carroll 3 May 2023 5:22 pm
Kraft Heinz has pledged to step up marketing spend by double-digits this financial year, in order to grow its market share across its portfolio of brands.
Reporting its results for its first quarter, the business, which owns brands such as Heinz and Capri Sun, reported that its teams have “kickstarted” a plan to capture additional market share, which includes upping marketing spend.
In the most recent quarter, ended 1 April 2023, the business had accrued marketing expenses of $758m, up from $749m in the previous quarter.
This investment to drive share gains will take place across Kraft Heinz’s portfolio, but it highlighted Kraft Mac and Cheese and Philadelphia as two particular brands where it is “focusing investment to drive share”.
CEO Miguel Patricio told investors on a call today (3 May) that the company had delivered against its objectives to deliver a “strong” set of results. Sales increased 7.3% year-over-year to $6.49bn. Profit also grew by 9.4% to $2.11bn.
Patricio said the company was “particularly pleased” by its adjusted gross margin, which increased 126 basis points to 32.8%. This was driven largely by pricing, with volumes down 5.3% in the quarter.
The company has upgraded its adjusted gross margins expectation for the full year, which it says will allow it to further reinvest in areas such as marketing and research and development.
The CEO praised the company’s progress in its “disruptive marketing” and highlighted its media efficiencies.
“In the first quarter alone, we had 7.5 billion earned media impressions, an increase of 150% versus the first quarter of last year, and our total consumer engagement grew 24% across activations,” he said.
He also classified the Kitchen, Kraft Heinz’s internal agency team, as a “growth driver” for the business, alongside the company’s innovation engine.
Innovating around the core is central to growth at Kraft Heinz, he noted. The most notable recent innovation for the UK market is the range of pasta sauces launched by Heinz last year.
These sauces captured a 7% share of the pasta sauce market in just a few months, the business claimed, and is continuing to make gains in the market. Patricio also highlighted the recently-launched collaboration between Heinz and Pernod Ricard’s Absolut to create a vodka pasta sauce product.
He claimed the collaboration, which brings together two sets of brand expertise, is already “extremely successful” in the market.
Kraft Heinz is utilising a data tool which allows it to determine the depth and timing of its promotional and discounting activity, Patricio told investors.
As a result, the company has “significantly improved ROIs on promotional activity, executing fewer, better promotions”. In the US, it has reduced its volume sold on promotion by 12% versus the first quarter of 2019, and improved ROI by 15%.
The company noted it is seeing continuing competition from private labels against its brands, but noted it has, by now, grown accustomed to this environment amid inflation.
Where it is seeing the threat of private label share steals, the company is being “savvy” about how it deploys its promotional activity to reach consumers, as well as ensuring it has “the right solutions in the right channel” to meet consumer need.
