Kraft Heinz targets $ 2 billion in cost cuts, sets long-term goal

On May 5, 2017, characters from the Berkshire Hathaway Company Craft Heinz booth pose with a reporter on Shareholder Shopping Day as part of the Berkshire Hathaway Annual Meeting Weekend in Omaha, Nebraska.

Rick Wilking | Reuters

Kraft Heinz is trying to capitalize on consumers’ redistributed interest in store-bought mac and cheese and ore-Ida French fries as it unveiled a change plan on Tuesday that would shave $ 2 billion in costs through 2024 and Will invest some in marketing its products.

The company also expects long-term organic sales growth of 1% to 2% and adjusted earnings per share of 4% to 6%. The company said the financial goals reflected confidence in its continued recovery. In 2019, its organic net sales were down by 1.7%.

Kraft Heinz shares rose 2% in early trading Tuesday. The stock, which has a market value of $ 40.1 billion, has risen 2% this year.

Billions of dollars of savings are expected to come from the Integrated Business Plan for greater efficiency between its manufacturing, procurement and logistics operations. Its procurement division alone is about to invest $ 1.2 billion in savings over five years due to close collaboration with suppliers.

CEO Miguel Patricio, who joined the company in July 2019, said during investor presentations that the cost savings would bring back his investment in Kraft Heinz. For example, the company will increase its marketing and advertising expenses by 30%. This is the first long-term turnaround plan under Patricio.

CFO Paulo Basilio said in a statement, “We are committed to the continued growth of Kraft Heinz on both the top and bottom lines.”

In recent years, Kraft Heinz has struggled as consumers shop more around the perimeter of the grocery store in search of fresh foods. The decline in sales led the food giant to report billions of dollars in losses on some of its brands, including Cool Whip, Oscar Mayer, Kraft and Maxwell House and reshuffle its leadership.

However, the coronavirus epidemic has boosted sales, helping it during its return. Kraft Heinz updated its third-quarter outlook on Tuesday, stating that organic sales are now expected to rise in the mid-single digits. The company will announce its quarterly results in October.

The company said that it has stopped thinking about its portfolio in terms of its products category. Instead, Kraft Heinz is going to look at its products to see how they meet consumer needs. A new category, for example, Ore-Ida, Craft Mac and Cheese and Bagel Bites group together because all can be part of an easy meal.