Kraft Heinz has downgraded its full-year outlook for FY2025, expecting organic net sales to fall 3%-3.5% as a “challenging” operating environment hits volumes in developed markets.
Organic revenues at the processed foods giant fell 2.5% to $6.2bn in the quarter, compared to the prior year, as volumes slipped 3.5% – led by North America, where volumes were down 4.2%.
Slipping revenues hit Kraft Heinz’s profit margins, with gross margin falling 230 basis points to 31.9%. Adjusted operating profit fell 16.9% to $1.1bn.
Despite the tough results, Kraft Heinz CEO Carlos Abrams-Rivera took an upbeat tone, pointing to a “modest year-over-year improvement in [the company’s] top-line performance” relative to the first half of the year.
“While the operating environment remains challenging, we’re seeing improvement driven in part by targeted investments we’re making to deliver superior and affordable products to our consumers.”
Kraft Heinz has opted not to hit most of its markets with further price rises in Q2 and Q3, after major price hikes over the past few years.
Pricing in North America was up just 0.4% in the quarter, with international developed markets up 1%. The reduction in revenue guidance was “not too surprising”, according to Bernstein analyst Alexia Howard.
“All in, there are some bright spots, but clear headwinds remain as we roll into 2026,” she said.
“The global Heinz brand is still performing strongly in emerging markets, up 14% so far this year.
“It is also encouraging to see the Lunchables brand return to positive territory after the adverse consumer reports note from April 2024, and brand renovation efforts on Capri-Sun seem to have paid off.
“But the problem is ongoing pressure in more commoditised categories like cold cuts, coffee, and cheese. We continue to worry that rates of innovation have been too low for too long and will take time to play out, although at least the company is heading in the right direction.”
Kraft Heinz remains “on track” to split into two separate companies in the second half of 2026, said Abrams-Rivera.
Announced in early September, the split will come just over a decade since the group was created, forming two distinct, publicly traded companies through a tax-free spin-off.
Provisionally called Global Taste Elevation Co, one business will focus mostly on sauces, spreads and seasonings from the Heinz, Kraft Mac & Cheese, and Philadelphia brands, generating annual revenues north of $15bn.
The other company, named for now as North American Grocery Co, has yearly sales of about $10bn and supplies a number of category-leading brands such as Oscar Mayer, Kraft Singles and Lunchables.
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