The move comes four months after Kraft Heinz unveiled plans to sell a mix of cheese brands to Lactalis in a $3.2bn deal, and find $2bn of cost savings through 2024 from efficiencies in procurement, manufacturing and logistics as part of a highly-anticipated plan to re-engineer its portfolio and pay down debt.
Kraft Heinz, which told us it doesn’t comment on rumors or speculation, has eliminated more than 1,100 products in recent months as it focuses on bigger winners, telling investors in September that it is on a mission to “build sustainable competitive advantage in businesses where we have stronger brand equity, greater growth prospects and can use our manufacturing scale and consumer-based platforms approach.”
Through 2024, bosses are also “targeting $2bn of gross productivity efficiencies,” added CEO Miguel Patricio, who said its procurement division alone would secure $1.2bn of savings, in part due to closer collaboration with suppliers.
Hormel, which told us that "it is our policy to not comment on speculative business rumors," has made a series of acquisitions in recent years, buying Applegate in 2015, Justin's in 2016 and Columbus Craft Meats in 2017.
Best known for its dry roasted peanuts (an area in which it will presumably be able to find procurement savings by teaming up with Hormel, which owns nut butter brands Skippy and Justin's), Planters also sells cashews, and cheez balls and curls.
'Consumers are spending more time at home and rediscovering some of our brands'
One of the world's most iconic food companies, Kraft Heinz had something of an annus horribilis in 2019. First came a $15.4bn write-down signaling a plunge in the value of some of its most famous brands, swiftly followed by an SEC investigation into its accounting and controls, topped off with dismal Q4 earnings that sent the company’s stock into a tailspin.
However, it made solid progress in 2020, with US zone president Carlos Abrams-Rivera telling delegates at the Morgan Stanley Global Consumer Conference in December that "consumers are spending more time at home and rediscovering some of our brands."
He added: "Half of our brands are growing double-digit household penetration... but also when you look at new buyers, the rate of those new buyers repurchasing two or more of our products is actually double what we have seen in the past."
Bernstein: 'Kraft Heinz could leverage its meat portfolio to capitalize on faster growth in the refrigerated section of the store'
In a Jan. 21, 2021 report, analysts at Bernstein said they saw growth opportunities in the store perimeter for Kraft Heinz: "Over the longer term, we believe that Kraft Heinz could leverage its meat portfolio to capitalize on faster growth in the refrigerated section of the store. Refrigerated snack combinations have been by far the fastest growing food category in measured channels in recent years, followed by refrigerated entrees.
"Within Kraft Heinz's categories, combination lunches and refrigerated bacon have also generated above-average volume growth among packaged food categories. In particular, we believe that the Lunchables brand gives Kraft Heinz an advantage over many other large U.S.-focused packaged food companies in that it brings together multiple meal components in a refrigerated format. While the brand is often seen as less healthy and has lost share to private label and other smaller brands in recent years, we have seen that Kraft Heinz reversed the trend in the back half of 2020.
"With Kraft Heinz's experience in developing and distributing refrigerated meals, the category could become a strategic opportunity if the company develops or acquires a new brand of better-for-you snacks and meals to better match evolving consumer preferences for fresh, simple, healthy and more convenient foods."
Read more at the Wall Street Journal HERE.
Kraft Heinz recently announced a shift from managing its brands at the level of more than 50 individual categories to clustering its products under six new platforms based on meal occasions and consumer needs:
- Taste Elevation ($7bn category focused on condiments including A1 steak sauce, ketchup, salad dressing, mustard, mayonnaise and peanut butter)
- Easy Meals Made Better ($4.3bn category including macaroni and cheese, beans, Quero, Classico and Bagel Bites)
- Real Food Snacking ($2.2bn category including Lunchables, P3 protein snacks, Planters)
- Fast Fresh Meals ($5.9bn category including Philadelphia, Oscar Mayer, Claussen pickles)
- Easy Indulgent Desserts ($0.9bn category including Jell-O, Jet-Puffed and Cool Whip)
- Flavorful Hydration ($1.5bn category including Mio, Kool Aid, Creative Roots, Capri Sun)