Kraft Heinz focuses on renovation over innovation to keep new consumers gained during pandemic

03-Dec-2020 - Last updated on 03-Dec-2020 at 17:45 GMT

Source: Kraft Heinz

Related tags Kraft heinz Innovation coronavirus

Kraft Heinz is pulling back on innovation in favor of renovating well-established, iconic brands to which consumers have flocked during the coronavirus pandemic in an effort to maintain household penetration gains made in the last nine months of lockdowns, social distancing and forced at-home eating.

Like many large CPG companies, Kraft Heinz has benefited from new consumer shopping and eating habits developed during the pandemic. Since February, when the COVID-19 outbreak began in the US, Kraft Heinz has seen household penetration increase double-digits across half of its brands with new buyers repurchasing two or more products at a rate double that of the past, Carlos Abrams-Rivera, president of Kraft Heinz’s US Zone, said yesterday during Morgan Stanley’s Global Consumer & Retail Conference.

He explained that the elevated household penetration and repeat purchase rates illustrate that “our iconic brands can and will resonate with these new consumers. We are seeing that already, that the new consumers that are discovering our brands, are seeing great taste, quality and also value because it’s something that really the whole family would love.”

This “gives us confidence to continue to drive investment behind these brands so that we can continue to fuel that growth as we go forward,” he added, noting that in 2021 “you’ll see and feel quite a bit of renovation as well in our big brands to make sure we continue to build on the household penetration gains that we have made this year.”

2021 will see 30% fewer innovative projects

As Kraft Heinz focuses on renovation it is pulling back on innovation with a quality over quantity approach to new product development.

“From last year to this year, we cut about half of the innovation in terms of the number of projects because we do have to focus on fewer, bigger innovations. As we go into 2021, we actually have another 30% fewer projects as we go into next year. So, net-net, we are basically half of the number of projects we have in 2021 that we had in 2019,” Abrams -Rivera said.

While he declined to share specific details about upcoming innovations, he said he was confident in the company’s streamlined approach because it allows Kraft Heinz to focus on the fundamentals of the business and ensure that new innovations are stickier than in the past and based on consumers’ “real insights about what they’re looking for and in a collaboration with our retailers that we haven’t done in the past.”

He added: “For us to be successful in innovation, we have to do some things first. We needed to make sure we improve the quality of our marketing, the sales execution and our supply chain. Those are the focus that we’re doing right now, is basically creating the foundational base in which we can launch that innovation as we go forward.”

The focus on fundamentals first could slow innovation execution, Abrams-Rivera suggested, noting that sizable innovations and platforms will “take some time. We will see some of that in 2021. We will see more of those as we go into ’22 and ’23.”

Reorganized portfolio provides ‘clarity of purpose’

The company’s shift to renovation from innovation is part of a broader restructuring announced in September that re-centers Kraft Heinz’s portfolio from 55+ categories to six “consumer-driving” platforms, including Taste Elevation, Easy Meals Made Better, Real Food Snacking, Fast Fresh Meals, Easy Indulgent Desserts and Flavorful Hydration.

These platforms were further divided into “growth, energize and stabilize,” and Abrams-Rivera said that the bulk of resources, innovation and renovation will be focused on the growth and energize platforms, which include Taste Elevation, Easy Meals Made Better, Real Food Snacking and Fast Fresh Meals.

He noted that Taste Elevation, Easy Meals Made Better and Real Food Snacking “are places we actually already are seeing quite a bit of growth and penetration increases since we launched this new way of thinking as a company.”

In addition, he said, Kraft Heinz is “renovating as we speak in order to drive future growth” in the Fast Fresh Meals segment by focusing on its Oscar Mayer portfolio and cheese business.

Segments including desserts and flavorful hydration “are places which we feel like we need to do what is needed to maintain the focus on those platforms,” but which have been designated as “stabilize platforms,” he added.

Overall, Abrams-Rivera noted, the reorganization has provided Kraft Heinz with “clarify of our purpose, clarity of our mission, a new set of values and a strategy underpinning that allows for us to march into one area as one team.”