Kraft Heinz reaches ‘inflection point’ in transformation with bold goal to capture $2b in sales with innovation in three years

By Elizabeth Crawford

- Last updated on GMT

Source: Kraft Heinz
Source: Kraft Heinz

Related tags Kraft heinz NotCo Innovation plant-based

Kraft Heinz is entering the final stage of its transformation in which it plans to capture $2b in incremental net sales from innovation through 2027 after the company has systematically rebuilt itself following the dramatic fallout of an aggressive cost-cutting and zero-based budgeting approach that sent its stock and consumer trust plummeting in 2019.

“We have been hard at work transforming Kraft Heinz for the last three years. And, in my opinion, we have made tremendous progress on our journey. We set out company’s foundation in 2020 and fully deployed our new operating model by 2021, and now we are entering the final stage of our transformation here to accelerate profit growth,”​ CEO Miguel Patricio said yesterday at the Consumer Analyst Group of New York’s conference.

“I’m thrilled about the momentum we have as we enter in 2023,”​ he added, noting that since he took the helm in 2019 the company’s price multiple has improved dramatically. And while he acknowledged it is “still well below our peer average,”​ he noted he is excited about the company’s accomplishments in a short period and where it is going.

To finish closing the gap and secure Kraft Heinz’s position once again as a CPG leader, Patricio outlined a three-prong approach to driving growth in 2023, which includes scaling the company’s US retail platforms, in part by renovating existing brands and innovating to meet new consumer needs.

“We find ourselves at Kraft Heinz at an inflection point in our business. Over the last few years, we’ve built a strong foundation for growth, renovated our entire portfolio of iconic brands, and put consumers at the center of solving for pain points that nobody else has solved and innovating faster,”​ agreed Carlos Abrams-Rivera, EVP and president North America Zone.

He explained the company’s success to date can be attributed to its “thinking of meals in a whole new way,” “shattering the notion that convenience requires a trade-off, that healthy food can’t be craveable,”​ and creating a “homegrown AI enabled solutions to accelerate all parts of the business.”

While laudable, he added, “this is just the beginning.”

Now, he said, the company is ready to innovate to meet the future needs of consumers in North America, which he estimated will unlock an incremental $2b in net sales over the next four years.

“This growth will come from three priority consumer spaces: exploration and authenticity, quick with quality and holistic wellness,”​ he said.

Innovating around authenticity

The first pillar of Kraft Heinz’ North American innovation strategy will focus on exploring authenticity and growing consumer demand for new flavors and authentic cuisines that offer a break from their routine, Abrams-Rivera said.

This includes innovating around personalized sauces that allow consumers to customize flavor intensity, the launch of a new direct-to-consumer Just Spices line that eventually will expand to “bring modern culinary led solutions”​ to retail stores, and the expansion of Mexican food, he said.

Innovating around convenience

Kraft Heinz’s second innovation priority in North America is “quick with quality,”​ which Abrams-Rivera said offers consumers high quality food that is convenient to prepare.

“Here we are focusing on two areas,”​ he explained

The first is what Kraft Heinz calls crisp from the microwave.

“How many of you have put something in the microwave, then when you pull it out, think it’s a hot mess?”​ he asked. “We actually have filled that pain point”​ with patented technology that allows consumers to enjoy from the microwave a crispy grilled cheese sandwich made with Kraft Singles.

This technology is still in test markets but early results show 80% of consumers report it exceeds their expectations.

The second area within convenience where Kraft Heinz is innovating is in what it calls Homebake – a line of sides and dishes that use “ownable tech platforms” to cook in 30 minutes so everything is done at the same time and, Abrams-Rivera says taste “just like homemade.”

According to Kraft Heinz, Homebake has earned a 92% repeat purchase rate.

Holistic wellness

The third pillar of the company’s North American retail innovation strategy focuses on products that promise to enhance health and physical wellness by focusing on “simple ingredients that taste delicious,”​ Abrams-Rivera said.

Housed within this focus area is the company’s joint-venture with NotCo, which leverages AI to innovate plant-based solutions quickly without compromising taste or product performance.

For example, NotCo plant-based cheese was developed in less than a month. And while this product is still in test markets, it is selling six times the company’s original forecast and has become the number one plant-based cheese in test markets, Abrams-Rivera said.

Another example within holistic wellness is Kraft Heinz’ Primal Kitchen line, which Abrams-Rivera said has seen net sales grow two times since was acquired in January 2018.

As illustrated by these examples, Abrams-Rivera said, “when it comes to enabling innovation, Kraft Heinz is playing smarter, bigger and bolder,”​ and it is ready to scale its approach across the company.

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