Kraft Heinz Cuts $2B of Costs to Lift Marketing Spending 30%

Kraft Heinz shares rose on Monday after the foods giant said it would cut $2 billion of costs and use the funds to lift marketing spending 30%.
Author:
Publish date:

Kraft Heinz  (KHC) - Get Report shares rose Monday after the iconic food-and-beverage giant said it would cut $2 billion of costs over four years and use the funds to boost marketing spending 30%.

The Pittsburgh company has struggled since Kraft and Heinz merged five years ago, with analysts seeing it as too slow to alter older brands and unwilling to commit adequate resources to marketing.

Kraft Heinz recently traded at $32.55, up 2.1%. The stock had eased 0.8% year to date through Monday.

“We are placing the consumer at the center of everything we do," Chief Executive Miguel Patricio said in a statement. 

That means "leveraging our greatest assets, strengthening our partnerships, generating fuel that funds growth investments like our 30% increase in marketing spend, and creating a clear path to rebuilding Kraft Heinz into the industry leader we have the potential to become.” 

As for the cost cuts, “through 2024, the company’s Ops Center has identified and is targeting" some $2 billion of "gross productivity efficiencies to offset inflation and critical investments to support the company’s growth initiatives,” Kraft Heinz said..

The company hopes to cut net leverage to below 4 times “on a consistent basis” by year's end, it said. Kraft Heinz set long-term growth targets, including:

· Growth of 1% to 2% in net sales excluding acquisitions;

· Growth of 2% to 3% in adjusted earnings before interest, taxes, depreciation and amortization;

· Growth of 4% to 6% in adjusted earnings per share, with greater than or equal to 100% free-cash flow-conversion.

Kraft expects constant-currency Ebitda growth in the high-single digits percent for the third quarter and mid-single digits for all of 2020.