Q3 2023 Kraft Heinz Co Earnings Call - Q&A
Speaker 1: Good day and thank you for standing by. Welcome to the Kraft Heinz Company third quarter results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Good day, and thank you for standing by and welcome to the Kraft Heinz Company third quarter results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question question and answer session to ask a question. During this session. Please press star one on your Telus.
Speaker 1: To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1-1.
Phone and wait for your name to be announced to withdraw. Your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Anne Marie Megillah Global Investor Relations.
Speaker 1: Please be advised that today's conference is being recorded. I would not like to hand the conference over to your speaker today. Anne-Marie Magella, Global Investor Relations.
Thank you and Hello, everyone welcome to our Q&A session for our third quarter 2023 business update.
Speaker 2: Thank you, and hello everyone. Welcome to our Q&A session for our third quarter 2023 Business Update.
Speaker 2: During today's call, we may have forward-looking statements regarding our expectations for the future, including items related to our business, plans, and expectations, strategy, efforts, and investments, and related timing and expected impact.
During today's call. We may have forward looking statements regarding our expectations for the future, including items related to our business plans and expectations strategy efforts and investments and related timing and expected impacts.
Speaker 2: These statements are based on how we see things today, and actual results may differ materially due to risk and uncertainty.
These statements are based on how we see things today and actual results may differ materially due to risks and uncertainties.
Speaker 2: Please see the cautionary statements and risk factors contained in today's earnings release, which is accompanied by this call, as well as our most recent 10K, 10Q, and AK filings for more information regarding these risks and uncertainties.
Please see the cautionary statements and risk factors contained in our contained in today's earnings release, which accompanies this call as well as our most recent 10-K 10-Q and 8-K filings for more information regarding these risks and uncertainties.
Speaker 2: Additionally, we may refer to non-gout financial measures, which excludes certain items for our financial results reported in accordance with GAP.
Additionally, we may refer to non-GAAP financial measures, which exclude certain items for our financial results reported in accordance with GAAP.
Speaker 2: Please refer to today's earnings release and the non-GAP information available on our website at ir.craft.heimscompany.com under news and events. For discussion of our non-financial measures and reconciliation to the comparable GAAP financial measures, before we begin, I'm going to hand it over to our CEO , Miguel Patricio, for some brief opening remarks.
Please refer to today's earnings release, and the non-GAAP information available on our website at IR Dot Kraft Kraft Heinz company Dot Com under news and events for a discussion of our non financial measures and reconciliations to the comparable GAAP financial measures.
Before we begin I'm going to hand, it over to our CEO Miguel Patricio for some brief opening remarks.
Speaker 3: Well, thank you, Annemarie, and thank you all for being with us today.
Well, Thank you Maria and thank you all for being with us today.
Speaker 3: And before I open the call for questions, I just would like to thank Kraftkind, my entire team, for another great quarter. And again, I would like to highlight some positive aspects about these quarters.
And before opening the call for questions I would like to think Kraft Heinz.
Our team for another great quarter.
And again I would like just to highlight some positive aspects about this quarter.
Speaker 3: We are generating accelerated profitable growth as she will buy our city pillar.
We arent generating accelerated profitable growth fueled by our three pillars.
Speaker 3: our share and volume trends are improving as a result of the action plans that we are implementing.
Our share and volume trends are improving as a result of the action plans that we are implementing.
And we continue to strengthen our balance sheet hitting our target net leverage of approximately three times.
Speaker 3: And we continue to strengthen our balance sheet, hating our target net leverage of approximately three times.
Speaker 3: And then we continue to invest in the future with another quarter of significant investments in marketing technology in Ireland.
We continue to invest in the future.
Another quarter of significant investments in marketing technology and R&D.
Speaker 3: Well, with that, I have here with me today Andrea and Carlos. And so let's open the call for the Q&A.
Well with that I have here with me today in DRAM cargos and so let's open the call for the Q&A.
Speaker 1: Thank you. As a reminder to ask a question, please press Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 1-1 again. One moment for questions.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
One moment for questions.
Speaker 1: Our first question comes from Andrew Lazar with Barclays he may proceed.
Our first question comes from Andrew Lazar with Barclays. You May proceed.
Speaker 4: Great, thanks. Good morning, everybody. In slide 33 of the slide deck this morning, you call out branded promotional activity as is still below 19 levels, and craft activity is below branded. So one clarification is the branded figure you highlight all food categories, or just the branded players within craft hines as categories. And then I guess based on your plans for the remainder of the year and looking into 24, I guess how would you anticipate these metrics shifting?
Great. Thanks, good morning, everybody.
In.
And slide 33 of the slide deck. This morning, you called out branded promotional activity is still below 19 levels and craft activity is below branded so one clarification is the branded figure you highlight all food categories or just the branded players within Kraft Heinz as categories, and then I guess based on your.
Plans for the remainder of the year and looking into 'twenty four I guess, how would you anticipate these metrics shifting do.
Speaker 4: Do you expect branded promo levels to return to historical levels? And would you expect craft times to narrow the gap versus branded or how do you see those metrics moving from here? Thanks so much.
Do you expect branded promo levels to return to historical levels and would you expect Kraft Heinz to narrow the gap versus branded or or how do you see those metrics moving from here. Thanks, so much.
Thanks, Angela if Carlos.
Speaker 3: Let me first address your point about clarification what you see in the page. It is about those branded players that do compete with Krupp High.
Let me, let me first address.
As you pointed out clarification, what you see in the.
Page it is about the branded players that do compete with Kraft Heinz.
Unknown Executive: Good day, and thank you for standing by.
Unknown Executive: Welcome to the Kraft Heinz company, third quarter results conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question, question and answer session. To ask a question during the session, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded.
Speaker 5: The second part in terms of, you know, how do we think about our promotions that we go forward? First, I will tell you that, you know, I'm not gonna comment to what other companies might, might or may not do, but I will tell you is that one, we're not going back to 2019 levels.
The second part in terms of how do we think about our our promotions as we go forward first I would tell you that.
I'm going to comment on what other companies might may or may not do.
But I will tell you is that one we're not going back to 2019 levels.
Speaker 5: We are going at the same time as we go forward into Q4. We know there is a sea of analogy to our business. And as we have said earlier, we're going to make sure now, as we go into the holiday season, that we break the right investments to support our business.
We are going to at the same time as we go forward into Q4, we know there is a seasonality to our business and as we have said earlier, we wouldn't make sure now as we go into the holiday season.
Unknown Executive: I would not like to hand the conference over to your speaker today.
Marie McGellah: And Marie McGellah, Global Investor Relations. Thank you and hello everyone. Welcome to our Q&A session for our third quarter, 2023 business update. During today's call, we may have forward looking statements regarding our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. These statements are based on how we see things today and actual results may differ materially due to risk and uncertainties.
That we make the right investments to support our business now.
Speaker 5: Now, I'll say that at the same time, we're going to continue with the same level of discipline that we have shown until now to make sure that our investment with the right levels ROI as we go forward. Thanks for the question, Andrew.
Now I will say that at the same time, we're going to continue with the same level of discipline that we have shown until now to make sure that our investment with the right levels of Rois as we go forward.
Thanks for the question Andrew.
Yes.
Thank you one moment for questions.
Speaker 1: Our next question goes from Peter Gable with Bank of America. You may proceed. Hey, guys.
Our next question comes from Peter Galbo with Bank of America, You May proceed.
Hey, guys. Good morning, Thank you for taking the question.
Marie McGellah: Please see the cautionary statements and risk factors contained in our, contained in today's earnings release, which is companies this call, as well as our most recent 10K, 10Q and AK filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-gap financial measures, which excludes certain items from financial results reported in accordance with GAP. Please refer to today's earnings release and the non-gap information available on our website at ir.crafthymescompany.com under news and events for a discussion of our non-financial measures and reconciliation to the comparable GAP financial measures.
Speaker 6: I guess just in North America on the volume P, you know, there's a fair amount of discussion open in the pair of marks around kind of meets being a drag this quarter and.
Good morning.
Morning.
Just just in North America on the volume piece.
Theres a fair amount of discussion.
Both on the in the prepared remarks around kind of meet speak a drag this quarter and you discussed a bit about how you are giving up maybe some volume to maximize profitability and gross margins.
Speaker 6: You know, you discussed a bit about how you're giving up maybe some volume to maximize profitability and gross margin.
Speaker 6: But then you also kind of discuss how service levels are where you want them to be particularly in place meets and you're expecting, you know, improvement on that going forward. I guess the question is just what should we be taking away from those comments? Are you kind of continuing to scale back on volume and focus on the profitability there? Or should we think about, you know, a volume share recovery and maybe some headwinds to the margin mix that come with that? Particularly as we think about, you know, North America volume.
But then you also kind of discuss how service levels arent, where you want them to be particularly in sliced meats and youre expecting improvement on that going forward. I guess the question is just what should we be taking away from those comments are you kind of continuing to scale back on volume and focus on the profitability there or should we think about a volume share recovery and maybe some some headwinds to the margin mix.
That come with that.
Particularly as we think about North America volume. Thanks.
Miguel Patricio: Before we begin, I'm going to hand it over to our CEO, Miguel Patrichio, for some brief opening remarks. Thank you and Maria, and thank you all for being with us today. And before I open the call for questions, I just would like to thank Craft Kinds, my entire team for another great quarter. And again, I would like to highlight some positive aspects about these quarters. We are generating accelerated profitable growth, as you will, by our three pillars.
Speaker 7: Well, first of all, I think that let me just put into context kind of the the volume question that you see in North America. First I will tell you is that what you see for us at the company is we continue to improve sequentially from what you saw in Q3 and sorry, Q2 to now in Q2 in Q3 and
Well I think.
First of all I think let me just put into context kind of the.
The volume question that Youll see in North America first I would tell you is that when you.
For us as a company we continue to improve.
Equation from what you saw in Q3, I'm, sorry, Q2 to now in Q2 in Q3.
Speaker 7: And that, if I look holistically at the company first, you'll see that we continue to drive the things that are working for us. We are continuing to growing emerging markets, where we grow in volume next year of a year in Q3, that we continue to expand our in our food service. And that, we believe that it's continued to drive opportunity if we go forward.
And then if I look holistically at the company one youll see that we continue to drive the things that are working for US. We have continued to grow in emerging markets, where we're growing volume mix year over year. During Q3, we continued to expand in our foodservice and we believe that it continued to drive opportunity as we go.
Miguel Patricio: Our share and volume trends are improving, as result of the action plans that we are implementing. And we continue to strengthen our balance sheet, hating our target net leverage of approximately three times. And then we continue to invest in the future with another quarter of significant investments in marketing technology and R&D.
Forward.
Speaker 7: And then, specifically in the US business, you can see how the investment we have made in terms of improving and share our share of our investment in marketing, our investing in innovation, and our improvement in CFR have continued to improve our rural actions.
And then specifically in the U S business, you've seen how the investments we have made in terms of improving the share of shelf our investments in marketing and investing in innovation and improvement in CFR have continued to improve overall actions.
Unknown Executive: Well, with that, I have here with me today, Andrea and Carlos.
Unknown Executive: And so let's open the call for the Q&A. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions.
Now as we think about the total portfolio. There are some places in which we've been remained focused and disciplined on how we invest back into the business and I think you referred to in our Ms business.
Speaker 7: As we think about the total portfolio, there are some places in which we've been a remained focused and disciplined on how we invest back into the business. And I think you referred to in our...
Speaker 7: Where we want to make sure that, you know, we are not going to be just following unprofitable growth, but that we're going to be rational and disciplined on how we invest in those business in order for us to drive the right consumer pool, but at the same time, not sacrificing the world property, the ability of the business that we need to maintain.
We want to make sure that we are not going to be just following on profitable growth, but we cannot be rational and disciplined on how we invest and build business in order for us to drive the right consumer pool, but at the same time not sacrificing the overall profitability of the business that we need to maintain.
Andrew Lazar: Our first question comes from Andrew Lazar with Barclays. He may proceed. Great. Thanks. Good morning, everybody. In slide 33 of the slide deck this morning, you call out branded promotional activity is still below 19 levels. And craft activity is below branded.
Speaker 3: How does that add to that? In our loan term algorithm, volume is important to us. So in our two, three percent growth becomes a balanced contribution between price and volume. So volume is narrow, but that's how it's bad. We are seeking profitable volume growth. We are not trying to maximize growth percentage margin. We are trying to deliver profitable sustainable growth. Ultimately, translate into sustainable EPS growth. Thank you for the question. Great.
I would just add that in our long term algorithm volume is important to us. So in our two 2% growth would come from a balanced contribution between price and volume so volumes matter, but thats Carlos that we're seeking profitable volume growth. We are not trying to maximize gross percentage margin, we're trying to deliver profitable sustainable growth.
Andrew Lazar: So one clarification is, is the branded figure you highlight all food categories or just the branded players within Craft Kinds as categories. And then I guess based on your plans for the remainder of the year and looking into 24, I guess how would you anticipate these metrics? Do you expect branded promo levels to return to historical levels? And would you expect Craft Kinds to narrow the gap versus branded or how do you see those metrics moving from here? Thanks so much. Thanks, Andrew.
Ultimately translate into sustainable EPS growth.
Thanks for the questions great. Thanks very much.
Thank you one moment for questions.
Our next question comes from John Baumgartner with Mizuho Securities You May proceed.
Speaker 1: Our next question comes from John Baumgartner with musical securities he may proceed.
Carlos Abrams: It's Carlos. Let me first address your point about clarification. When you see in the page, it is about those branded players that do compete with Kraft Heinz. The second part in terms of, you know, how do we think about our promotions that we go forward?
Speaker 6: Go on, thanks for the question. Klaus, I just wanted to touch on the meetsbit and again come back to Peter's question. You know, you point out, you know, it's an energizes.
Alright, thanks for the question.
I just wanted to touch on the niche businesses again coming back to Peter's question, you pointed out it's an energized business, but the category has seen price competition private label gaining share that was not happening at the outset during COVID-19 during work from home.
Speaker 6: But the category seeing price competition, private label gaining share, that was not happening at the outset during COVID, during work from home.
Speaker 4: You know, it just seems as though the ambition to rebuild or maintain profit, it's hard to square that with what looks like a need to reinvest more given the clients. So how do you think about resource allocation? Your willingness to continue reinvesting in that business relative to the point where you just say, you know, hey, these assets may be better suited to another owner, like what happened with the nut business. Just curious about your willingness to stick with it and you're given a very tough backdrop in the category. Thank you. You
Carlos Abrams: First, I will tell you that, you know, I'm not going to comment what other companies might, might not do, but I will tell you is that one we're not going back to 2019 levels. We are going at the same time as we go forward into Q4, we know there's a sea of analogy to our business. And if we have said earlier, we're going to make sure now, if we go into the holiday season, that we make the right investments to support our business.
It just seems as though it is ambition to rebuild or maintain profit it's hard to square that with what looks like a need to reinvest more given the declines.
Do you think about resource allocation your willingness to continue reinvesting in that business relative to the point, where you just say hey, the assets may be better suited to another owner.
What happened with another business just curious about your willingness to stick with it and you have given a very tough backdrop in the category. Thank you.
Carlos Abrams: Now, I'll say that at the same time, we're going to continue with the same level of discipline that we have shown until now to make sure that our investment with the right level of ROI is as we go forward. Thanks for the question, Andrew. Thank you.
Andrew why don't you when you start hearing I can bill sure. So as we have said before different parts of our portfolio that have different rules and this growth might change over time their role for me right now is to rebuild our profitability, which hesitant relative 50% in the last five years, while continuing to invest in their brands.
Speaker 8: So, as you have said before, different parts of the portfolio, they have different roles. And these roles might change over time. The role for me right now is to rebuild the profitability, which has enrolled at 50% in the last five years.
Speaker 8: while continuing investing their brand to improve renovates. So then at some point, this bank and the opposition should grow in a profitable way again. And that's what we're doing in Q3 for the second quarter in a row.
Unknown Executive: One moment for questions.
To improve and innovate so that at some point these bank I'm in a position to grow and our profitability again and Thats what were doing in Q3 for the second quarter in a row.
Peter Galbo: Our next question goes from Peter Galbo with Bank of America. You may proceed. Hey guys, good morning. Thank you for taking the question. Good morning. I guess just in North America on the volume piece, you know, there's a fair amount of discussion open in the in the pair of arcs around kind of meets being a drag this quarter and you discussed a bit about how you're giving up maybe some volume to maximize profitability and gross margins.
Speaker 8: this part of the portfolio, this client, meet you high single digits on the top line, but grow meet you high single digits on the bottom line.
Despite of the portfolio decline mutual high single digits on the top line, but grow mutual high single digits on the bottom line.
Peter Galbo: But then you also kind of discussed how service levels are where you want them to be particularly in place meets and you're expecting improvement on that going forward. I guess the question is just what should we be taking away from those comments? Are you kind of continuing to scale back on volume and focus on the profitability there? Or should we think about a volume share recovery and maybe some headwinds to the margin mix to come with that particularly as we think about North America volume? Thanks. Well, thanks.
Speaker 8: not by Mewkinderbren, but by making the right type of investment and right type of action that are appropriate for this portfolio right now. For us to be chasing volume with this in a unsustainable way only through promotion, that's not the game that this won't event to play.
Not by Nuc in dividend, but by making the type of the right type of investments and the right type of actions that are appropriate for this portfolio right now.
For us to be chasing volume.
This is not sustainable we only through promotional that's not the game.
It has been through Blake.
Speaker 7: The only thing I would add is that even in our, you know, if you think about our co-occal business within our meat business.
The only thing I would add.
Even in a.
If you think about our <unk> business within our meat business.
Speaker 7: You know, we have continued to improve our CFR, but that is one area where we're still not at the right level of service that we want for the year. You will see that progression. At the same time as we have improved our service, we have also been in seed improvement in our share too. So if you look at months of day, that's well to October .
We have continued to improve our CFR, but that is one area, where we're still not at the right level of service that we want for the year you will see that progression at the St. Thomas We have improved our our service. We are also beginning to see improvement in our share too. So if you look at month to date as well through October.
Carlos Abrams: First of all, I think that let me just put into contact cannot be the volume question that you see in North America. First, I will say is that what you see for us at the company, we continue to improve sequentially from what you saw in Q3. I'm sorry, Q2 to now in Q2 in Q3. And and that, you know, if I look at holistically at the company first, you'll see that we continue to drive the things that are working for us.
Speaker 9: We are seeing that in fact our co-cultus business are beginning to gain share. So we are just gonna be looking at the category in a very disciplined way to make sure we do it the right things as Andrew said. Thank you.
We are seeing that in fact, our Coco business are beginning to gauge gained share. So we are just going to be looking at the category in a very disciplined way to make sure. We're doing the right things as Andrew said.
Okay. Thank you.
Great question John.
Thank you one moment for questions.
Carlos Abrams: We are continue to growing emerging markets where we grow in volume mix year by year in Q3 that we continue to expand our in our food service. And that, you know, we believe that it's continue to drive opportunity if we go forward. And then a particularly in the US business, you see how the investment we have made in terms of improving and share shelf our investment in marketing, our investing innovation and our improvement in CFR have continued to improve our real actions.
Our next question comes from Stephen Powers with Deutsche Bank You May proceed.
Speaker 1: Our next question comes from Steven Powers with Deutsche Bank. You may proceed.
Speaker 10: Great, thank you. Good morning. One of the shift gears, if I could, and talk about the momentum you have in both food service and emerging market.
Great. Thank you good morning, all of Us shift gears, if I could.
Talk about the most.
That team you have in both foodservice and emerging markets.
Speaker 10: Just to get your perspective on your confidence that momentum can continue and perhaps how the organizational changes that you announced today internationally might contribute to that momentum as we go forward. And also, Andrea, if you could, if I could tack on a second question. Just now that leverage has been below that target.
Just get your perspective on your confidence that momentum can continue and perhaps.
How the organizational changes that you have.
Play internationally might contribute to that momentum as we go forward.
Carlos Abrams: Now, as we think about the total portfolio, there are some places in which we've been a remain focused and disciplined on how we invest back into the business. And I think you referred to in our meat business, where we want to make sure that, you know, we are not going to be just following unprofitable growth, but that we're going to be rational and disciplined on how we invest in those business in order for us to drive the right consumer pool, but at the same time, not sacrificing the world property of the business that we need to maintain.
I'd also Andre.
If I can tack on a second question just now that leverage has dipped below that target.
Speaker 10: level of three times. Just wondering how you're starting to think about prioritization of cash going forward because the cash generation has been good. I presume cash will build and just think about how you're thinking about how to allocate in that cash going forward. Thank you.
Level of three times.
Just wondering how how youre starting to think about prioritization of.
Cash going forward.
So the cash generation has been good I presumed cash flow build and just think about how you or how youre thinking about allocating that cash going forward. Thank you.
Thank you for that question is to you.
Speaker 7: Thank you for the question, Stephen. Andrew, why don't you comment on the capital allocation, then I'll talk about food service and emerging markets. Sure.
Why don't you comment on the capital allocation, then I will talk about foodservice in emerging markets sure.
Carlos Abrams: I would just add that in our long-term algorithm volume is important to us. So in our 2-3% growth it comes from balanced contribution between price and volume so volume is narrow but as Carlos said, we are seeking profitable volume growth. We are not trying to maximize growth percentage margin. We are trying to deliver profitable sustainable growth ultimately translating to sustainable EPS growth. Thanks for the question. Thank you. One moment for questions.
So on capital allocation, our priorities remain unchanged that means continue to fund our very competitive dividend.
Speaker 8: So on capital allocation, our priorities remain unchanged. That means continue to fund our very competitive dividends.
Speaker 8: Maintaining investment rates and prioritizing organic growth like we have been consistently doing during the past three, four years.
Maintaining investment grade and prioritizing organic growth like we have been consistently doing during the past three or four years.
Speaker 8: We are very proud that we were able to get to this level of leverage one year ahead of our initial expectation. And that's very important that the show that the business is strong, that the organization is focused on delivering sustainable performance, not only on the data side, but also in cash conversion, which is a remarkable improvement for this organization. And now I think that put us in a very good situation to affect options to deploy this cash and we are looking at those.
We are very proud that we were able to get to this level of leverage one year ahead of our initial expectation and that's very important to show that the business is strong and the organization is focused on delivering sustainable performance not only on the EBITDA side, but also on cash conversion, which is a remarkable improvement for this organization.
John Baumgartner: Our next question comes from John Baumgartner with musical securities he may proceed. Thanks for the question. I just wanted to touch on the meets bit and again come back to Peter's question. You know you point out it's an energized business but the category seeing price competition, private label, gaining share, that was not happening at the outset during COVID, during work from home.
And I think that puts us in a very good situation to assess options to deploy discussion and we are looking at those.
Speaker 7: Thanks, Andrew. Let me let me comment first on food service. You know, I feel very optimistic about our plans in food service and
Thanks, Andrew Let me, let me comment first on foodservice.
Very optimistic about our plans in foodservice.
Carlos Abrams: You know it just seems as though the ambition to rebuild or maintain profit, it's hard to square that with what looks like and need to reinvest more given the clients. So how do you think about resource allocation, your willingness to continue reinvesting in that business relative to the point where you just say, you know, hey these assets may be better suited to another owner, like what happened with enough business, just curious about your willingness to stick with it and you're given a very tough backdrop on the category.
Speaker 7: You know, we have really been working on building a foundation for the future. And if you think about the way we're thinking about building our business, it's basically three areas. You know, we continue to make the investments in our chat lab models and that's driving positive performance for us.
We have really been working on building a foundation for the future and if you think about the way we're thinking about building our business in basically three areas. We continue to make the investments in our chaplain models and thus driving positive.
Performance for us.
Speaker 3: We also are making sure we are competing in more attractive and better margin channels, you know, things like independent and non-commercial channels versus traditional where we have been limited to. And then lastly, we are seeing much more powerful innovation that allows us to leverage the technology investments we have made and bring those into the product forefront whether that is in things like our high-end remix machines and how that actually creates an opportunity for us to separate ourselves from the future.
We also are making sure we are competing even more attractive in embedded margin channels things like our independent and noncommercial channels versus traditional but we have been limited to.
Carlos Abrams: Thank you. And when you when you start here, I can build sure. So as you have said before, different parts of the portfolio, they have different roles and these roles might change over time. The role for me right now is to rebuild the profitability, which has eroded 50% in the last five years. While continuing to invest in the brand to improve renovates for them at some point, this bank and middle position to grow in a profitable way again.
Then lastly, we are seeing much more powerful innovation that allows us to deliver the technology investments, we have made and bring those into the product forefront whether that is in things like our highest remix machines and how that actually creates an opportunity for us to separate ourselves for the future.
Speaker 3: Now, if you look at the full year for a food service.
Now if you look at the full year from full set for our foodservice.
Speaker 7: You know, our expectation is probably to grow somewhere in the low to mid-double digits versus last year, and we are, I will point out that we're gaining share, too, in both North America and the international.
Carlos Abrams: And that's what we're doing in Q3 for the second quarter in a row. This part of the portfolio decline, need to high single digits on the top line, but grow need to high single digits on the bottom line. Not by you can the brand, but by making the type of the right type of investment and right type of actions that are appropriate for this portfolio right now for us to be chasing volume with this in a sustainable way only through promotion.
And our expectation is probably to grow somewhere in the low to mid double digits versus last year, and we are I would point out that we're gaining share too in both North America and the international zone.
Speaker 7: And then let me just make sure also that it's clear that, you know, if we think about a long-term algorithm, food service is expected to grow about 5%, and we're going to be well above that level in 2023.
And then let me just make sure also that it's clear that.
About a long term algorithm.
Service is expected to grow about 5% and we're going to be well above that level in 2023.
Speaker 7: Now, if I switch over to our emerging market.
Now if I switch over to our emerging markets.
Carlos Abrams: That's not the game that this won't event to play. The only thing I would add is that even in our, you know, if you think about our local business within our meat business, you know, we have continued to improve our CFR, but that is a one area where we're still not at the right level of service that we won for the year. But you will see that progression at the same time as we have improved our, our service, we have also begin to see improvement in our share too.
Speaker 7: You know, the one great thing that we have also have been investing behind in emerging markets is kind of the discipline of our go-to market model. And for us, the reason we feel so confident is because there is a data driven go-to market model that allows us to drive the distribution, that then we can then build the pressing in the existing market and engineer one.
Yes.
One great thing that we have also have been investing behind in emerging markets is kind of the discipline of our go to market model.
And for Us.
Reason, we feel so confident is because there is a.
Data driven go to market model that allows us to drive distribution that then we can then build depressing exited market and enter new ones and.
Speaker 7: And we have done it that in several nine, several occasions. In fact, we are in track to implement our model in 90% of emerging markets by the end of this year.
And we have done it add several 97 locations. In fact, we are on track to implement our model 90% of emerging markets by the end of this year.
Carlos Abrams: So if you look at months to date as well to October, we are seeing that in fact our local business are beginning to gain, gain share. So we are just going to be looking at the category in a very disciplined way to make sure we do it the right things as Andrew said. Okay. Thank you. Our question done. Thank you. One moment for questions.
Speaker 7: And just to remind you, I think in the first phase of building the distribution, that we build the infrastructure, and then we go into the full structure in order to truly take advantage of our emerging business.
And just to remind you it seems like the first phase of building distribution.
Build the infrastructure and then we go into the full structure in order to truly take advantage of our emerging business.
Speaker 7: I think in emerging markets, I would just add the comment that in Q3, we saw a temporary headwind as we think about particularly in Asia.
I think in emerging markets I would just add to comment that in Q3, we saw.
Stephen Powers: Our next question comes from Stephen Powers, a Deutsche Bank. You may proceed. Great. Thank you. Good morning.
A temporary.
Temporary headwind as we think about particularly in Asia.
Speaker 7: where we have a business in Indonesia that is most surrounding around Ramadan season. And what we saw some some travel shifting, spending shifting from in the travel away from gifting and we have a gifting business in Indonesia. So that was a temporary thing, but as we think about the year ahead, we believe that we'll get back to the right levels of performance also in our Indonesia business. So thanks for the question.
We have a business in Indonesia, the remote rounding around Ramadan season, and what we saw some subs travel shifting spending shifting from in the travel away from gifting and we have against the business in Indonesia.
Andrew Maciel: All of this shift gears if I could and talk about the momentum you have in both food service and emerging market, and just get your perspective on your confidence that momentum can continue and perhaps how the organizational changes that you announced today, internationally, might contribute to that momentum as we go forward. And also, Andre, if you could, if I could check on a second question, just now that leverage has it below that target level of three times.
So that was that was a temporary thing, but as we think about the year ahead. We believe that we will get back to the right levels of performance also in our Indonesia business.
So thanks for the question.
Thank you. Thank you.
One moment for questions.
Andrew Maciel: Just wondering how you're starting to think about prioritization of cash going forward. Because the cash generation has been good, I presume cash will build and just think about how you're thinking about how to allocate that cash going forward. Thank you. Thank you for the questions, Stephen.
Speaker 1: Our next question comes from Ken Golden with JP Morgan, you may proceed.
Our next question comes from Ken Goldman with Jpmorgan you May proceed.
Speaker 11: Hi, thank you. Just a quick one. In your slide presentation from the prior quarter to Q, you mentioned that you were expecting positive volume growth in 2024. I may have missed it, but did you reiterate that today, any of the slides or any of your commentary?
Hi, Thank you just a quick one in your slide presentation from the prior quarter. <unk>. You mentioned that you were expecting positive volume growth in 2024, I may have missed it but did you reiterate that today and into the slides or any of your commentary.
Andrew Maciel: But, Andrew, why don't you comment on the capital location then I'll talk about food service and emerging markets. Sure. So, on capital location, our priorities remain unchanged. That means continue to fund our very competitive dividend, maintaining investment rate and prioritizing the organic growth, like we have been consistently doing during the past three four years. We are very proud that we were able to get to this level of leverage one year ahead of our initial expectation.
Speaker 7: Yes, we did, we did. And that's the case, nothing changes. So nothing changes in terms of bottom expectations, Carlos said. So we said, and it happened that volume would improve in Q3 sequential Q3, and it did. It would improve in Q4 versus Q3. And at some point, in 2004, the volumes will turn positive. In fact, I think everything that we see right now in the market in our actions are working. And just give us more confidence as we think about our 2024 plan.
Yes.
We did and Thats the case nothing changed it so nothing changed in terms of our volume expectations as Carlos said, So we said and you happen that volume would improve in Q3 sequentially into Q2 and it did improve in Q4 versus Q3 and at some point in 2000 and for the volumes will turn positive.
In fact, I think everything that we've seen right now in the marketing and our actions are working and just gives us more confidence as we think about our 2024 plants.
Andrew Maciel: And that's very important that the show that the business is strong, that the organization is focused on delivering sustainable performance, not only on the data side, but also in cash conversion, which is a remarkable improvement for this organization. And now I think that puts us in a very good situation to affect options to deploy this cash and we are looking at those.
Speaker 11: Sorry, can I just quickly clarify that? I thought, I think people interpreted the commentary about positive volume about as net throughout.
Sorry can I just quickly clarify that I thought I think people interpreted the commentary about positive volume about as net throughout 'twenty.
Speaker 11: 2024 it will be positive, but I think the comment that was just made was at some point in 2024 it'll turn positive. I guess I'm curious do you expect you know at the end of the year your total 2024 volume to be positive? I just wanted to get a sense that people aren't overmodeling the year
<unk> 2024, it will be positive, but I think the comment that was just made was at some point in 2024, it'll turn positive I guess I'm curious do you expect at the end of the year. Your total 2020 for volume to be positive I, just wanted to get a sense that people aren't over modeling the year.
Carlos Abrams: Andrew, let me comment first on food service. You know, I feel very optimistic about our plans in food service. And, you know, we have really been working on building a foundation for the future. And if you think about the way we're thinking about building our business, it's basically three areas. You know, we continue to make the investments in our chat led models and that's driving positive performance for us. We also are making sure we are competing in more attractive and better margin channels, you know, things like independent and not commercial channels versus traditional, but we have been limited to.
Carlos Abrams: And then lastly, we are seeing much more powerful innovation that allows us to leverage the technology investments we have made and bring those into the product forefront, whether that is in things like our high remix machines and how that actually creates an opportunity for us to separate ourselves. Now, if you look at the full year for food service, you know, expectations for the growth somewhere in the low to meet double digits versus last year.
Speaker 8: I'm not going to give guidance in 2024 right now. What I just said is what you have been saying all along.
I'm not going to give guidance in 2034 right now.
I'd just add is what you have been saying all along.
Thank you one moment for our next question.
Speaker 1: Our next question goes from my Calabry with Piper Sandler. You may proceed.
Our next question comes from Michael Lavery with Piper Sandler You May proceed.
Speaker 1: Thank you, good morning. I know we covered me a little bit just on the volume and how to think about its role in the portfolio side, but I want to just come back to one specific piece. You've talked about your approach and being disciplined and rational, but in your prepared remarks too, you also specifically said that in cold cuts, you're investing to hit the right price points. Can you just maybe unpack that a little bit and
Thank you and good morning.
Covered me a little bit just on the volume and how to think about its role in the portfolio side, but I wanted to just come back to one specific piece you've talked about.
Your approach and being disciplined and rational.
In your prepared remarks to you also specifically said that in cold cuts youre investing to hit the right price points can you just maybe unpack that a little bit.
Speaker 1: Recky Pile, how those two go together and what exactly you mean by by those investments.
Reconcile how those two go together and what exactly you mean by by those investments.
On the <unk>, yes, good question.
Speaker 7: Happy to try my, you know, what I will say is that we need to make sure that we are responding to the moments in which consumers are going to be looking for, you know, right solutions for whatever, whether it's at the holiday seasons or all the points throughout the year. And as we go into Q4, for example, we'll make sure that we're making the right investment.
Happy to clarify Michael what I will say is that we need to make sure that we are responding to the moments in which consumers are going to be looking for.
Carlos Abrams: And we are, I will point out that we're gaining share to in both North America and the international zone. And then let me just kind of make sure also that it's clear that, you know, we think about our long-term algorithm. It's full service is effective to grow about 5% and we're going to be well above that level in 2023.
Great solutions for whatever whether it's at the holiday seasons OLED point throughout the year and as we go into Q4. For example, we will make sure that we're making the right investments. However, we will be doing that with the right level of discipline to make sure we drive the right thing.
Speaker 7: However, we will be doing that with the right level of discipline to make sure we drive the right team returns one that is best.
Carlos Abrams: Now, if I switch over to our emerging markets, you know, the one great thing that we also have been investing behind in emerging markets is kind of the discipline of our go-to-market model. And for us, the reason we feel so confident is because there is a data driven go-to-market model that allows us to drive the distribution, that then we can then build the pressing in the existing market and into new ones, and we have done it that in a several nine several occasions.
Returns on that investment. So is the idea that we are simply like we stated earlier, we are not going to just be chasing volume, we're going to be looking for what is the way for us to drive profitable volume in a way that combines our ability to clinical view to build our businesses through the right investments in marketing.
Speaker 7: So is the idea that we have simply, like we stated earlier, we are not gonna just be chasing volume, we're gonna be looking for what is the way for us to drive profitable volume in a way that combines our ability to kind of compute the build our businesses through the right investments in marketing.
Speaker 7: and using the full array of revenue management tools in order for us to be able to drive the right efficiency and effectiveness of our investment.
And using the full array of revenue management tools in order for us to be able to drive the efficiency and effectiveness of our investments.
Carlos Abrams: In fact, we are in track to implement our model in 90% of emerging markets by the end of this year. And just to remind you and things like in the first phase of building distribution, they would build the infrastructure and then we go into the full structure in order to truly take advantage of our emerging business. You know, I temporarily had when as we think about particularly in Asia, where we have a business in Indonesia that is most surrounding around Ramadan season.
Speaker 1: And so some of what you're saying would be the depth of the promotion is part of how you want to make the investments on price points, but the discipline is the depth of that and not to push it too hard. Would that be a right interpretation?
And so some of what you're saying would be the depth of the promotion is.
Part of how you want to make the investments on price points, but the discipline is the depth of that and not to push it too hard would that be a right interpretation.
I think that would be one of the things that you can say, but I think on top of that if you think about the full array of our revenue management tools.
Speaker 9: I think that would be one of the things that you could say, but I think on top of that, if you think about the full array of our revenue management tools, you know, pricing, price architecture, all their tools are disposed of that allows us to actually think about what is the right investments in order to us to maintain the level of improvement, level of profitability that we have seen deteriorate over the last few years. Okay, thanks so much.
Pricing price pack architecture, other tools or dispose of that allows us to actually think about it what is the right investments in order to us to maintain the level of.
Carlos Abrams: And what we saw some some travel shifting spending shifting from in the travel away from gifting and we have a gifting business in Indonesia. So that was that was a temporary thing, but as we think about the year ahead, we believe that we'll get back to the right levels of performance also in our in our Indonesia business. Thanks for the question. Thank you.
Improving the level of profitability that we have seen deteriorate over the last few years.
Okay. Thanks, so much.
Unknown Executive: One moment for questions.
Yeah.
Thank you.
Thank you one moment for questions.
Speaker 1: Our next question comes from Jason English with Goldman Sachs, he may proceed.
Our next question comes from Jason English with Goldman Sachs. You May proceed.
Hey, good morning folks thanks for slotting.
Speaker 4: Mori, a Stück shes slamming assault, wow
Yes.
Speaker 4: So I guess congrats are in order. Congrats Miguel for a good run and the improvements you've driven while at the helm of the company and congrats Carlos on the upcoming promotion responsibility. So on that topic, I guess the startup question is, what do you expect to do different? Should we be bracing and expecting any strategic shifts or given that you've been an architect of many of the plans that have been in place, is this going to be sort of business as usual?
So.
Congrats on order and congrats for a good run.
Ken Goldman: My next question comes from Ken Golden with JP Morgan. You may proceed. Hi, thank you. Just a quick one in your slide presentation from the prior quarter to you. You mentioned that you were expecting positive volume growth in 2024. I may have missed it, but did you reiterate that today neither the slides or any of your commentary. Yes, we did we did. And that's the case, nothing changes. So nothing changes in terms of bottom expectations, Carlos.
And the improvements you've you've driven while at the helm of the company and congrats Carlos.
The upcoming promotion responsibility.
So on that topic.
I guess.
Starting off question is what do you expect to do different should we be bracing and expecting any strategic shifts or given that <unk> been an architect of many of the plans that have been in place is this going to be sort of business as usual.
Speaker 7: First of all, Jason, thank you for the kind words and, you know, I'm certainly very much, you know, humble and excited about the opportunity I have for me and for the company. What I will say is that, you know, as you pointed out, you know, I've been sitting next to Miguel for the last almost four years now and I think a number of things that we have done as a company, you know, we certainly have done together.
First of all Jason Thank you for the kind words.
Ken Goldman: So we said, and it happened that volume would improve in Q3 sequential Q2 and it did get to improve in Q4 versus Q3. And at some point in 2000 for the volumes, we will turn positive. In fact, I think everything that we see right now in the market in our actions working. And you know, just give us more confidence as we think about our 2024 plans.
I'm certainly very much humble.
Excited about the opportunity ahead for me and for the company, but I will say is that.
As you pointed out I've been I've been sitting next to Miguel for the last almost four years now.
I think a number of things that we have done as a company. We certainly have done together and it strategically I think I'm certainly committed to the three growth pillars that we have for going forward that is and think about how do we continue to drive our expansion in emerging markets, Although we could see the see foodservice.
Speaker 12: And it's strategically, I think I am certainly committed to the three girls pillars that we have for going forward. That is in think about us, how do we continue to drive our expansion and emerging markets? How do we continue to see food services as a great girl for us? And then the growth platforms within our US business.
Ken Goldman: Sorry, can I just quickly clarify that? I think people interpreted the commentary about positive volume about as net throughout 2024. It will be positive, but I think the comment that was just made was at some point in 2024, it'll turn positive. I guess I'm curious. Do you expect, you know, at the end of the year, your total 2024 volume to be positive? I just wanted to get a sense that people aren't overmodeling the year.
Great growth for Us and then the growth platforms within our U S business.
Speaker 12: At the same time, you also probably read some of the changes we're making in our structure in order to actually help us accelerate some of those things that we have done. You know, for me,
At the same time, you also probably read some of the changes we're making in our structure in order to actually help us accelerate some of those things that we have done for me.
Unknown Executive: I'm not going to give guidance to 2024 right now. What just that is what you have to have these very own. Thank you. One moment for our next question. All right.
Speaker 12: One of the critical aspects of this time where I have been transitioning and coming to the new role in January has been listening to the organization and making sure we have the clarity of our strategy and our structure is going to follow.
One of the critical aspect of this time where have been transitioning.
And coming to the new broad in January has been listening to the organization and making sure. We have the clarity of our strategy and our structure is going to follow that clarity.
Michael Lavery: Next question goes from my delivery with pipe or stand there. You may proceed. Thank you.
Speaker 12: So some of the things you'll see in terms of us being able to have a bit of breaking down the international zone, which has worked in the past world for us. But now as we go into a new way of us growing, allows us to be a little more focused on those emerging markets in which we're going to make some additional investments.
Carlos Abrams: Good morning. I know we covered me a little bit just on the volume and how to think about its role in the portfolio side, but I want to just come back to one specific piece. So you've talked about your approach and being disciplined and rational, but in your prepared remarks, too, you also specifically said that in cold cuts, you're investing to hit the right price points. Can you just maybe unpack that a little bit and reconcile how those two go together and what exactly you mean by by those investments.
So some of the things you will see it in terms of us being able to have a late breaking down the international sone, which have to work into pad well for us, but now with we go into a new into a new way of us growing allows us to be a little more focus on both emerging markets and which we're going to make some additional investments.
Speaker 12: That I think is part of us thinking differently about how we bring that structure and so that strategy to life in our structure. So that I think some of the things that you're gonna see is what are the places that with the lens of the jobs to be done for the strategy of the company, that we can maybe arrange certain things where we can truly leverage the scale of the company, the scale that we have been investing behind our technology and our marketing capabilities, and to deploy them against the three pillars strategically that I'm very much aligned with.
That I think is part of the us thinking differently about how we bring that structure and so that strategy to life in our structure. So does that thing some of the things that you see is what are the places that with the length of the just to be done for the strategy of the company that we can maybe raise certain things, where we can truly leverage the scale of the company that scale that.
Carlos Abrams: Yeah, good question. Happy to try my, you know, what I will say is that we need to make sure that we are responding to the moment in which consumers are going to be looking for, you know, right solutions for whatever, whether it's at the holiday seasons or all the points around the year. And as we go into Q4, for example, we'll make sure that we're making the right investments. However, we will be doing that with the right level of discipline to make sure we drive the right team returns on that investment.
We have been investing behind our technology, and our marketing capabilities and to deploy them against the three pillars strategically that I am very much aligned with.
And should we expect inorganic solutions to come into the fall a little bit more so now that your balance sheets in a better situation.
Speaker 4: And should we expect inorganic solutions to come into the fold a little bit more so now that your balance sheets in a better situation?
Speaker 8: As Andrew said earlier, we could keep look at opportunities, but I would say that's something that is part of our ongoing thoughts about how we continue to see the active view of our portfolio. But there's nothing today that I would say that we would be announcing, no, anything else you would ask. No, I think as we've considered, I think as something I've said before, I think our priorities are organic business and M&A, if it happens, it has to help us accelerate our organic strategy.
As Anders said earlier, we continue to look at opportunities, but I would say.
Carlos Abrams: So is the idea that we have simply like we stated earlier, we are not going to just be chasing volume. We're going to be looking for what is the way for us to drive for a whole point in a way that combines our ability to kind of compute to build our businesses through the right investments in marketing and using the full array of revenue management tools in order for us to be able to drive the right efficiency effectiveness of our investments, and so some of what you're saying would be the depth of the promotion is part of how you want to make the investments on price points, but the discipline is the depth of that and not to push it too hard would that be a right interpretation.
Something that is part of our ongoing.
Thoughts about how do we continue to see.
The active view of our portfolio, but there is nothing today that I will say that we would be announcing.
Carlos Abrams: I think that would be one of the things that you could say, but I think on top of that, if you think about the full array of revenue management tools, you know, pricing, price after architecture, other tools are disposed of those. The allows us to actually think about it, what is the right investments in order to us to maintain the level of improvement level of profitability that we have seen deteriorate over the last few years. Okay, thanks so much. Thank you. Thank you, one moment for questions.
Anything to LG.
I think as a consistent so I think I've said before I think our priorities organic business M&A. If it happens it has to help us to accelerate our organic strategy.
Speaker 4: It's been fully consistent. Like we have done, that's for acquisitions, all state television and three-up damning emerging markets. And to be creative, short-top line, both on top of acquisitions, that's what we are focusing on. Understood. Thank you very much. Thank you, Jason.
That should be fully consistent.
We have done thus far acquisitions, though since the innovation and three outstanding in emerging markets have to be accretive to our top line bolt on type of acquisitions Thats, what we are focusing on.
Understood. Thank you very much.
Thank you Jason.
Thank you.
One moment for questions.
Our next question comes from Matt Smith with Stifel. You May proceed.
Speaker 1: Our next question comes from Matt Smith, who's people you may proceed.
Speaker 13: Hi, good morning. One of the ask a question, your productivity savings have been very strong this year, and you already increased your target for the year. Those in part been used to have you a stepped up level of investment behind marketing, R&D, and innovation. But as we look forward, can you sustain this level of incremental savings into 2024, or should we expect a return to the target of $500 million? And after this year of stepped up investment, do you believe you're exiting with the appropriate level of investment across the business?
Hi, Good morning wanted to ask a question your productivity savings have been very strong this year and you already increased your target for the year those have in part been used to heavier stepped up.
Level of investment behind marketing R&D and innovation, but as we look forward can you sustain this level of incremental savings into 2024 or should we expect to return to the target of $500 million in and after this year of stepped up investment do you believe you're exiting with the appropriate level of investment across the business or do you plan to continue to.
Jason English: Our next question comes from Jason English with Goldman Sachs, he may proceed. Hey, good morning, folks. Thanks for slot me. So I guess congrats are in order. Congrats Miguel for a good run and the improvements you've driven while at the helm of the company and congrats Carlos on the upcoming promotion responsibility. So on that topic, I guess the startup question is, what do you expect to do different? Should we be bracing and expecting any strategic shifts or given that you've been an architect of many of the plans that have been in place? Is this going to be sort of business as usual?
Speaker 13: Are you planning to continue to invest in an elevated rate as we look forward?
At an elevated rate as we look forward.
Speaker 12: Maybe Android, if you could stick to efficiency plants. Sure. So.
Maybe Andrew if you could speak to the efficiency plans sure. So.
Speaker 8: But at this point, we still committed to delivering 3% of cards of $500 million on a go forward basis. But as we have said before,
Luke.
Despite we are still committed to deliver the 3% of Cogs and $500 million on a go forward basis, but as we have said before.
Speaker 8: Our benchmark is really on the 4% level which we are achieving this year. Can you keep in mind that this year as well? We had a lot of
Our benchmark is really on the 5% level, which we are achieving this year and you keep in mind that this year as well we had a lot of let's go get the bills from inefficiency that we generated throughout the pandemic. That's also helping but but we feel good about our supply chain organization. Today is operating a completely superior level is very stable.
Speaker 8: Let's call getables from inefficiency that regenerated product and them if that's also healthy.
Carlos Abrams: Our first of all, Jason, thank you for the kind words and, you know, I'm certainly very much, you know, humble and excited about the opportunity ahead for me and for the company. What I would say is that, you know, as you pointed out, you know, I've been sitting next to Miguel for the last almost four years now and I think a number of things that we have done as a company, you know, we certainly have done together.
Speaker 8: But, but you feel good about how we supply chain organization today is operating a completely superior level with various tables service levels and be a lot more forward thinking, which you have confidence in the event at least 3% that we have talked.
So that would then be a lot more forward thinking which give us confidence in delivering at least 3% doesn't have talked before.
Speaker 9: from an investment standpoint. I think this is also being a great year because it's been able to, they were very solid bottom line growth, why are you really respecting the investment level from the further company for the future, which means that I think a lot of the research has happened. There is still places that we want to invest more, but I think we took a advantage of this year to really reset the level of investments to a very good level. Thank you, and thank you. Thank you very much.
From an investment standpoint, I think this is also has been a great year, because we have been able to deliver very solid bottom line growth, while really resetting the investment level from the project company for the future, which mean that.
Carlos Abrams: And it's strategically, I think if I am certainly committed to the three girls pillars that we have for going forward, that is in think about us, how do we continue to drive our expansion and emerging markets? How do we continue to see good service as a great girl for us? And then the growth platforms within our U.S, business. At the same time, you also probably read some of the changes we're making in our structure in order to actually help us accelerate some of those things that we have done.
I think a lot of the resets that have happened. There is two places that we want to invest more but I think we took advantage of this year to really reset the level of investments drove very good Michael.
Thank you for that I can think of them.
Yeah.
Thank you.
One moment for questions.
Alright, great. Thanks.
Carlos Abrams: You know, for me, one of the critical aspect of this time, where I have been transitioning as and coming to the new role in January, has been literally into the organization and making sure we have the clarity of our strategy and our structure is going to follow that clarity. So some of the things you'll see in terms of us being able to have a bit of breaking down the international zone, which has worked in the past world for us, but now what we go into a new way of us growing allows us to be a little more focused on those emerging markets in which we're going to make some additional investments.
Operator, this will be the last question.
Speaker 9: Thank you. And our last question comes from Robert Moscow with TD Cowan. You may proceed.
Thank you and our last question comes from Robert Moskow with TD Cowen You May proceed.
Robert Moskow Your line is now open.
Hey can you hear me now.
Yes, I'm sorry about that.
Speaker 14: Sorry about that. So this is kind of a what if question, and maybe you might not want to answer what if questions. But we're all watching top line growth kind of decelerate in the US, and the US retail is such an important part of your mix. So I guess my question is, if we're in a scenario where we're kind of in a zero to 1% kind of sales growth environment next year, just be your category.
So this is kind of a what if question and maybe you might.
Not what I want to ask the answer what if questions but.
We're all watching topline growth kind of decelerate in the U S and the U S retail.
Carlos Abrams: That I think is part of the us thinking differently about how we bring that structure and so that that strategy to life in our structure. So that I think some of the things that you're going to see is what are the places that with the length of the just to be done for the strategy of the company that we can maybe erase certain things where we can truly leverage the scale of the company, the scale that we have been investing behind our technology and our marketing capabilities and to deploy them against the three pillars strategically that I'm very much aligned with.
Such an important part of your your mix.
I guess my question is if.
If we're in a scenario, where we're kind of in a zero to 1% kind of sales growth environment next year, just beer categories. What would your philosophy on an EBITDA basis like would you still drive to.
Speaker 14: What would your philosophy be on an epidop?
Speaker 14: Like would you still drive to drop savings to the bottom line to hit the mid-single digit EBITDA, or would a slower top line environment necessitate a slower EBITDA growth kind of tart?
Dropped savings.
Savings to the bottom line to hit the mid single digit EBITDA or what a slower top line environment necessitate a slower EBITDA growth kind of target.
Carlos Abrams: And should we expect inorganic solutions to come into the fold a little bit more so now that your balance sheets in a better situation? I think our priorities are organic business and MNA, if it happens, it has to help us accelerate our organic strategy. It's supposed to be fully consistent, like we have done, that's for acquisitions, all safety and liberation, three of them in emerging markets, have to be a creative short of the line, both on top of acquisitions, that's what we are focusing on. Understood. Thank you very much. Thank you, Jason. Thank you. One moment for questions.
Speaker 8: Okay, good morning Robin, good to hear back from you.
Okay.
Good morning, Robin and good to hear back from you.
Look.
We.
Speaker 8: We believe that for us to grow top line in a profitable sustainable way is critical.
We believe that's what it is to grow bottom line in a profitable sustainable way is critical so.
Speaker 8: So if in the event where industry is zero
<unk> our industry is zero.
Speaker 8: I think that doesn't change the game that we're trying to play. Because I don't know if you are implying that we will start to go aggressive on promotions to try to get volume through market share in there.
That doesn't change the game play.
Blake because I don't know if youre, implying that we will start to go aggressive on promotions with natural gas volumes grew market share in that.
Speaker 8: productive and sustainable way. If that's what you're asking behind your question, although that's not the game you want to play. So I just said that our strategy continues the same. It's working and I think with you, Petra, I had a right direction. I don't want to make change in the direction because of temporary situations in the industry.
Productive and sustainable way.
What you're asking behind your question, although that's not the game you want to play so.
I will just say that our strategy continues the same it's working and I think we feel better having the right directionally the mix changing direction because of temporary.
Patients in the industry.
Okay. Thank you.
Thanks Robert.
Matthew Smith: Our next question comes from Matt Smith with people you may proceed. Hi, good morning. One of the ask a question, your productivity savings have been very strong this year and you already increased your target for the year. Those in part have been used to have a stepped up level of investment behind marketing, R&D and innovation. But as we look forward, can you sustain this level of incremental savings into 2024? Or should we expect a return to the target of 500 million?
Speaker 1: Thank you. I'd now like to turn the call back over to Carlos Abrams-Rivera for any closing remarks.
Thank you I'd now like to turn the call back over to Carlos Abrams Rivera for any closing remarks.
Thank you.
Speaker 12: So before we leave here, I just wanted to acknowledge and take a moment to thank Miguel for all the support and trust that he has shown to me personally.
So before we leave here I just wanted to.
And take a moment to thank me Gale four and.
All the support.
Just.
He has said to me personally.
Speaker 12: And so everything he has done for a company, as he has built this tremendous and strong foundation.
And and for everything he has done for for our company as he has built tremendous and strong foundation.
Matthew Smith: And after this year have stepped up investment, do you believe you're exiting with the appropriate level of investment across the business? Are you planning to continue to invest in an elevated rate as we look forward? Maybe Andrew, if you could stick to efficiency plans? Sure. So, look, at this point, we still committed to delivering the 3% of cards of 500 million dollars on a go forward basis. But as we have said before, our benchmark is really on the 4% level, which we are achieving this year.
Speaker 7: I can tell you that today, Crafines is a much stronger company because in 2019, Miguel Patricio put this company on his back and carried it forward. And I am forever grateful for being part of his team, as we all worked together to transform Crafines. And I think over at the next year, Crafines, I'm proud of where we have been as a company, and even more thrilled about what we're going. And thank you.
I can tell you that today is at a much stronger company because in 2019 Miguel Patricio put this company on his back and carrier forward and I am forever grateful for being part of this team.
As we all work together to transform Kraft Heinz.
And I.
I think over the next year cut Heinz and proud with what we have been as a company and.
And even more thrilled about what we're going.
And thank you all for joining us today.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker 1: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Matthew Smith: Can you keep in mind that this year as well? Well, we had a lot of, let's call, getables from inefficiency that regenerated throughout the pandemic. That's also healthy. But if you're good about how we supply chain organization today is operating a completely superior level with very stable service levels and be a lot more forward thinking, which you give us confidence in that it is a 3% that we have talked before. From an investment standpoint, I think this has also been a great year because it has been able to be very solid bottom line growth. Why are you really resetting the investment level from the follow company for the future? Which means that I think a lot of the reset have happened. There is still places that we want to invest more.
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Andrew Maciel: But I think we took advantage of this year to really reset the level of investments to a very good level. Thank you for that. Thank you. One moment for questions.
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Robert Moskow: Operator, this will be the last question. Thank you and our last question comes from Robert Moscow with TD Cowan. You may proceed. Robert, Moscow, your line is now open. Hey, can you hear me now? Yes, I'm sorry about that. So this is kind of a what if question and maybe you might not want to ask answer what if questions, but, you know, we're all watching top line growth kind of decelerate in the US and the US retail is such an important part of your mix.
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Robert Moskow: So I guess my question is if we're in a scenario where we're kind of in a zero to 1% kind of sales growth environment next year, just for your categories, what would your philosophy be on an EBITDA basis? Like would you still drive to drop savings to the bottom line to hit, you know, the mid single digit EBITDA or would a slower top line environment necessitate a slower EBITDA growth kind of target?
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Carlos Abrams: Okay, good morning Robin, good to hear back from you. Look, we believe that for a short grow top line in a profitable sustainable way is critical. So if in an event where industry is zero, I think that doesn't change the game that you're trying to play because I don't know if you are implying that we will start to go aggressive on promotions to try to get volume through market share in a productive sustainable way.
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Speaker 1: Good day and thank you for standing by. Welcome to the Kraft Times company third quarter results conference call. At this time, all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session.
Good day and thank you for standing by welcome to the Kraft Heinz Company third quarter results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session. Please press star one on your telephone and wait for your name to be in.
Speaker 1: To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1-1.
To withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, and Marine Megillah Global Investor Relations.
Speaker 1: Please be advised that today's conference is being recorded. I would not like to hand the conference over to your speaker today and Marie McGellah, Global Investor Relations.
Speaker 2: Thank you and hello everyone. Welcome to our Q&A session for our third quarter, 2023 Business Update.
Thank you and Hello, everyone welcome to our Q&A session for our third quarter 2023 business update.
Speaker 2: During today's call, we may have forward-looking statements regarding our expectations for the future, including items related to our business, plans, and expectations, strategy, efforts, and investments, and related timing and expected impact.
During today's call. We may have forward looking statements regarding our expectations for the future.
<unk> items related to our business plans and expectations strategy.
And investments and related timing and expected impacts.
Speaker 2: These statements are based on how we see things today and actual results made different materially due to risk and uncertainty.
These statements are based on how we see things today and actual results may differ materially due to risks and uncertainties.
Speaker 2: Please see the cautionary statements and risk factors contained in today's earnings release, which is accompanied by this call, as well as our most recent 10K, 10Q, NAK K-Fileings for more information regarding these risks and uncertainties.
Please see the cautionary statements and risk factors contained in our contained in today's earnings release, which accompanies this call as well as our most recent 10-K 10-Q and 8-K filings for more information regarding these risks and uncertainties.
Speaker 2: Additionally, we may refer to non-gout financial measures, which excludes certain items from financial results reported in accordance with GAL.
Additionally, we may refer to non-GAAP financial measures, which exclude certain items for our financial results reported in accordance with GAAP.
Speaker 2: Please refer to today's earnings release and the non-GAP information available on our website at ir.craft.heimscompany.com under news and events. For discussion of our non-financial measures and reconciliation to the comparable GAAP financial measures, before we begin, I'm going to hand it over to our CEO , Miguel Patricio, for some brief opening remarks.
Please refer to today's earnings release, and the non-GAAP information available on our website at IR Dot correct.
Science company Dot Com under news and events for a discussion of our non financial measures and reconciliations to the comparable GAAP financial measures before we begin I'm going to hand, it over to our CEO Miguel Patricio for some brief opening remarks.
Speaker 3: Well, thank you, Marie, and thank you all for being with us today.
Thank you Anne Marie and thank you all for being with us today.
Speaker 3: And before offering the call for questions, I just would like to thank Kraft Heinz, my entire team, for another great quarter. And again, I would like to highlight some positive aspects about thesearleouds that we received, ?? Seine too Buddy Fan that isjak Stet potte
And before opening the call for questions I would like to think Kraft Heinz.
<unk> team for another great quarter.
And again I would like just to highlight some positive aspects about this quarter.
Speaker 3: We are generating accelerated profitable growth she will buy our city pillar.
We are generating accelerated profitable growth fueled by our three pillars.
Speaker 3: our share and volume trends are improving as result of the action plans that we are implementing.
Sure and volume trends are improving.
A lot of the action plans that we are implementing.
Speaker 3: And we go to do some strength and power balance sheet, hating our target net leverage of approximately three times.
And we continue to strengthen our balance sheet hitting our target net leverage of approximately three times.
Speaker 3: And then we continue to invest in the future with another quarter of significant investments in marketing technology and our
We continue to invest in the future with another quarter of significant investments in marketing technology and R&D.
Speaker 3: Well, with that, I have here with me today and Diane Carzus. And so, let's open the call for the Q&A.
Well with that I have here with me today in DRAM Cosmos, and so let's open the call for the Q&A.
Speaker 1: Thank you. As a reminder to ask a question, please press Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 1-1 again. One moment for questions.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
One moment for questions.
Speaker 1: Our first question comes from Andrew Lazar with Barclays he may proceed.
Our first question comes from Andrew Lazar with Barclays. You May proceed.
Speaker 15: Great, thanks. Good morning, everybody. In slide 33 of the slide deck this morning, you call out branded promotional activity as is still below 19 levels, and craft activity is below branded. So one clarification is the branded figure you highlight all food categories, or just the branded players within craft hines as categories. And then I guess based on your plans for the remainder of the year and looking into 24, I guess how would you anticipate these metrics shifting?
Great. Thanks, good morning, everybody.
In.
In slide 33 of the slide deck. This morning, you called out branded promotional activity is still below 19 levels and craft activity is below branded so one clarification is the branded figure you highlight all food categories or just the branded players within Kraft Heinz as categories, and then I guess based on your.
Plans for the remainder of the year and looking into 'twenty four I guess, how would you anticipate these metrics shifting do.
Speaker 15: Do you expect branded promo levels to return to historical levels? And would you expect craft times to narrow the gap versus branded? Or how do you see those metrics moving from here? Thanks so much.
Do you expect branded promo levels to return to historical levels and would you expect Kraft Heinz to narrow the gap versus branded or or how do you see those metrics moving from here. Thanks, so much.
Thanks, Angela if Carlos.
Speaker 12: Let me first address your point about clarification. What you see in the page, it is about those branded players that do compete with Krupp High.
Let me, let me first address.
As you pointed out clarification, what you see in the page. It is about the branded players that do compete with Kraft Heinz.
Robert Moskow: Okay, thank you. Thanks Robert.
Speaker 7: The second part in terms of, you know, how do we think about our promotions that we go forward? First, I will tell you that, you know, I'm gonna comment to what other companies might, might or may not do, but I will tell you is that one, we're not going back to 2019 levels.
The second part in terms of how do we think about our our promotions as we go forward first I would tell you that.
Unknown Executive: Thank you.
I'm going to comment on what other companies might may or may not do.
But I will tell you is that one we're not going back to 2019 levels.
Speaker 12: We are going at the same time as we go forward into Q4. We know there is a sea of analogy to our business. And as we have said earlier, we're going to make sure now, as we go into the holiday season, that we make the right investments to support our business.
We are going to at the same time as we go forward into Q4, we know there is a seasonality to our business and as we have said earlier, we got to make sure. It now as we go into the holiday season.
That we make the right investments to support our business now.
Speaker 5: Now, I'll say that at the same time, we're going to continue with the same level of discipline that we have shown until now to make sure that our investment with the right levels ROI is as we go forward. Thanks for the question, Andrew.
Now I will say that at the same time, we're going to continue with the same level of discipline that we have shown until now to make sure that our investment with the right levels of Rois as we go forward.
Thanks for the question Andrew.
Yes.
Thank you one moment for questions.
Speaker 1: Our next question goes from Peter Gobble with Bank of America. You may proceed. Hey, guys.
Our next question comes from Peter Galbo with Bank of America, You May proceed.
Hey, guys. Good morning, Thank you for taking the question.
Speaker 6: Good morning. I guess just in North America on the volume P, there's a fair amount of discussion open in the pararabarks around kind of meets being a drag this quarter.
Good morning.
Morning.
Just just in North America on the volume piece.
Theres a fair amount of discussion.
Both on the in the prepared remarks around kind of meet speak a drag this quarter and you discussed a bit about how you are giving up maybe some volume to maximize profitability and gross margins.
Speaker 6: You know, you discussed a bit about how you're giving up maybe some volume to maximize profitability and gross margin.
Speaker 6: But then you also kind of discuss how service levels aren't where you want them to be, particularly in place meets and you're expecting improvement on that going forward. I guess the question is just, what should we be taking away from those comments? Are you kind of continuing to scale back on volume and focus on the profitability there, or should we think about a volume share recovery and maybe some headwinds to the margin mix that come with that, particularly as we think about North America volume.
But then you also kind of discuss how service levels arent, where you want them to be particularly in sliced meats and youre expecting improvement on that going forward. I guess the question is just what should we be taking away from those comments are you kind of continuing to scale back on volume and focus on the profitability there or should we think about a volume share recovery and maybe some some headwinds to the margin mix.
With that.
Particularly as we think about North America volume.
Carlos Abrams: I'd now like to turn the call back over to Carlos Abrams Rivera for any closing remarks. Thank you.
Speaker 12: Well, first of all, I think that let me just put into context kind of the volume question that you see in North America. First I would say is that what you see for us as a company, we continue to improve sequentially from what you saw in Q3. I'm sorry, Q2 to now in Q2 in Q3 and...
Well first.
First of all I think let me just put into context kind of the.
Carlos Abrams: So before we leave here, I just wanted to acknowledge and take a moment to thank Miguel for all the support and trust that he has shown to be personally. And for everything he has done for for a company as he has built this tremendous and strong foundation, I can tell you that today Kraft Heinz is a much stronger company because in 2019, Miguel Patricia put this company on his back and carry it forward.
The volume question that Youll see in North America first I would tell you is that what you're.
Carlos Abrams: And I am forever grateful for being part of his team as we all worked together to transform Kraft Heinz. And I think over at the next year, Kraft Heinz, I'm proud of where we have been as a company and even more thrilled about what we're going.
For us as a company we continue to improve.
Actually from what you saw in Q3, I'm, sorry, Q2 to now in Q2 in Q3.
Unknown Executive: And thank you all for joining us today. Thank you.
Speaker 7: And that, if I look holistically at the company first, you'll see that we continue to drive the things that are working for us. We are continuing to growing emerging markets when we grow in volume next year, over year, in our Q3, that we continue to expand our in our food service. And that, we believe that it's continued to drive opportunity if we go forward.
And then if I look holistically at the company one youll see that we continue to drive the things that are working for US. We have continued to grow in emerging markets, where we're growing volume mix year over year now in Q3 that we continue to expand our in our foodservice.
Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect. Michael Lavery, Kenneth Goldman, John Baumgartner, John Baumgartner, John Baumgartner Michael Lavery, Kenneth Goldman, John Baumgartner, John Baumgartner, John Baumgartner Michael Lavery, Kenneth Goldman, John Baumgartner, John Baumgartner, John Baumgartner Michael Lavery, Kenneth Goldman, John Baumgartner . .
We believe that it continued to drive opportunity as we go forward.
Unknown Executive: [inaudible] Good day and thank you for standing by. Welcome to the Kraft Heinz Company third quarter results conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.
Speaker 12: And then, specifically in the US business, you can see how the investment we have made in terms of improving and share our share of our investment in marketing, our investing in innovation, and our improvement in CFR have continued to improve our rural actions.
And then a specifically in the U S business you see how the investments we have made in terms of improving the share of shelf our investments in marketing and investing in innovation.
Improvement in CFR have continued to improve overall actions.
Speaker 7: As we think about the total portfolio, there are some places in which we've been a remain focused and disciplined on how we invest back into the business. And I think you referred to in our...
Now as we think about the total portfolio. There are some places in which we've been at remain focused and disciplined on how we invest back into the business and I think you referred to in our meat business, where we want to make sure that we are not going to be just following on profitable growth, but we cannot be rational and disciplined on how.
Marie McGellah: I would not like to hand the conference over to your speaker today and Marie McGellah, Global Investurulations. Thank you and hello everyone.
Marie McGellah: Welcome to our Q&A session for our third quarter, 2023 business update. During today's call, we may have forward looking statements regarding our expectations for the future, including items related to our business plans and expectations. Strategy, efforts and investments and related timing and expected impacts. These statements are based on how we see things today and actual results made different materially due to risk and uncertainties.
Speaker 7: Where we're going to make sure that, you know, we are not going to be just following unprofitable growth, but that we're going to be rational and disciplined on how we invest in those business in order for us to drive the right consumer pool. But at the same time, not sacrificing the world property, the ability of the business that we need to maintain.
We invest and build business in order for us to drive that right.
Marie McGellah: Please see the cautionary statements and risk factors contained in today's earnings release, which is companies this call, as well as our most recent 10K, 10Q, NAK filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-gap financial measures, which excludes certain items from financial results reported in accordance with GAP. Please refer to today's earnings release and the non-gap information available on our website at ir.crafthymescompany.com under news and events, for a discussion of our non-financial measures and reconciliation to the comparable GAP financial measures.
<unk> pool, but at the same time not sacrificing the overall profitability of the business that we need to maintain.
Miguel Patricio: Before we begin, I'm going to hand it over to our CEO, Miguel Patricio, for some brief opening remarks. Thank you and Maria, and thank you all for being with us today. And before I open the call for questions, I just would like to thank Craft Kinds, my entire team, for another great quarter.
Speaker 8: I would just add that in our loan term, our reason volume is important to us. So in our two, three percent growth comes from balance contribution between price and volume. So volume's matter, but that's Carlos dad. We are seeking profitable volume growth. We are not trying to maximize gross percentage margin. We are trying to deliver profitable sustainable growth. Ultimately, it is letting you sustainable EPS growth. Thanks for the question. Great.
I would just add that in our long term algorithm volume is important to us so in our two 2% the growth come from a balanced contribution between price and volume so volumes matter, but thats Carlos that we're seeking profitable volume growth. We are not trying to maximize gross percentage margin, we're trying to deliver profitable sustainable growth.
Miguel Patricio: And again, I would like to highlight some positive aspects about these quarters. We are generating accelerated profitable growth, as you will, by our city pillars, our share and volume trends are improving, as result of the action plan that we are implementing. And we continue to strengthen our balance sheet, hating our target net leverage of approximately three times. And then we continue to invest in the future with another quarter of significant investments in marketing, technology, and our end.
Ultimately translate into sustainable EPS growth.
Thanks for the question great. Thanks very much.
Thank you one moment for questions.
Speaker 1: Our next question comes from John Baumgartner with
Our next question comes from John Baumgartner with Mizuho Securities You May proceed.
Speaker 6: Thanks for the question. Klaus, I just wanted to touch on the meets, business again, come back to Peter's question. You know, you point out, you know, it's an energized,
Yes.
Alright, Thanks for the question Carlos I, just wanted to touch on the niche businesses again coming back to Peter's question, you pointed out.
Speaker 6: But the category of seeing price competition, private label vending share, that was not happening at the outset during COVID, during work from home.
Energize business, but the category has seen price competition private label gaining share that was not happening at the outset during COVID-19 during work from home.
Speaker 15: You know, it just seems as though the ambition to rebuild or maintain profit, it's hard to square that with what looks like a need to reinvest more given the declines. So how do you think about resource allocation? Your willingness to continue reinvesting in that business relative to the point where you just say, you know, hey, these assets may be better suited to another owner, like what happened with the nut business. Just curious about your willingness to stick with it and you're given a very tough backdrop on the category. You
It just seems as though it is ambition to rebuild or maintain profit it's hard to square that with what looks like a need to reinvest more given the declines. So how do you think about resource allocation and your willingness to continue reinvesting in that business relative to the point, where you just say hey, the assets may be better suited to another owner like what happened with <unk>.
Business, just curious about your willingness to stick with it and you have given a very tough backdrop in the category. Thank you.
Andrew Let me start here I can build sure. So as we have said before different parts of our portfolio that have different rules and this growth might change over time their role for me right now is to rebuild the profitability, which hesitant relative 50% in the last five years.
Speaker 8: So, as you have said before, different parts of the portfolio, they have different roles. And these roles might change over time. The role for me right now is to rebuild the profitability, which has eroded 50% in the last five years.
Speaker 8: while continuing to invest in the brand to improve renovates. So then at some point, this bank amiraposition should grow in a profitable way again. And that's what we're doing in Q3 for the second quarter in a row.
Unknown Executive: Well, with that, I have here with me today, Andrea and Carlos, and so let's open the call for the Q&A. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions.
While continuing to invest in the brands to improve and innovate so that at some point. These bank I'm in a position to grow in a profitable way again and Thats what were doing in Q3 for the second quarter in a row.
Andrew Lazar: Our first question goes from Andrew Lazar with Barclays, he may proceed. Great. Thanks.
Andrew Lazar: Good morning, everybody. In slide 33 of the slide deck this morning, you call out branded promotional activity is still below 19 levels, and craft activity is below branded. So one clarification is, is the branded figure you highlight all food categories, or just the branded players within craft Heinz's categories. And then I guess, based on your plans for the remainder of the year and looking into 24, I guess how would you anticipate these metrics shifting?
Andrew Lazar: You expect? Branded promo levels to return to historical levels, and would you expect craft times to narrow the gap versus branded or how do you see those metrics moving from here? Thanks so much. Thanks, Andrew. It's Carlos. Let me first address your point about clarification, what you see in the page, it is about those branded players that do compete with craft Heinz. The second part in terms of, you know, how do we think about our promotions that we go forward?
Speaker 8: this part of the portfolio, this client, meet you high single digits on the top line, but grow meet you high single digits on the bottom line.
This positive portfolio decline mutual high single digits on the top line, but grow mutual high single digits on the bottom line.
Speaker 8: not by Mewkinder brand, but by making the right type of investment and right type of action that are appropriate for this portfolio right now. For us to be chasing volume with this in a unsustainable way only through promotion, that's not the game that is going to event to play.
Not by Nuc in dividend, but by making the type of the right type of investments and the right type of actions that are appropriate for this portfolio right now for us to be chasing volume.
At this time sustainably only through promotion or if that's not the game.
Will it be debenture Blake.
Speaker 7: The only thing I would add is that even in our, you know, if you think about our co-occal business within our meat business.
The only thing I would add.
That evening.
If you think about our clinical business within our meat business.
Speaker 12: You know, we have continued to improve our CFR, but that is in one area where we're still not at the right level of service that we won for the year. You will see that progression. At the same time as we have improved our service, we have also been able to see improvement in our share too. So if you look at months to date as well to October .
We have continued to improve our CFR, but that is one area, where we're still not at the right level of service that we want for the year you will see that progression at the St. Thomas We have improved our volume our service. We are also beginning to see improvement in our share too. So if you look at month to date as well through October.
Andrew Lazar: First, I will tell you that, you know, I'm not going to comment to what other companies might, might not do. But I will tell you is that one, we're not going back to 2019 levels. We are going at the same time, as we go forward into Q4, we know there's a security to our business. And as we have said earlier, we're going to make sure now, as we go into the holiday season, that we bake the right investments to support our business.
Speaker 9: We are seeing that in fact our co-cult business are beginning to gain share. So we are just gonna be looking at the category in a very disciplined way to make sure we do and divide things as Andrew said. Okay, thank you.
We are seeing that in fact, our Coco business will begin to gauge gained share. So we are just going to be looking at the category in a very disciplined way to make sure. We're doing the right things as Andrew said.
Andrew Lazar: Now, I'll say that at the same time, we're going to continue with the same level of discipline that we have shown until now, to make sure that our investment with the right level of ROI is as we go forward. Thanks for the question, Andrew. Thank you. One moment for questions.
Peter Galbo: Our next question goes from Peter Galbo with Bank of America. You may proceed. Hey, guys. Good morning. Thank you for taking the question. Good morning.
Okay. Thank you.
Great question John.
Thank you.
One moment for questions.
Speaker 1: Our next question comes from Stephen Powers, a Deutsche Bank, you may proceed.
Our next question comes from Stephen Powers with Deutsche Bank You May proceed.
Speaker 10: Great, thank you. Good morning. One of the shift gears of I could and talk about the momentum you have in both food service and emerging market.
Great. Thank you good morning all.
This shift gears if I could.
Talk about the momentum you have in both foodservice and emerging markets.
Speaker 10: just get your perspective on your confidence that momentum can continue and perhaps how the organizational changes that you announced today internationally contributes to that momentum as we go forward. And also, Andrea, if you could, if I could check on a second question, just now that leverage has it below that target.
Just get your perspective on your confidence that momentum can continue and perhaps.
How the organizational changes that you announced today internationally might contribute to that momentum as we go forward.
I'd also Andre if you clearly if I can I'll talk on a second question just now that leverage has dipped below that target.
Speaker 10: level of three times. Just wondering how you're starting to think about prioritization of cash going forward. Because the cash generation's been good. I presume cash will build and just think about how you're thinking about how to allocate in that cash going forward. Thank you.
Level of three times.
Just wondering how youre starting to think about prioritization of cash.
Cash going forward.
So the cash generation has been good I presumed cash flow build and just think about how you or how youre thinking about allocating that cash going forward. Thank you.
Speaker 7: Thank you for the questions, Steven. But, Andrew, why don't you comment on the capital location? Then I'll talk about food service and emerging markets. Sure.
Thank you for the question Stephen.
Why don't you comment on the capital location, then I'll talk about foodservice in emerging markets sure.
Speaker 8: So on cat allocation, our priorities remain unchanged. That means continue to fund our very competitive dividend.
So on capital allocation, our priorities remain unchanged that means continue to fund our very competitive dividend.
Speaker 8: maintaining investment rates and prioritizing organic growth, like we have been consistently doing during the past three, four years.
Maintaining investment grade and prioritizing organic growth like we have been consistently doing during the past three or four years.
Speaker 8: We are very proud that we were able to get to this level of leverage one year ahead of our initial expectation. And that's very important that the show that the business is strong, that the organization is strong because on the delivery and sustainable performance, not only on the EBITDA side, but also in cash conversion, which is a remarkable improvement for this organization. And now I think that put us in a very good situation to affect options to deploy this cash. And we are looking at those.
We are very proud that we were able to get to this level of leverage one year ahead of our initial expectation and that's very important to show that the business is strong and the organization is focused on delivering sustainable performance not only on the EBITDA side, but also on cash conversion, which is a remarkable improvement for this organization.
Carlos Abrams: I guess just in North America on the volume piece, you know, there's a fair amount of discussion open in the pair of arcs around kind of meets being a drag this quarter and you discussed a bit about how you're giving up maybe some volume to maximize profitability and gross margins. But then you also kind of discussed how service levels aren't where you want them to be particularly in place meets and you're expecting improvement on that going forward.
And I think that puts us in a very good situation to assess options to deploy discussion and we are looking at those.
Speaker 7: Let me comment first on foot service. You know, I feel very optimistic about our plans in foot service.
Thanks, Andrew Let me, let me comment first on foodservice.
Very optimistic about our plans in foodservice.
Carlos Abrams: I guess the question is just what should we be taking away from those comments? Are you kind of continuing to scale back on volume and focus on the profitability there? Or should we think about a volume share recovery and maybe some headwinds to the margin mix to come with that particularly as we think about North America volume? Thanks.
Speaker 7: You know, we have really been working on building a foundation for the future. And if you think about the way we're thinking about building our business, it's basically three areas. You know, we continue to make the investments in our chatlet models. And that's driving positive performance for us.
We have really been working on building a foundation for the future and if you think about the way we're thinking about building our business in basically three areas. We continue to make the investments in our chaplain models and Thats driving positive.
Carlos Abrams: Well, thanks. First of all, I think that let me just put into contact kind of the volume question that you see in North America. First I would say is that what you see for us as a company, we continue to improve sequentially from what you saw in Q3. I'm sorry, Q2 to now in Q2 in Q3, and that, you know, if I look holistically at the company first, you'll see that we continue to drive the things that are working for us.
Performance for us with.
Speaker 12: We also are making sure we are competing in more attractive and better margin channels, you know, things like independent and non-commercial channels versus traditional, where we have been limited to. And then lastly, we are seeing much more powerful innovation that allows us to leverage the technology investments we have made and bring those into the product forefront, whether that is in things like our high-end remix machines and how that actually creates an opportunity for us to separate ourselves from the future.
We also are making sure we are competing even more attractive in embedded margin channels things like our independent noncommercial channels versus traditional but we have been limited to.
And then lastly, we are seeing much more powerful innovation that allows us to leverage the technology investments, we have made and bring those into the product forefront whether that is in things like our highest remix machines and how that actually creates an opportunity for us to separate ourselves for the future.
Carlos Abrams: We are continue to growing emerging markets where we grow in volume next year over year, now in Q3, that we continue to expand our in our food service, and that, you know, we believe that it's continue to drive opportunity if we go forward. And then it's specifically in the US business, you see how the investment we have made in terms of improving and share ourselves. Our investment in marketing, our investing innovation, and our improvement in CFR have continued to improve our real actions.
Carlos Abrams: Now, as we think about the total portfolio, there are some places in which we've been a remained focus and discipline on how we invest back into the business. And I think you referred to in our meat business where we want to make sure that, you know, we are not going to be just following on profitable growth, but that we're going to be rational and displaying on how we invest in those business in order for us to drive the right consumer pool, but at the same time, not sacrificing the world property, the ability of the business that we need to maintain.
Carlos Abrams: I would just add that in our long term algorithm volume is important to us. So in our Q3 percent growth, it comes from balance contribution between price and volume. So volumes matter, but that's how it's bad. We are seeking profitable volume growth. We are not trying to maximize growth percentage margin. We are trying to deliver profitable sustainable growth, ultimately translating to sustainable EPS growth. Thanks for the question.
Speaker 12: Now if you look at the 40 years from booster for a foot service
Now if you look at the full year for full set for our foodservice.
Speaker 7: You know, expectations for the growth somewhere in the low to meet double digits versus last year. And we are, I will point out that we're gaining share to in both North America and the international.
Unknown Executive: Great. Thanks very much. Thank you. One moment for questions.
And our expectation is probably to grow somewhere in the low to mid double digits versus last year, and we are I would point out that we're gaining share too in both North America and the international zone.
John Baumgartner: Our next question comes from John Bob Gardner with Muzouhou Securities. He may proceed. Thanks for the question. I just wanted to touch on the meat business again. Come back to Peter's question. You know, you point out, you know, it's an energized business, but the category seeing price competition, private label, gaining share, you know, that was not happening at the outset during COVID, during work from home. You know, it just seems as though the ambition to rebuild or maintain profit, it's hard to square that with what looks like a need to reinvest more given the clients.
Speaker 5: And then let me just make sure also that it's clear that, you know, we think about a long-term algorithm, it puts services effective to grow by 5%. And we're gonna be well above the level in 2023.
Carlos Abrams: So how do you think about resource allocation, your willingness to continue reinvesting in that business relative to the point where you just say, you know, hey, these assets may be better suited to another owner, like what happened with enough business, just curious about your willingness to stick with it and you're given a very tough backdrop on the category. Thank you. And when you start here, I can build sure. So as you have said before, different parts of our portfolio, they have different roles and these roles might change over time.
And then let me just make sure also that it's clear that we think about our long term algorithm in foodservice is expected to grow about 5%.
And we're going to be well above that level in 2023.
Speaker 7: Now, if I switch over to our emerging market,
Now if I switch over to our emerging markets.
Speaker 12: You know, the one great thing that we have also have been investing behind in emerging markets is kind of a discipline of our go-to-market model. And for us, the reason we feel so confident is because there is a data driven go-to-market model that allows us to drive the distribution, that at then we can then build the pricing in the existing market and introduce one.
The one great thing that we have also have been investing behind in emerging markets is kind of the discipline of our go to market model and for us.
The reason we feel so confident is because there is a data driven go to market model that allows us to drive distribution that has been we can then build depressing exited market and enter new ones.
Speaker 7: And we have done it that in several nine several occasions. In fact, we are in track to implement our model in 90% of emerging markets by the end of this year.
And we have done it add several 97 locations. In fact, we are on track to implement our model 90% of emerging markets by the end of this year.
Speaker 12: And just to remind you, I think that in the first phase of building a distribution, that would build the infrastructure, and that we go into the full structure in order to truly take advantage of our emerging business.
And just to remind you it seems like the first phase of building distribution.
We build the infrastructure and then we go into the full structure in order to truly take advantage of our emerging business.
Speaker 5: I think in emerging markets, I would also add the comment that in Q3, we saw a, you know, a, you know, I did probably have wind as we think about particularly in Asia.
I think in emerging markets I would just add to comment that in Q3, we saw.
A temporary.
Temporary headwind as we think about particularly in Asia.
Speaker 12: where we have a business in Indonesia that is most surrounding around Ramadan season and where we saw some travel spending shifting from in the travel away from gifting and we have a gifted business in Indonesia. So that was a temporary thing, but as we think about the year ahead, we believe that we'll get back to the right levels of performance also in our Indonesia business. So thanks for the question.
We have a business in Indonesia, the remote rounding around Ramadan season, and what we saw some some travel shifting spending shifting from in the travel away from gifting and we have against the business in Indonesia.
Carlos Abrams: The role for me right now is to rebuild the profitability, which has been rolled at 50% in the last five years. While continuing to invest in the brand to improve renovates for them at some point, this bank, I mean, a position to grow in a profitable way again. And that's what we're doing in kill three for the second quarter in a row. This part of the portfolio, a deep line, medium high single digits on the top line, but grew medium high single digits on the bottom line.
So that was that was a temporary thing, but as we think about the year ahead. We believe that we will get back to the right levels of performance also in our Indonesia business.
Carlos Abrams: Not by milk in the brand, but by making the type of right type of investment and right type of action that are appropriate for this portfolio right now for us to be chasing volume with this in a unsustainable way only through promotion. That's not the game that is going to ban to play. The only thing I would add is that even in our, you know, if you think about our local business within our meat business, you know, we have continued to improve our CFR, but that is a one area where we're still not at the right level of service that we want for the year, you will see that progression.
So thanks for the question.
Thank you. Thank you.
One moment for questions.
Carlos Abrams: At the same time as we have improved our our service, we have also been able to see improvement in our share too. So if you look at months today, that's well through October, we are seeing that in fact our local business are beginning to gain, gain share. So we are just going to be looking at the category in a very disciplined way to make sure we do it the right things as Andrew said. Okay. Thank you. All right, boys and gentlemen. Thank you. One moment for questions.
Speaker 1: My next question comes from Ken Golden with JP Morgan, he may proceed.
Our next question comes from Ken Goldman with Jpmorgan you May proceed.
Speaker 11: Hi, thank you. Just a quick one. In your slide presentation from the prior quarter to Q, you mentioned that you were expecting positive volume growth in 2024. I may have missed it, but did you reiterate that today, neither the slides or any of your commentary?
Hi, Thank you just a quick one in your slide presentation from the prior quarter. <unk>. You mentioned that you were expecting positive volume growth in 2024, I may have missed it but did you reiterate that today and into the slides or any of your commentary.
Stephen Powers: Our next question comes from Stephen Powers, the Deutsche Bank. You may proceed. Great. Thank you. Good morning.
Andrew Maciel: One of the shift years, if I could, and talk about the momentum you have in both food service and emerging markets and just get your perspective on your confidence that momentum can continue, and perhaps, how the organizational changes that you announced today, internationally might contribute to that momentum as we go forward. And also, Andrea, if you could, if I could check on a second question, just now the leverage has it below that target level of three times.
Andrew Maciel: Just wondering how, how you're starting to think about prioritization of, of cash going forward, because the cash generation has been good, I presume cash will build and just think about how you're, how you're thinking about how to allocate and that cash going forward. Thank you. Thank you for the question, Stephen. But Andrew, why don't you comment on the capital location? Then I'll talk about food service and emerging markets. Sure. So on capital location, our priorities remain unchanged.
Speaker 5: Yes, we did, we did. And that's the case, nothing changed it. So nothing changed in terms of what I'm expecting as Carlos said. So we said, and it happened that volume would improve in Q3 sequential Q3, and it did. It would improve in Q4 versus Q3. And at some point, in 2004, the volumes will turn positive. In fact, I think everything that we've seen right now in the market in our actions are working. And just give us more confidence as we think about our 2024 plan.
Yes.
We did and Thats the case nothing changed it so nothing changed in terms of our volume expectation as Carlos said, So we said and you happen that volume would improve in Q3 sequentially into Q2 and it did improve in Q4 versus Q3 and at some point in 2000 and for the volumes will turn positive.
Andrew Maciel: That means continue to fund our very competitive dividend, maintaining investment rate and prioritizing organic growth, like you have been consistently doing during the past three four years. We are very proud that we were able to get to this level of leverage one year ahead of our initial expectation, and that's very important that the show that the business is strong, that the organization is focused on delivering sustainable performance, not only on the data side, but also in cash conversion, which is a remarkable improvement for this organization. And now I think that put us in a very good situation to affect options to deploy this cash and we are looking at those.
I think everything that we've seen right now in the marketing and our actions are working and just gives us more confidence as we think about our 2024 plants.
Speaker 11: Sorry, can I just quickly clarify that? I thought, I think people interpreted the commentary about positive volume about as net throughout.
Sorry can I just quickly clarify that I thought I think people interpreted the commentary about positive volume about as net throughout 'twenty.
Speaker 11: 2024 it will be positive, but I think the comment that was just made was at some point in 2024 it'll turn positive. I guess I'm curious do you expect you know at the end of the year you're total 2024 volume to be positive? I just wanted to get a sense that people aren't overmodeling the year.
<unk> 2024, it will be positive, but I think the comment that was just made was at some point in 2024, it'll turn positive I guess I'm curious do you expect at the end of the year. Your total 2020 for volume to be positive I, just wanted to get a sense that people aren't over modeling the year.
Carlos Abrams: Let me comment first on food service. You know, I feel very optimistic about our plans in food service. And, you know, we have really been working on building a foundation for the future. And if you think about the way we're thinking about building our business, it's basically three areas. You know, we continue to make the investments in our chatlet models and that's driving positive performance for us. We also are making sure we are competing in more attractive and better margin channels, you know, things like independent and non-commercial channels versus traditional, but we have been limited to.
Carlos Abrams: And then lastly, we are seeing much more powerful innovation that allows us to leverage the technology investments we have made and bring those into the product forefront, whether that is in things like our high tree mix machines and how that actually creates an opportunity for us to separate ourselves from the future. Now, if you look at the full year for food service, you know, expectations probably to grow somewhere in the low to meet double digits versus last year, and we are, I will point out that we're gaining share to in both North America and the international film.
Speaker 8: I'm not going to give guidance in 2024 right now. What just said is what you have been saying all along.
I'm not going to give guidance in 2034 right now.
Just as what we have been saying all along.
Thank you one moment for our next question.
Speaker 1: Our next question comes from my Calabry with Piper Sandler. You may proceed.
Our next question comes from Michael Lavery with Piper Sandler You May proceed.
Speaker 1: Thank you, good morning. I know we covered me a little bit just on the volume and how to think about its role in the portfolio side, but I want to just come back to one specific piece. You've talked about your approach and being disciplined and rational, but in your prepared remarks too, you also specifically said that in cold cuts, you're investing to hit the right price points. Can you just maybe unpack that a little bit and
Thank you and good morning.
I know, we covered a little bit just on the volume and how to think about its role in the portfolio side, but I wanted to just come back to one specific piece, you've talked about your approach and being disciplined and rational.
Your prepared remarks to you also specifically said that in cold cuts youre investing to hit the right price points.
Can you just maybe unpack that a little bit.
Speaker 1: Reckon file how those two go together and what exactly you mean by by those investments?
Reconcile how those two go together and what exactly you mean by those investments.
On the price yes, good question.
Speaker 7: Happy to try my call. You know, what I will say is that we need to make sure that we are responding to the moments in which consumers are going to be looking for, you know, the right solutions for whatever, whether it's at the holiday seasons or all the points throughout the year. And as we go into Q4, for example, we'll make sure that we're making the right investments.
Happy to clarify Michael what I'll say is that we need to make sure that we are responding to the moments in which consumers are going to be looking for.
Carlos Abrams: And then let me just kind of make sure also that it's clear that, you know, if we think about our long-term algorithm, it full service is effective to grow about 5% and we're going to be well above that level in 2020.
Great solutions for whatever whether it's at the holiday seasons OLED point throughout the year and as we go into Q4. For example, we will make sure that we're making the right investments. However, we will be doing that with the right level of discipline to make sure we drive the rising.
Speaker 7: However, we will be doing that with the right level of discipline to make sure we drive the right team returns
Carlos Abrams: Now, if I switch over to our emerging markets, you know, the one great thing that we have also have been investing behind an emerging market is kind of a discipline of our go to market model. And for us, the reason we feel so confident is because there is a data driven go to market model that allows us to drive the distribution. That is then we can then build the pressing is accepted market and new ones and we have done it that in a several nine several occasions.
Returns on that investment. So is the idea that we are simply like we stated earlier, we are not going to just be chasing volume, we're going to be looking for what is the way for us to drive profitable volume in a way that combines our ability to clinical view to build our businesses through the right investments in marketing.
Speaker 7: So is the idea that we have simply, like we stated earlier, we are not gonna just be chasing volume, we're gonna be looking for what is the way for us to drive proper volume in a way that combines our ability to kind of compute the build our businesses through the right investment in marketing and using the full array of revenue management tools in order for us to be able to drive the right efficiency and effectiveness of our investment.
And using the full array of revenue management tools in order for us to be able to drive the efficiency and effectiveness of our investments.
Carlos Abrams: In fact, we are in track to implement our model in 90% of emerging markets by the end of this year. And just to remind you, it seems like in the first phase of building the distribution, they would build the infrastructure and then we go into the full structure in order to truly take advantage of our emerging business. I think in emerging markets, I would also add the comment that in Q3, we saw a, you know, a, you know, I typically had when, as we think about particularly in Asia, where we have a business in Indonesia that is most branding around Ramadan season.
Speaker 1: And so some of what you're saying would be the depth of the promotion is part of how you want to make the investments on price points, but the discipline is the depth of that and not to push it too hard. Would that be a right interpretation?
And so some of what Youre, saying would be the depth of the promotion is.
Part of how you want to make the investments on price points, but the discipline is the depth of that and not to push it too hard would that be a right interpretation.
Speaker 1: I think that would be one of the things that you could say, but I think on top of that, if you think about the full array of revenue management tools, you know, pricing, price after architecture, other tools are disposed that allows us to actually think about what is the right investments in order to us to maintain the level of improvement level of profitability that we have seen deteriorate over the last few years. Okay, thanks so much.
I think there will be one of the things that you can say, but I think on top of that if you think about the full array of our revenue management tools.
Pricing price pack architecture, other tools or dispose of that allows us to actually think about it what is the right investments in order to us to maintain the level of.
Carlos Abrams: And what we saw some some travel shifting, expanding shifting from in the travel away from gifting and we have a gifting business in Indonesia. So that was that was a temporary thing. But as we think about the year ahead, we believe that we'll get back to the right levels of performance also in our in Indonesia business. So thanks for the question. Thank you.
Improving the level of profitability that we have seen deteriorate over the last few years.
Okay. Thanks, so much.
Yeah.
Thank you.
Thank you one moment for questions.
Speaker 1: Our next question comes from Jason English with Goldman Sachs, he may proceed.
Our next question comes from Jason English with Goldman Sachs. You May proceed.
Speaker 4: Hey, good morning folks. Thanks for slot me.
Hey, good morning folks thanks for slotting.
Ken Goldman: One moment for questions. My next question goes from Ken Goldman, the JP Morgan, you may proceed. Hi, thank you. Just a quick one in your slide presentation from the prior quarter to Q. You mentioned that you were expecting positive volume growth in 2024. I may have missed it, but did you reiterate that today, neither the slides or any of your commentary? Yes, we did, we did, and that's the case, nothing changes.
Yes.
Speaker 4: So I guess congrats are in order. Congrats Miguel for a good run and the improvements you've driven while at the helm of the company and congrats Carlos on the upcoming promotion responsibility. So on that topic, I guess the startup question is, what do you expect to do different? Should we be bracing and expecting any strategic shifts or given that you've been an architect of many of the plans that have been in place, is this going to be sort of business as usual?
So.
Congrats on order congrats Mcgill for a good run.
And the improvements you've you've driven while at the helm of the company and congrats Carlos.
The upcoming promotion responsibility.
So on that topic.
I guess.
Starting off question is what do you expect to do different should we be bracing and are you expecting any strategic shifts or given that <unk> been an architect of many of the plans that have been in place is this going to be sort of business as usual.
Ken Goldman: So nothing changes in terms of what I'm expecting as Carlos said. So we said, and it happened that volume would improve in Q3 sequential Q3, and it did improve in Q4 versus Q3. And at some points, in 2004, the bonus will turn positive. In fact, I think everything that we've seen right now in the marketing and our actions are working. And you know, just give us more confidence as we think about our 2024 plans.
Speaker 7: How, first of all, Jason, thank you for the kind words. And, you know, I'm certainly very much, you know, humble and excited about the opportunity I have for me and for the company. But I would say is that, you know, as you pointed out, you know, I've been sitting next to Miguel for the last almost four years now. And I think a number of things that we have done as a company, you know, we certainly have done together.
First of all Jason Thank you for the kind words.
I'm certainly very much humbling.
Excited about the opportunity ahead for me and for the company, but I will say that.
As you pointed out I've been I've been sitting next to Miguel for the last almost four years now.
I think a number of things that we have done as a company. We certainly have done together and it strategically I think im certainly committed to the three growth pillars that we have for going forward that is and think about how do we continue to drive our expansion in emerging markets, Although we could see the see foodservice.
Speaker 5: And it's strategically, I think I am certainly committed to the three girls pillars that we have for going forward. That is in think about us, how do we continue to drive our expansion in emerging markets? How do we go to see you to see good services as a great girl for us? And then the girls platforms within our US business.
Ken Goldman: Sorry, can I just quickly clarify that? I thought I think people interpreted the commentary about positive volume about as net throughout 2024. It will be positive. But I think the comment that was just made was at some point in 2024, it'll turn positive. I guess I'm curious. Do you expect, you know, at the end of the year, your total 2024 volume to be positive? I just wanted to get a sense that people aren't overmodeling the year. Thank you.
Unknown Executive: One moment for our next question.
Great growth for Us and then the growth platforms within our U S business.
Speaker 7: At the same time, you also probably read some of the changes we're making in our structure in order to actually help us accelerate some of those things that we have done. You know, for me,
At the same time, you also probably read some of the changes we're making in our structure in order to actually help us accelerate some of those things that we have done for me.
Speaker 7: One of the critical aspect of this time where I have been transitioning as and coming to the new role in generating has been literally to the organization and making sure we have the clarity of our strategy. And our structure is gonna follow.
One of the critical aspect of this time where have been transitioning.
And coming to the new broad in January has been literally to the organization and making sure. We have the clarity of our strategy and our structure is going to follow that clarity.
Michael Lavery: Our next question goes from Michael Lavery with Piper Sandler, you may proceed. Thank you. Good morning. I know we covered me a little bit just on the volume and how to think about its role in the portfolio side, but I want to just come back to one specific piece. You've talked about your approach and being disciplined and rational. But in your prepared remarks to you also specifically said that in cold cuts, you're investing to hit the right price points.
Speaker 7: So some of the things you'll see in terms of us being able to have a bit of breaking down the international zone, which has worked in the past world for us. But now as we go into a new way of us growing, allows us to be a little more focused on those emerging markets in which we're going to make some additional investments.
Some of the things you will see it in terms of us being able to have a late breaking down the international solid which has to work in the past well for us, but now with we go into a new into a new way of us growing allows us to be a little more focus on both emerging markets and which we're going to make some additional investments.
Michael Lavery: Can you just maybe unpack that a little bit and reconcile how those two go together? Another and what exactly you mean by by those investments on the price? Yeah, good question. Happy to try my, you know what I will say is that we need to make sure that we are responding to the moments in which consumers are going to be looking for, you know, the right solutions for whatever, whether it's at the holiday seasons or all the points throughout the year.
Speaker 7: And that, I think, is part of us thinking differently about how we bring that structure and that strategy to life in our structure. So that's, I think, some of the things that you're going to see is what are the places that, with the lens of the jobs to be done for the strategy of the company, that we can maybe arrange certain things where we can truly leverage the scale of the company, the scale that we have been investing behind our technology and our marketing capabilities, and to deploy them against the three pillars strategically that I'm very much aligned with.
That I think is part of the us thinking differently about how we bring that structure and so that strategy to life in our structure. So does that mean some of the things that you see is what are the places that with the length of the just to be done for the strategy of the company that we can maybe raise certain things, where we can truly leverage the scale of the company that scale that.
We have been investing behind our technology, and our marketing capabilities and to deploy them against the three pillars strategically that I am very much aligned with.
Speaker 1: And should we expect inorganic solutions to come into the fold a little bit more so now that your balance sheets in a better situation?
Michael Lavery: And as we go into Q4, for example, we'll make sure that we're making the right investments. However, we will be doing that with the right level of discipline to make sure we drive the writing returns on that investment. So is the idea that we have simply like we stated earlier, we are not going to just be chasing volume. We're going to be looking for what is the way for us to drive.
And should we expect inorganic solutions to come into the fall a little bit more so now that your balance sheets in a better situation.
Speaker 8: You know, as Andrew said earlier, you know, we continue to look at opportunities, but I would say, you know, that's something that is part of our ongoing thoughts about how do we continue to see of the active view of our portfolio, but there's nothing today that I would say that we would be announcing. Andrew, anything to add to that? No, I think as a consistent shot, as I said before, I think our priority is organic business, and M&A, if it happens, it has to help us accelerate our organic strategy.
As Anders said earlier, we continue to look at opportunities, but I would say.
Something that is part of our ongoing.
Thoughts about how do we continue to see.
The active view of our portfolio, but there is nothing today that I will say that we will be announcing.
Michael Lavery: Far from all volume in a way that combines our ability to contribute to build our businesses through the right investment in marketing and using the full array of revenue management tools in order for us to be able to drive the right efficiency and effectiveness of our investments. And so some of what you're saying would be the depth of the promotion is part of how you want to make the investments on price points, but the discipline is the depth of that and not to push it too hard would that be a right interpretation.
Anything to LG.
I think as a consistent so I think I've said before I think our priorities organic business and M&A.
If it happens it has to help us accelerate our organic strategy.
Speaker 4: It has to be fully consistent, like we have done. That's what acquisitions are all, safe deliberation and pre-attaining emerging markets have to be accretive to our top line, both on top of acquisitions. That's what we are focusing on. Understood. Thank you very much. Thank you, Jason.
Essentially be fully consistent like we have done thus far acquisitions, though since the innovation and three of the EMEA emerging markets have to be accretive to our top line.
Startup of acquisitions Thats, what we are focusing on.
Understood. Thank you very much.
Thank you Jason.
Michael Lavery: I think that would be one of the things that you could say, but I think on top of that, if you think about the full array of revenue management tools, you know, pricing, price architecture, other tools are disposed that allows us to actually think about what is the right investments in order to us to maintain the level of improvement level of profitability that we have seen deteriorate over the last few years. Okay, thanks so much. Thank you. One moment for questions.
Thank you one moment for questions.
Speaker 1: Our next question comes from Matt Smith, who is people you may proceed.
Our next question comes from Matt Smith with Stifel. You May proceed.
Speaker 13: Hi, good morning. One of the ask a question, your productivity savings have been very strong this year and you already increased your target for the year. Those in part been used to have you a stepped up level of investment behind marketing, R&D and innovation. But as we look forward, can you sustain this level of incremental savings into 2024, or should we expect a return to the target of 500 million? And after this year of stepped up investment, do you believe you're exiting with the appropriate level of investment across the business?
Hi, Good morning, I wanted to ask a question your productivity savings have been very strong this year and you already increased your target for the year those have in part been used to heavy a stepped up level of investment behind marketing R&D and innovation, but as we look forward can you sustain this level of incremental savings in the 2012.
For or should we expect to return to the target of $500 million in and after this year of stepped up investment do you believe you're exiting with the appropriate level of investment across the business.
Jason English: Our next question comes from Jason English with Goldman Sachs. He may proceed. Hey, good morning, folks.
Carlos Abrams: Thanks for slot me. So I guess congrats are in order. Congrats Miguel for a good run and the improvements you've driven while at the helm of the company and congrats Carlos on the upcoming promotion responsibility. So on that topic, I guess the story of questions, what do you expect to do different? Should we be bracing expecting any strategic shifts or given that you've been an architect of many of the plans that have been in place?
Speaker 13: Are you planning to continue to invest in an elevated rate as we look forward?
Do you plan to continue to invest at an elevated rate as we look forward.
Speaker 12: Maybe, Andre, if you could speak to our efficiency plans. Sure. So.
Maybe Andrew if you could speak to the efficiency plans sure. So.
Speaker 8: But at this point, we still committed to delivering the 3% of cards of $500 million on a go forward basis. But as we have said before,
At this point, we still committed to deliver the 3% of Cogs and $500 million on a go forward basis, but as we have said before.
Speaker 8: Our benchmark is really on the 4% level which we are achieving this year. Can you keep the mind that this year as well we had a lot of.
Our benchmark is really on the 5% level, which we are achieving this year and you keep in mind that this year as well we had a lot of let's go get the bills from inefficiencies represented record throughout the pandemic. That's also helping.
Carlos Abrams: Is this going to be sort of business as usual? Now, first of all, Jason, thank you for the kind words and, you know, I'm certainly very much, you know, humble and excited about the opportunity I had for me and for the company. But I would say is that, you know, as you pointed out, you know, I've been sitting next to Miguel for the last almost four years now, and I think a number of things that we have done as a company, you know, we certainly have done together.
Speaker 8: That's called getables from inefficiency that was in the right hand for all the pandemic, and that's also healthy.
Carlos Abrams: And it's strategically, I think if I am certainly committed to the three girls pillars that we have for going forward, that is, and think about us, how do we conclude to drive our expansion in emerging markets? How do we continue to see good service as a great growth for us? And then the growth platforms within our US business. At the same time, you also probably read some of the changes we're making in our structure in order to actually help us accelerate some of those things that we have done.
Speaker 8: but if you're good about how we're supply chain organization today is operated at completely superior level with various tables service levels and be a lot more forward-thinking, which give us confidence in the living at the least at 3% that we have talked about.
But we feel good about our supply chain organization today is operating in a completely superior level with very stable service levels can be a lot more forward thinking which gives us confidence in delivering at the recent 3% debt.
We have talked before.
Speaker 16: from an investment standpoint. I think this is also being a great year because it's been able to, they were very solid bottom line growth, why you really resetting the investment level from the project company for the future, which means that I think a lot of the research has happened. There is still places that we want to invest more, but I think we took a advantage of this year to really reset the level of investments to a very good level. Thank you, Fred. I can thank you.
From an investment standpoint, I think this is also has been a great year, because we have been able to deliver very solid bottom line growth, while really resetting the investment level from the project company for the future, which mean that.
I think a lot of the reset that has happened there is two places that we want to invest more but I think we took advantage of this year to really reset the level of investments drove very good levels.
Thank you for that I can think of it on.
Thank you.
One moment for questions.
Alright, great. Thanks.
Carlos Abrams: You know, for me, one of the critical aspect of of this time where I have been transitioning as and coming to the new role in generating has been literally to the organization and making sure we have the cloud view of strategy. And our structure is going to follow that clarity. So some of the things you'll see in terms of us being able to have a bit of breaking down the international zone, which has worked in the past well for us.
Operator, this will be the last question.
Speaker 16: Thank you. And our last question comes from Robert Mosca with TD Cowen. You may proceed.
Thank you and our last question comes from Robert Moskow with TD Cowen You May proceed.
Robert Moskow Your line is now open.
Hey can you hear me now.
Yes, I am sorry about that.
Speaker 14: Sorry about that. So this is kind of a what if question, and maybe you might not want to answer what if questions. But we're all watching top line growth kind of decelerate in the US and the US retail is such an important part of your mix. So I guess my question is, if we're in a scenario where we're kind of in a zero to 1% kind of sales growth environment next year, just be your category.
Carlos Abrams: But now what we go into a new into a new way of us growing allows us to be a little more focused on those emerging markets in which we're going to make some additional investments. That I think is part of the us thinking differently about how we bring that structure and so that that strategy to life in our structure. So that I think some of the things that you're going to see is what are the places that with the lens of the just to be done for the strategy of the company that we can maybe array certain things where we can truly leverage the scale of the company, the scale that we have been investing behind our technology and our marketing capabilities and to deploy them against the three pillars strategically that I'm very much aligned with.
So this is kind of a what if question and maybe.
You might not want to ask the answer what if questions, but we're all watching topline growth kind of decelerate in the U S and the U S. Retail is such an important part of your your mix. So I guess my question is if it.
If we're in a scenario, where we're kind of in a zero to 1% kind of sales growth environment next year, just beer categories.
Speaker 14: What would your philosophy be on an epidop?
What's your philosophy on an EBITDA basis like would you still drive to.
Speaker 14: Like, would you still drive to drop savings to the bottom line to hit, you know, the mid single digit EBITDA, or would a slower top line environment necessitate a slower EBITDA growth kind of target?
Dropped savings to the bottom line to hit the mid single digit EBITDA or what a slower top line environment necessitate a slower EBITDA growth kind of target.
Carlos Abrams: And should we expect inorganic solutions to come into the fall a little bit more so now that your balance sheets in a better situation? You know, I said earlier, you know, we could keep look at opportunities but I would say you know there's something that is part of our ongoing thoughts about how do we continue to see of the active view of our portfolio but there's nothing today that I will say that we will be announcing nothing for anything else you would have.
Speaker 8: Okay, good morning, Robin. Good to hear back from you.
Okay. Good.
Robin good to hear back from you.
Sure.
Look.
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Speaker 8: We believe that for us to grow, populate in a profitable, sustainable way is critical.
We we believe that's what it is to grow top line in a profitable sustainable way is critical.
Speaker 8: So if in the event where industry is zero
No.
Event, where our industry is zero I think that doesn't change the game.
Carlos Abrams: No, I think as we've considered something I've said before, I think our priorities are organic business and M&A, if it happens, it has to help us accelerate our organic strategy. It tends to be fully consistent like we have done, that's what acquisitions all say, innovation and three of them in emerging markets have to be a creative short-top line, both on top of acquisitions, that's what we are focusing on. Understood. Thank you very much. Thank you, Jason.
Speaker 8: I think that doesn't change the game that we're trying to play. Because I don't know if you are implying that we will start to go aggressive on promotions to try to get volume through market share in there.
You play because I don't know if you are implying that we will start to go aggressive on promotions with natural gas volumes grew market share in that.
Speaker 8: productive and sustainable way. If that's what you're asking behind your question, whether that's not the game you want to play. So I just said that our strategy continues the same. It's working and I think with you, that you're heading the right direction. I don't want to make change in the direction because of temporary situations in the industry.
And productive and sustainable way.
Matthew Smith: Thank you. One moment for questions. Our next question comes from Matt Smith with people you may proceed.
Thats, what youre asking behind your question.
That's not the game you want to play so.
I will just say that our strategy continues the same it's working and I think we feel better having the right directionally the mix changing direction because of temporary situations in the industry.
Okay. Thank you.
Thanks Robert.
Speaker 1: Thank you. I'd now like to turn the call back over to Carlos Abrams-Rivera for any closing remarks.
Thank you I'd now like to turn the call back over to Carlos Abrams Rivera for any closing remarks.
Andrew Maciel: Hi, good morning. One of the ask a question, your productivity savings have been very strong this year and you already increased your target for the year. Those have in part been used to have you a stepped up level of investment behind marketing, R&D and innovation but as we look forward can you sustain this level of incremental savings into 2024 or should we expect a return to the target of 500 million and after this year have stepped up investment, do you believe you're exiting with the appropriate level of investment across the business?
Thank you.
Speaker 7: So before we leave here, I just wanted to acknowledge and take a moment to thank Miguel for all the support and trust that he has shown to me personally.
So before we leave.
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Knowledge and take a moment to thank me Gale four.
All the support and trust.
He has said to me personally.
Speaker 7: And so everything he has done for a company as he has built this tremendous and strong foundation.
And and for everything he has done for for our company as he has built tremendous and strong foundation.
Speaker 5: I can tell you that today, Kraft Heinz is a much stronger company because in 2019, Miguel Patricia put this company on his back and carried it forward. And I am forever grateful for being part of his team, we all worked together to transform Kraft Heinz. And I think over at the next year, Kraft Heinz I'm proud of where we have been as a company and even more thrilled about what we're going. And thank you.
I can tell you that today is at a much stronger company because in 2019 Miguel Patricio put this company on his back and carry this forward and I am forever grateful for being part of this team.
Andrew Maciel: Are you planning to continue to invest in an elevated rate as we look forward? Maybe Andre, as you can speak to our efficiency plans. Sure. So look, at this point, we still committed to deliver the 3% of cards of $500 million on a go-forward basis. But as we have said before, our benchmark is really on the 4% level, which we are achieving this year. But we feel good about how our supply chain organization today is operating a completely superior level with very stable service levels and be a lot more forward thinking, which give us confidence in the recent 3% that we have talked before.
As we all work together to transform Kraft Heinz.
And I.
I think over the next year cut Heinz and proud with what we have been at the company and.
And even more thrilled about what we're going.
And thank you all for joining us today.
Okay.
Speaker 1: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Andrew Maciel: But from an investment standpoint, I think this has also been a great year because we have been able to deliver very solid bottom line growth while really resetting the investment level from the project company for the future, which means that I think a lot of that has happened. There is still places that we want to invest more, but I think we took advantage of this year to really reset the level of investments to a very good level. Thank you for that. I can. Thank you. One moment for questions. Operators, this will be the last question. Thank you.
Robert Moskow: And our last question comes from Robert Moscow with TD Cowan. You may proceed. Robert Moscow, your line is now open. Hey, can you hear me now? Yes, I'm sorry about that. So this is kind of a what if question and maybe you might not want to ask answer what if questions, but you know, we're all watching top line grows kind of decelerate in the US and the US retail is such an important part of your your mix. So I guess my question is, if we're in a scenario where we're kind of a zero to 1% kind of sales growth environment next year, just be your categories.
Carlos Abrams: What would your philosophy be on an EBITDAH on basis, like would you still drive to drop savings to the bottom line to hit, you know, the mid single digit EBITDAH, or would a slower top line environment necessitate a slower EBITDAG growth. Okay. Good morning, Robin. Good to hear back from you. Look, we, we believe that for us to grow top line in a profitable sustainable way is critical. So if in the event where industry is zero, I think that doesn't change the game that we're trying to play because I don't know if you are implying that we will start to go aggressive on promotions to try to get volume through market share in a productive and sustainable way.
Carlos Abrams: If that's what you're asking behind your question, whether that's not the game you want to play. So I just said that our strategy continues the same. It's working. And I think with you that I had in the right direction, I don't want to make change the direction because of temporary situations in the English.
Carlos Abrams: Okay, thank you. Thank you. Thanks, Robert.
Unknown Executive: Thank you.
Carlos Abrams: I'd now like to turn the call back over to Carlos Abrams, Rivera for any closing remarks. Thank you. So before we leave here, I just wanted to acknowledge and think a moment to thank Miguel for all the support and trust that he has shown to me personally. And so everything here he has done for a company as he has built this tremendous and strong foundation. I can tell you that today, Kraft Heinz is a much stronger company because in 2019, Miguel Patricio put this company on his back and carried it forward.
Carlos Abrams: And I am forever grateful for being part of his team, as we all worked together to transform Kraft Heinz. And you know, I think over the next year, Kraft Heinz, I'm proud of where we have been as a company. And even more thrilled about what we're going through.
Unknown Executive: And thank you all for joining us today. Thank you.
Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.