Q1 2024 Kraft Heinz Co Earnings Call

May 1, 2024

[music].

Recently, but in the accelerate platform specifically.

Unknown Executive: but in the Accelerate platform specifically. Your remarks call out holding or gaining a share in about 55% of this platform. I guess we do expect this percentage to be higher given the disproportionate, you know, allocation of resources to this platform. I guess a little more detail on share trends with an acceleration would be helpful. And then, you know, you mentioned U.S. restaurants softening a bit. Are you starting to see any of that, you know, on the flip side benefit of home eating for your business? And if not, why would that be?

Your remarks, callout, holding or gaining share at about 55% of this platform.

I guess would you expect this percentage to be higher given the disproportionate.

Allocation of resources to this platform.

I guess, a little more detail and share trends within accelerate would be helpful and then.

You mentioned U S restaurants, offering a bit are you starting to see any of that on the flip side benefit at home meeting for your for your business and if not why would that be thanks. So much.

Unknown Executive: Thanks so much. Yeah, so thank you.

Rafael de Oliveira: Yeah, so thank you for the question. Before I get into the accelerator, let me just at least give you a view of how I'm seeing the business performance so far. And if you look at the last five weeks, removing the noise of Easter, we actually continue to see volume share improvement versus year to date, and we're holding dollar share at the same pace in the U.S. So that's at the macro level of the U.S. for our company.

Speaker Change: Yeah. So thank you for that question.

Speaker Change: Before I get into that said, let me just at least give you a view of how <unk> seen so far the business performance.

Speaker Change: You look at the last five weeks just to remove the noise of Easter we actually have continued to see volume share improvement versus year to date, and we're holding dollar share the same pace in the U S.

Speaker Change: So that's a good macro level at the U S where our company now if you look at accelerate platforms, we actually continued to outperform the other platforms.

Rafael de Oliveira: Now, if you look at accelerated platforms, we actually continue to outperform the other platforms. So far, we are seeing flat dollar share and growing volume share by 0.2 points, and now, let me just break the other two and then I'll go back to accelerate. We are losing share and protecting platforms as we continue to see the impact of the decline in SNAP benefits.

Speaker Change: So far we're seeing flat in dollar share and growing volume share by 0.2 points.

Speaker Change: And now let me just break daily to lending I'll go back to accelerate.

Speaker Change: We are losing share and protect platforms as we continue to see the impact of the decline is not benefit at the same time I'm actually pretty excited about the renovation. We are seeing in these brands because we are going to be continue to bring more consumer preference options as we go into the sense of the year.

Rafael de Oliveira: At the same time, I'm actually pretty excited about the renovations we are seeing in this brand because we are going to continue to bring more consumer preference options as we go into the center of the year, in our balance part of our portfolio. We are losing share, but improving versus year to go versus year to date, primarily driven by cost. Now to your question about Accelerate Platforms, there are a couple of big brands that are in there that I would like to unpack a little more.

Speaker Change: In a balanced part of our portfolio.

Speaker Change: We are losing share, but improving versus year ago gift of year to date, primarily driven by coffee.

Speaker Change: Now to your question about accelerate platforms. There's a couple of big brands that are in there that I would like to unpack a little more.

Rafael de Oliveira: If you think about our mac and cheese business, which is within the accelerated fast, What you're going to continue to see is one category that was probably one of the more categories that was more actually impacted by SNAP.

Speaker Change: If you think about our Mac and cheese business, which is within the accelerated platforms and you're going to be continued to see as one we are going to start lapping a little of the headwinds from snap Mac and cheese was really one of the more category that was more actually impacted by snap.

Rafael de Oliveira: And as we go into Q2, beginning now in May, you'll see a plethora of new innovation, from Gluten Free to new options on flavors for the mac and cheese business, as well as some new exciting things for the category with some new SKUs that we're bringing in the second half of the year. If you look at the other parts of our Accelerate platform, that includes our company. And on the condiment side, what I would say is our category is actually expanding.

Speaker Change: And as we go into Q2, beginning now in May you will see a plethora of new innovations from gluten free to new options on flavors on a Mac and cheese business as well as some new and exciting things for the category, which doesn't use can you use that we're bringing in the second half of the year.

Speaker Change: If you look at the other parts of our accelerated platform that includes our condiments and indeed come to decide what I'll say is our category actually is expanding so we are growing and we actually growing volume share.

Rafael de Oliveira: So we are growing, and we're actually growing volume share. So for us, it's how do we continue to drive this growth within that category that has the right tailwinds behind it? And you'll see us continue to expand on the number of offers and innovations if we go into the next year. The one note that may be helpful in understanding that Accelerate platform is that we also got out some non-strategic business, in particular, our Heinz bulk vinegar, which was a business that for us, in terms of the economics, didn't make as much sense.

Speaker Change: So for US is how do we continue to drive this growth within the category that has the riot tail winds behind it and Youll see us continue to expand on the number of authors and innovations and we go into year to go.

Speaker Change: The one note that may be also helpful to understanding that accelerated platform is also we also have good out some some nonstrategic business.

Speaker Change: In particular, our highest bulk vinegar, which it was a business that for us in terms of economic didn't make us more sense. So we also exited that in the first quarter of the year.

Rafael de Oliveira: So we also exited that in the first quarter of the year. So hopefully, that gives you a sense of how we think about accelerating within the context of our company. I think the second part of your question is about an away from home business. And I think, you know, let me just say that. Right now, as I mentioned in my prepared remarks, we are seeing some of the slowing of restaurant traffic in the US, which you know is impacting our business, but also, some of the impact that we saw in the first quarter was due to us exiting some low-margin businesses, you know, as we think about making the right choice for the overall P&L. The actual exit of the business was about $50 million in the first quarter, and that's going to be similar throughout the rest of the year.

Speaker Change: So hopefully that gives you a sense how are we thinking about accelerate within the context of our total company.

Speaker Change: I think the second part of your question is on in away from home business and I think you know, let me just say that.

Speaker Change: Right now as I mentioned some of the prepared remarks, we are seeing some of the slowing of the restaurant traffic in the U S.

Speaker Change: Which you know and some of it is impacting our business, but also some of the impact that we saw in the first quarter was due to us exiting some low margin businesses.

Speaker Change: As we as we think about making the right choice for the overall P&L.

Speaker Change: The actual the exit of that business was about 50 million in the first quarter and that is going to be similar throughout the rest of the year.

Operator: Now, for us, as we go forward, we actually believe that it's about us continuing to drive the importance of away from home in new channels. I mentioned in my opening remarks that we're also seeing great opportunities in terms of travel and leisure, and that's an area where our teams are both focused, because it not only grows, but also because it allows us to expand margins into those areas. And we are also seeing improvement in terms of the distribution of our core businesses as we go into Q3.

Speaker Change: Now for US as we believe we go forward, we actually believe that it is about us continuing to drive the importance of away from home in new channels I mentioned in the opening remarks that we are also seeing great opportunities in terms of travel and.

Speaker Change: Alicia and nothing area the way our teams are both focus.

Speaker Change: Because of the only grows but also because it allows us to expand margins into those areas and we also are seeing improving trends of distribution of our core businesses as we go into the into Q3.

Operator: So again, I feel very good about being away from home. I think that the trends will continue to improve. And at the same time, for us at Kraft Heinz, we have the scale to make sure that no matter where our consumers are shopping in hotels, whether they're going into restaurants or a home, we have the distribution opportunity for us to kind of make sure that we are there to serve anywhere they are. Thanks for your question, Andrew.

Speaker Change: Again, I feel very good about away from home I think that the trends will continue to improve and they take time.

Speaker Change: For us at Kraft Heinz we have the scale to make sure that no matter, where our consumers are shopping.

Speaker Change: Tells whether theyre going into restaurants or at home that we have visits infusion opportunity for us to kind of make sure that we're there to service anywhere they are.

Speaker Change: Thanks for that question Andrew.

Speaker Change: Thank you.

Operator: One moment for questions. Our next question comes from Ken Goldman with J.P. Morgan. You may proceed.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Ken Goldman with Jpmorgan you May proceed.

Kenneth B. Goldman: Hi, good morning. Thank you. Hi, you mentioned inflation in your comments in a few areas. I guess I have two questions here. First, I don't think you updated us. Forgive me if I missed it.

Kenneth B. Goldman: Hi, good morning, Thank you.

Kenneth B. Goldman: You mentioned.

Kenneth B. Goldman: Hi, you mentioned inflation in your comments in a few areas.

Kenneth B. Goldman: I guess two questions here first I don't think you updated us forgive me if I missed it but I think last time, you were talking about maybe 3% cost inflation for the year I'm just curious if that's still a reasonable number and then I guess.

Unknown Executive: But I think last time you were talking about maybe 3% cost inflation for the year. I'm just curious if that's still a reasonable number. And then, you know, second, more broadly, there's been a lot of attention paid to cocoa, obviously, but coffee inflation has been fairly notable as well. And I'm just curious, even though, historically, coffee is somewhat of a pass-through category. Do you think that if you and your competitors need to, you'll be able and even willing to raise prices for customers as much as you typically might hear? Or do you maybe expect a little more, I guess, pushback than usual?

Kenneth B. Goldman: Second more broadly there's been a lot of attention paid to cocoa, obviously, but coffee inflation has been fairly notable as well and I'm just curious right, even though historically coffee is somewhat of a pass through category.

Kenneth B. Goldman: Do you think that if you or your competitors need you'll be able and even willing to raise prices to customers as much as you typically might here or do you maybe expect a little more I guess pushback than usual.

Unknown Executive: Thank you, Ken, for that question. Let me just get me started.

Speaker Change: Thank you Ken for the question, let me let me just.

Speaker Change: Let me start and then hand, it to continue to build on it.

Unknown Executive: And then I'll ask Andrew to continue to build on it. You know, for us, we are certainly committed to continuing to provide families with affordable options. So, that means something that we take very seriously. And if you think about 2023, we did end the year with 3% inflation, but we only passed about 1% of the increase to consumers. So we do that very, very intentionally in a way for us to make sure we are all doing everything we can to offset things so that consumers don't see it. Now, Andrew, if you want to comment a little more in terms of what you see in terms of inflation today and the coffee category. Sure.

Speaker Change: For us we.

Speaker Change: We are certainly committed to continuing to provide families with affordable options, so and that means.

Kenneth B. Goldman: Something that we take very seriously.

Kenneth B. Goldman: And do you think about 2020, we did end the year with a 3% inflation, but we only passed about 1% pricing to consumers. So we do that very very much intentional in a way for us to make sure. We are all doing everything we can to upset seeing so that consumers don't see it now Andrew if you want to comment a little more in terms of what you're seeing.

Kenneth B. Goldman: Joseph.

Joseph: Inflation today, and the coffee category sure.

Andrew Lazar: Sure. Good morning, Ken.

Andrew: Good morning, Ken So, yes, we still expect deflation to be in the low single digit territory like we said before so nothing has changed on that regard.

Andrew: We have inflation a bit more concentrated in Q2 and Q3 than in the shoulder quarters.

Andrew Lazar: So, yeah, we still expect inflation to be in the low single-digit territory, like we said before, so nothing has changed in that regard, with inflation a bit more concentrated in Q2 and Q3 than in the shoulder quarters. And that's primarily because of what you call the big three commodities, cheese, meat, and coffee, which we're seeing, particularly in meat and cheese, a higher level of inflation happening to two countries are lapping very favorable comps from last year.

Andrew: And that's primarily because of the particularly the big three commodities cheese meats coffee.

Andrew: <unk>, particularly in meat and cheese and a higher level of inflation will happen in Q2 Q3 is around that being vetted.

Andrew: <unk> comps from last year.

Andrew: So.

Andrew Lazar: So, Yeah, we don't see any other meaningful change here. And the process that we've been taking is very surgical around those categories that have been suffering the largest impact. As I say, Cocoa, luckily, is not a relevant part of our portfolio at all. I mean, a little bit in the Netherlands, but beyond that, there's nothing worth mentioning. And we don't see any reason to believe at this point that we will not be able to continue to pass through prices in those commodity categories as has always been the case.

Andrew: Yes.

Andrew: We don't see any other.

Andrew: Meaningful change here and the price is going to be taking a very surgical around those categories have been suffering the largest impact is.

Andrew: As a cyclical luckily.

Andrew: It's not a relevant part of the portfolio at all I mean, a little bit.

Andrew: In the Netherlands, but beyond that there's nothing worth mentioning.

Andrew: We don't see any reason to believe at this point.

Andrew: We would not be able to continue to pass through the prices of those commodity categories. Like it has always been the case.

Andrew: So.

Speaker Change: Alright. Thank you if I could ask a quick follow up.

Unknown Executive: Thank you. If I could ask a quick follow-up question, just the increase in gross margin guidance coupled with no other changes, you know, implies a bit higher SG&A than you previously expected. So, just assuming that's accurate, are there any key areas and operating expenses we should think about that are maybe a little bit higher than planned, obviously not a huge amount. Or maybe plant shutdowns, the primary, I guess, culprit here, so to speak, just trying to get a little color there, if we could. So, as you saw in Cagney, we are starting.

Speaker Change: Just the increase in gross margin guidance, coupled with no other changes implies a bit higher SG&A than you previously expected. So just assuming that's accurate are there any key areas in operating expenses, we should think about that or maybe a little bit higher than planned obviously not a huge amount.

Speaker Change: Or maybe the plant shutdowns the primary I guess culprit here so to speak just trying to get a little color there if we could.

Unknown Executive: As you saw at Cagney, we are starting to deploy our brand growth system, which is the method that allows us to continue to improve our marketing and continue to strengthen our brands. And one of the components of the brand growth system is to ensure that you have the sufficient level of marketing across the portfolio. And we're starting to see a few selected areas where we need to step up market investment thinking long term. And we have been gradually approving incremental investments on top of what was initially planned on the marketing side in particular, which I think is a great thing for us. That's all.

Speaker Change: As you saw at Cagny, we are starting to deploy our brand growth system.

Speaker Change: Which is the metal that'll allow us to continue to improve in our marketing and continue to strengthen our brands and one of the components of the brand grow system is he showed that you have the sufficient level of marketing across the portfolio.

Speaker Change: And we are starting to see a few selected areas, where we need to step up in marketing investment thinking on the long term and we have been gradually up move incremental investments on top of what the initially planned on the marketing side in particular.

Speaker Change: It's a great thing for us.

Speaker Change: No.

Speaker Change: Thank you Ken.

Kenneth B. Goldman: Thank you.

Operator: One moment for questions. Our next question comes from Bryan Spillane with Bank of America. Okay.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Bryan Spillane with Bank of America, You May proceed.

Bryan Douglass Spillane: Thanks, operator. Good morning, everyone. I just had two questions. One, just, I guess, a detail. Can you share with us, I think in the past you've shared with us, how much the SNAP issue has impacted organic sales? So do you have that for the first quarter?

Bryan Douglass Spillane: Hey, Thanks, operator, operator, good morning, everyone I just had two questions. One one just I guess a detail.

Bryan Douglass Spillane: Can you share with us I think in the past you've shared with us how much the snap.

Bryan Douglass Spillane: You know issue has impacted organic sale. So do you have that for the first quarter.

Unknown Executive: Look, it's never 100% precise. We're talking about a macroeconomic model. But we estimate the US retail business like in the range of 200 beats in negative impact.

Speaker Change: <unk> is never.

Speaker Change: 100% precisely we're talking about a market economic model, but we estimate on a less retail business.

Speaker Change: And the range of 200 bps negative impact.

Unknown Executive: Okay, thank you. And then a question on away from home in the U.S. and the deceleration, and again, you've quantified the impact of the plant closure, but just can you give us a sense of how much the impact of leaving the customer is, but can you give us a sense of just how much of the decline is also related to things like traffic at restaurants? Um, you know, just trying to get a sense of the weighting of what's actually driving this slowdown.

Speaker Change: Okay. Thank you and then.

Speaker Change: Question on on the away from home in the U S and.

Speaker Change: The deceleration and again, you've quantified the impact of the plant closure, but just can you give us a sense of how much the.

Speaker Change: Our I'm sorry, the impact of the exiting the customer, but can you give us a sense of just how much of the decline.

Speaker Change: This is also related to like traffic at restaurants.

Speaker Change:

Speaker Change: Trying to get a sense of the weighting of what's what's actually driving the slowdown and then also as you look into the second half right, where youre expecting there is an expectation that there's going to be some recovery, just what underpins that and I say that in the context of as we're kind of going through earning season, a lot of the restaurants have incrementally gotten worse or slower.

Unknown Executive: And then also, as you look into the second half, right, where you're expecting there's an expectation that there's going to be some recovery, just what underpins that, and I say that in the context of, you know, as we're kind of going through earnings season, a lot of the restaurants have, you know, incrementally gotten worse or slower. So, you know, is there maybe too much optimism baked into the back half expectation for recovery when it looks like a lot of these restaurant companies are dying? Let me start on the

Speaker Change: So just is there maybe too much optimism baked into the back half expectation for a recovery when it looked like a lot of these restaurant companies are guiding down.

Speaker Change: Let me, let me start and then if you went to kind of build on that and thanks for the question Brian.

Unknown Executive: Let me start at the end if you want to kind of build on that. And thanks for the question, Bryan. You know, first of all, I continue to feel very good about the overall strategy globally away from home. Again, it's a business that we are seeing continue to improve outside the U.S. and even as we are seeing some of the slowing of the restaurant business here in the U.S. As I think about the second half, there are a few things that I think will feel better as we go into this rest of the year, even in the U.S.

Speaker Change: First of all I.

Speaker Change: Continue to feel very good about overall strategy globally about away from home again, it's a it's a business that we are seeing continued to improve outside the U S and it even as we are seeing some of this low in the restaurant business here in the U S.

Speaker Change: As I think about the second half there are a few things that I think we'll feel better as we go into this rest of the year even in the U S. Here.

Unknown Executive: You know, first of all, we mentioned this factory impact that we had to close for unplanned maintenance, and that's going to affect us in Q2, and that will be behind us as we go into the second half.

Speaker Change: First of all day and we.

Speaker Change: We mentioned about this factor impact that we had to close for unplanned maintenance and thats going to affect us in Q2 and that will be behind us as we go into the second half of the year.

Unknown Executive: The second part is that we are also going to be expanding the number of clients into where you're going to find our portfolio. So there's a number of things that, you know, I cannot speak to today but that we'll see as we go into Q3, when we actually expand the distribution of our product. And then the third part is that we are going to continue to drive the focus on us going into attractive higher margin channels.

Speaker Change: The second part is that we're also going to be expanding the number of clients is when you're going to find our portfolio. So there are number of things that I can speak to that today, but we'll see as we go into Q3 in which we actually expanded distribution of our products.

Speaker Change: And then the third part is that we are going to continue to drive the focus on us going into attractive higher margin channels. So again beyond the restaurants in places like leisure and hospitality and travel where we actually seen better better performance because of the higher income consumer and ask.

Unknown Executive: So again, beyond restaurants, in places like leisure and Hospitality and Travel, where we are actually seeing better performance because of the higher income consumer and us getting into those channels in particular. And I think within that channel, we are seeing very successful programs around our high selection program and hospitality experiences that allow us to bring differentiated types of programs in an industry that until now we really haven't played as strongly.

Speaker Change: Getting into those into those channels in particular and I think within that channel we are seeing.

Speaker Change: Very successful programs around a high intellectual program hospitality experiences that allow us to bring differentiated type of programs in an industry that until now we really haven't played as strongly.

Unknown Executive: So, and then lastly, what I would say is this is an area where we're going to continue to drive innovation in a way from home. I mean, you're already seeing how we are taking our Heinz Remix machine, and we are actually using that and planning it to work in the partnership that we have with BurgerFive, which is now our first restaurant to debut our Heinz Remix, and we're going to see that expanding as we go into 2024.

Speaker Change: So and then lastly, what I'll say is this is an area, where we've been and continue to drive innovation in away from home.

Speaker Change: Either you are seeing how we are taking our high end remix machine and we actually using that and planning it to work in the partnership that we have with Burger five which is now our fresh restaurants with abuse, our highest remix and that we're going to see that expanding as we go into 2024.

Unknown Executive: So the idea is it's not only the fact that we're going to be present, but we also want to continue to be innovative in both the channel and the type of products we're going to bring into those channels. And Andrew, anything else?

Speaker Change: So the idea is is not only the fact that we're gonna be present, but we also are going to continue to bring innovative in both the channel and the type of products, we cannot bring into those into those channels and gander anything else you can talk about.

Speaker Change: I don't think so.

Speaker Change: Thanks for the question Thanks, guys.

Operator: Twitter question. Thanks, guys.

Speaker Change: Thank you.

Operator: One moment for questions. Our next question comes from John Baumgartner with Mizzou Health Securities. He may proceed.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from John Baumgartner with Mizuho Securities You May proceed.

John Joseph Baumgartner: Good morning, thanks for the question. [inaudible] Carlos, you highlighted consumer stress as a theme, and I wanted to ask in North America, where the volume declines are still more pronounced, things like, you know, mac and cheese, which you just detailed for Andrew, but also ketchup and juices. These are categories where private labels have underpenetrated historically, and now you're seeing volumes growing a bit. But are you seeing anything different, whether it's new merchandising by retailers or new price sensitivity among consumers, that's changing the dynamic in these categories at all?

John Joseph Baumgartner: Good morning, Thanks for the question.

John Joseph Baumgartner: Alright.

John Joseph Baumgartner: Carlos you highlighted consumer stress as a theme and I wanted to ask in North America, where the volume declines are still more pronounce things like Mac and cheese, whereas you just detailed for Andrew but also catch up and uses these are categories, where private label. The underpenetrated historically and now youre seeing volumes growing a bit are you seeing anything different weather.

John Joseph Baumgartner: Its merchandising by retailers or new price sensitivity among consumers that's changing the dynamic in your categories at all so I'm curious for your take on the pockets of private label share growth and then maybe a follow up are there any specific categories in U S retail, where you're expecting material benefits from joint business plans or reinvestment for duration.

John Joseph Baumgartner: So I'm curious for your take on the pockets of private label share growth, and then maybe a follow-up question, are there any specific categories in US retail where you're expecting material benefits from joint business plans or reinvestment for the duration of this year? Let me thank you for that question.

John Joseph Baumgartner: Of this year.

Unknown Executive: Let me thank you for the question. First of all, we are fortunate that we have such an iconic and beloved brand in our portfolio. And I think what you're seeing is that really, we haven't seen much of a change in terms of our overall gaps versus private label. And I think for us, the benefit that we have had is that over the last two years, we have spent a significant amount of energy continuing to renovate our portfolio.

Speaker Change: Let me thank you for that question.

Speaker Change: Personally.

Speaker Change: Private label.

Speaker Change: First of all we are fortunate that we have such an iconic and beloved brands in our portfolio.

Speaker Change: And I think what Youre seeing is that really we haven't seen much of a change in terms of overall gaps versus private label.

Speaker Change: And I think for us the benefit that we have had is that over the last two years. We have spent a significant amount of energy in continue to renovate our portfolio and today, we certainly have in the U S renovated almost 100% of our portfolio to make sure that it continues to be.

Unknown Executive: And today, we certainly have renovated almost 100% of our portfolio in the US to make sure that it continues to be relevant for today and tomorrow. And I think that, along with the fact that we are also very much focused on delivering great value to consumers. You know, we have to make sure that if we think about value, that it's not just about the price point; it's also about whether it's worth paying for it.

Speaker Change: Relevant for today, and tomorrow, and I think Deb.

Speaker Change: That along with the fact that we are also very much focused on delivering great value to consumers.

Speaker Change: We have to make sure that as we think about value that is not just about the price point. It's also about is worth paying for it. So that's why our focus on driving quality products in a way that is affordable and give you more consumer choices that is also driving the world Valuate equation for four <unk>.

Unknown Executive: So that's why our focus is driving quality products in a way that is affordable and giving more consumer choice. That is also driving the world value equation for consumers. So what you're seeing in the data is that private label has been gaining share, but really, they have stabilized, and they're taking more share from other brands that play. In terms of our JVP, that continues to be a strength of ours, that frankly, you know, it comes out with the fact that we have been building this trust and partnership with our key retailers that allows us to truly leverage the scale of our total portfolio in a way that helps us to both drive our distribution of innovation, as well as improve our overall performance and execution in-store.

Speaker Change: Consumer so so what you're seeing in the data as you know private label have been gaining share, but really they have stabilized and they are taking more share from other branded players.

Speaker Change: In terms of our our GBP debt continues to be a strength of ours. The frankly it comes out with the fact that we have been building this trust and partnership with our key retailers that allow us to truly leverage the scale of our total portfolio in a way that help us to both drive our distribution of innovation as well.

Speaker Change: To improve our overall performance and execution in store.

Unknown Executive: Because of this partnership, we can do things in-store that probably other theaters cannot do. You know, whether that's when you think about the holiday season coming up now in the summer, we have the range of a portfolio that allows us to create truly differentiating and unique value promotions that other people cannot do. So it's something that we continue to elevate and build on as we have strengthened our portfolio and the partnership we have with the key retailers.

Speaker Change: Because of this partnership we can do things in store the profitability figures cannot do.

Speaker Change: Whether that you think about the where do you think about the holiday season coming up now in the summer we have the range of our portfolio that allows us to create truly differentiating and unique value promotions that other people cannot do so it's something that we continue to elevate and we continue to build on as we have strengthened our portfolio and the <unk>.

Speaker Change: We have with the key retailers.

Speaker Change: Thanks Helane.

Speaker Change: Thank you.

Speaker Change: Hi.

Operator: One moment for questions. Our next question comes from Steve Powers with Deutsche Bank. You may proceed.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Steve Powers with Deutsche Bank You May proceed.

Stephen Robert R. Powers: Yes, hey, good morning, guys. Thanks. Hey, Carlos, in the prepared remarks, you talked about the unplanned maintenance that you had to take on one of your away from home plants. It seems that you've resolved that issue, and you expect the impacts to be isolated to the second quarter, but maybe just a little bit more details on what transpired there. Any kind of root cause diagnostic? And then, you know, just do you expect that to be a pretty quick bounce back in recovery in three Q, or is the recovery going to be more spread across the back half?

Stephen Robert R. Powers: Yes, Hey, good morning, guys. Thanks.

Stephen Robert R. Powers: Hey, Carlos in the prepared remarks, you talked about the unplanned maintenance that you have to take on one of your away from home plants.

Speaker Change: It seems that you have.

Stephen Robert R. Powers: Resolve that issue and you expect.

Stephen Robert R. Powers: The impacts to be isolated to the second quarter, but maybe just a little bit more details on what transpired there.

Stephen Robert R. Powers: Any kind of root cause diagnostic and then.

Stephen Robert R. Powers: Just do you expect that to be a pretty quick bounce back.

Stephen Robert R. Powers: <unk> and <unk> or is the recovery going to be more spread across the back half. Thank you.

Stephen Robert R. Powers: Yes.

Unknown Executive: Yeah, thank you for the question, Steve. Yeah, listen, um, you know, it's not I wouldn't I wouldn't give you that much more information than I already shared.

Speaker Change: Yes, Thank you for the questions, Steve Yes listen.

Speaker Change: I wouldn't I wouldn't know.

Speaker Change: Give you that much more information that <unk> shared it was a temporary.

Speaker Change: Temporarily shut down in our plan for that.

Speaker Change: Unplanned maintenance now that particular factory with very much focus on our on our away from home business and so those condiments are places that we can absorb from other places and much within our within our network of factories. So that's why in particular it created a little bit of a difference in the Q2, only and Andrew if you want to give a little more details.

Unknown Executive: It was a temporary shutdown in our plan for that on-plan maintenance. Now that particular factory was very much focused on our on our way from home business, and so those condiments are places that we can outsource from other places and much within our within our network. So that's why, in particular, it created a little bit of a dissonance in Q2 only. And Andrew, if you want to give a little more details on the impact on what we see in the range of the portfolio for Q2.

Andrew: The impact in our what we see in the range of the portfolio for Q2, yes. So as we said in prepared remarks.

Unknown Executive: Yeah, so as we said in preparation, Mark's production has resumed and is gradually going back to the prior level. Not there yet, but production has resumed. And that's why I expect the impact to be, we do expect production to be fully back on track within the quarter. And then the impact on the top line, as we said, would be in the range of 50 to 100 bps to the total company growth, which is a function of how fast you can really bring production fully up to speed.

Andrew: <unk> has resumed and is gradually growing back towards the prior level.

Andrew: Better yet, but the production resumes and that's why I expect that impact to be we do expect production should be fully.

Andrew: Back on track.

Andrew: In the quarter and then the impact on top line as we said would be in the range of 50 to 100 bps to the total company growth, which is a function of health best It can really bring the production fully up to speed.

Speaker Change: Thanks for the question Steve.

Stephen Robert R. Powers: Thank you.

Operator: One moment for questions. Our next question comes from David Palmer with Evercore ISI.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from David Palmer with Evercore ISI you May proceed.

David Palmer: Two questions. Thanks.

David Palmer: First to follow up on on foodservice.

Unknown Executive: First, to follow up on food service. What is your general food service assumption going forward that underlies your mid-single-digit organic growth that you have planned for the year? Is that... you basically expected that current trends, industry-wide and globally, would remain at the similar level that you saw in the first quarter or improve from there. And then secondly, just Oscar Mayer, and the beverage business, both were declining maybe mid-single digits or so in measured channels in the first quarter. Could you maybe talk about the challenges and general plans and prospects for improvement for each of those? Thanks very much.

David Palmer: What is your general foodservice assumption going forward that underlies your mid single digit organic growth.

David Palmer: That you have planned for the year is that.

David Palmer: You basically expect the current trends industry wide and globally.

David Palmer: Will remain at similar level that you saw in the first quarter or improving from there.

David Palmer: And then secondly, just Oscar Mayer the beverage business, both were declining maybe mid single digits or so in measured channels in the first quarter.

David Palmer: Could you maybe talk about the challenges in general plans and prospects for improvement for each of those thanks very much.

Unknown Executive: Thank you. Maybe, Andre, if you can comment in a way from home, and maybe I can build on the work of my beverage business.

David Palmer: Thank you maybe Andrew if you can comment on away from home.

Andrew: Maybe I can build on the combined beverage business yes.

Unknown Executive: Yeah, so first, if you think about our second half, as you said, we expect to be on algo throughout the entire second half. And if you think about our three pillars of growth, first on emerging markets, as we said, Q1 came in line with what we said would happen, mid-single digit, primarily because of the shipment phase in Brazil. So as we head into Q2, we do expect emerging markets to be now very close to our long-term algo and, in the second half, fully on the long-term algo. So that's a point that comes from that, roughly, maybe a little more. On the US retail business, as a function of the industry improving gradually, volume continues to improve, all the innovation, and renovation, Carlos mentioned a few examples.

Andrew: Yes, so if you think about or.

Speaker Change: Our second half as we said we would expect to be on our go throughout the entire second half.

Andrew: And if you think about the three pillars of growth first on emerging markets.

Andrew: As we said Q1 came in line with what we said would happen mid single digits, primarily because of the shipment phasing in Brazil. So as we head into Q2, we do expect emerging markets to be now vehicles are at our long term I will go into the second half fully on the on the long term algo. So that's a point comes from that's roughly maybe a little.

Andrew: Omar.

Andrew: On the U S retail business is a function of the industry.

Unknown Executive: We do expect to be, if not on algo, at least approaching algo. So that would be a big contributor to the improvement as we head into the second half. And then, away from home, like we don't need to be fully on algo to deliver our numbers in the second half. And that's not what we're contemplating.

Speaker Change: Do you expect to be if.

David Palmer: If not I'll now go at least approaching algo, so that'll be a big contributor for the improvement as we head into the second half.

David Palmer: And then finally on away from home like we don't need to be fully on our go to deliver our numbers in the second half and Thats not what I'll call. The latest saw unexpected way for them to be fully back when I'll go even though in international sites, we should be.

Unknown Executive: So we don't expect to be away from home to be fully back on algo. Even though on the international side, we should be back there in the US, where we think the dynamics of the industry are what give us a pause. We do expect improvement and a gradual improvement in the industry plus business ways, but, I mean, I think we're still a bit on a pause to see how much of the industry will recover. But again, we don't need to be fully unagile in the US away from home to deliver our guidance for the second half.

Speaker Change: Thank you Dan in the U S, where we think the dynamics of the industry you want to keep it as a pause we do expect improvements improvements on needlessly close the business we used boats.

Speaker Change: I mean, I think we do.

David Palmer: On a pause to see how much of the industry will recover but again, we don't need to be fully on alcohol and you asked how we overwhelmed should deliver our guidance for the second half.

Unknown Executive: And then, you know, just going to get deeper on the Oscar Mayer and Beverage questions, David, what I would say, if you go back to our Carnegie presentation, those are businesses that are in two different and portfolio roles within our company. So our beverage business is within our core business, in which we actually are allocating resources in order to protect the profitability through the renovation across those brands. Dr. David Lavery, David Palmer, Cody Ross, Kenneth Goldman, and John just debuted our first major innovation in 10 years.

David Palmer: And then just going deeper on the <unk>.

David Palmer: And beverage questions, David but I will say if you go back to our kind of give presentation. Those are businesses that are in two different.

David Palmer: Portfolio roles within our company.

David Palmer: Our beverage business is within our protect business in which we actually are allocating resources you can go to to protect the profitability through the renovation across those brands to drive the growth. So if you think about some of the key brands there you'll see that our meal.

David Palmer: Neil liquid concentrate in which we actually just renovated.

David Palmer: Tayo kind of design of our product we have a new campaign marketing campaign focused on the wellness of the brand can offer if you think about Crystal light. We just debuted our first major innovation in 10 years, our launching a number of new and exciting functional benefits you would think and then for US is how do we continue to drive.

Unknown Executive: And we're launching a number of new and exciting functional benefits. If you think, and then for us, how do we continue to drive that sense of focus on renovating those particular products? Because we know they're differentiated and we think they are well positioned for the long term. Oscar Mayer is part of our balance business, which again, we are making sure we're making the right investments in order to protect our distribution.

Unknown Executive: Sense of focus on.

David Palmer: Renal renovating of those particular products because we know they are a differentiator and we think they are well positioned for the long term.

Unknown Executive: And the Oscar Mayer is part of our balanced business, which again, we're making sure we're making the right investments in order to protect our distribution and at the same time. We also are are being thoughtful about how we are going to minus a bit.

Unknown Executive: At the same time, we also are being thoughtful about how we are going to manage, you know, a business that is very exposed to the commodity side of things. So we are also thoughtful about making sure we are protecting the top line while, at the same time, making sure we have the right gross margin management in order for us to make it work within the entire.

Unknown Executive: They are very exposed to the commodity side of things. So we are being also a thoughtful of making sure. We are protecting the top line. What are the same time, making sure. We have the right gross margins management in order for us to make it work within the entire craft portfolio. That's the only thing I'll add on the balanced portfolio as a whole.

Unknown Executive: The only thing I'll add on the balance portfolio as a whole. You saw in prepared remarks that the overall balance declined 4% in the quarter, but gross profit dollars grew 5%. So, as I have said before, we continue to, it's a balancing act, and we continue to make sure that we don't starve those brands of the core investments to sustain their business, but you should not expect average growth from them. Great, thank you.

Speaker Change: Signed prepared remarks.

Unknown Executive: That they'll go to all the balance declined 4% in the quarter.

Unknown Executive: But the gross profit dollars grew 5%. So as you have said before we continue to is a balancing act and continue to make sure that we don't start with those brands.

Unknown Executive: Cardiovascular Mr sustained their business, but you should not expect that.

Unknown Executive: EBIT growth coming from there.

Unknown Executive: Great. Thank you.

Speaker Change: Great. Thank you.

Speaker Change: Operator, we have time for one more question.

Speaker Change: Thank you.

Operator: One moment for our last question. Our last question comes from Robert Moskow with TD Cal, and you may proceed.

Speaker Change: One moment for our last question.

Robert Bain Moskow: Our last question comes from <unk>.

Operator: Robert Moskow with TD Cowen you May proceed.

Robert Bain Moskow: Hi, thanks for the question. Andre, I think you might have already answered this, but mathematically, I think the guidance now for food service implies a 50 basis point reduction to the overall company compared to, I think, the high single-digit guidance you had last quarter. So does the rest of the portfolio need to offset that? Is anything, are you expecting anything to be a little better than you expected? Or is it just kind of absorbed by us?

Robert Bain Moskow: Hi, Thanks for the question.

Robert Bain Moskow: I think you might have already answered this but mathematically I think the guidance now for foodservice.

Robert Bain Moskow: It implies.

Robert Bain Moskow: 50 basis point reduction to the overall company compared to I think the high single digit guidance you had last quarter. So does the rest of the portfolio need to offset that if anything are you expecting anything to be a little better than you expected or is it is it just kind of absorbed and.

Robert Bain Moskow: And then secondly, I think the slide said.

Unknown Executive: And then secondly, I think the slide said that you're seeing improvement in retail trends in US retail. Maybe that's just versus a year ago. But can I assume that despite market shares being down versus a year ago, do you need to make any adjustments to your marketing plan for 2024? Is there any increased price investment or advertising investment that needs to be made that's different from what you expected?

Robert Bain Moskow: Youre seeing improvement in retail trends in U S retail.

Unknown Executive: Maybe that's just versus year ago, but can I assume that.

Unknown Executive: Despite the market shares being down.

Unknown Executive: Down versus year ago.

Unknown Executive: Do you need to make any big any adjustments to your marketing plan for 2024 is there any increased price investment or advertising investment that needs to be made.

Unknown Executive: That's different from what you expected.

Unknown Executive: Anthony, do you want to start with the waypoint home, and I can comment on the retail trends? Yeah, so good morning, Rob.

Speaker Change: And so you want to start with away from home and I can comment on the retail trends yeah. So good morning, Rob.

Unknown Executive: First, as you said, the 50 BIPs that we mentioned should be clear. The 50 to 100 BIPs linked to the plan are shut down and are focused on the second quarter. So we do not expect an impact from that as we go into the second half. As you head into the second half, as I said before, we do expect emerging markets to be fully back on algo. We do expect U.S. retail, and North American retail, to continue to improve, like improving Q1. We expect it to improve more in Q2 and then more in the second half, like as a function again of lapping this nap and a lot of contribution from innovation and renovation and On The Way From Home.

Unknown Executive: First as you said the 50 bps that we mentioned in prepared remarks, you should be clear is link it to 50 to 100 bps due to the planned shutdown and is focused on the second quarter. So with an unexpected impact from that as we go into the second half.

Unknown Executive: So as we head into the second half as I said before we do expect emerging markets to be fully back an hour ago.

Unknown Executive: We do expect the.

Unknown Executive: So we stay on North America retail to continue to improve like improve in Q1, we expect to improve more in Q2, and then and then monitor second half like is a function again.

Unknown Executive: Let be leased net.

Unknown Executive: The contribution from innovation and renovation.

Unknown Executive: And on the away from home.

Unknown Executive: We do expect the rest of the world to gradually improve and get closer, if not at all, and then the U.S. becomes the tender question where. We don't need to be at mid-single digit in the second half for us to achieve our guidance, but we do expect a gradual improvement in the industry, and I think we have seen that from different sources as well. I think that there is a general expectation for that.

Unknown Executive: We do expect.

Unknown Executive: The rest of the awards to gradually improve.

Unknown Executive: Get close if not at all go.

Unknown Executive: And then the U S. It becomes at the end of the question where we.

Unknown Executive: We don't need to be at mid single digits in the second half for us to achieve our our guidance.

Unknown Executive: We do expect a gradual improvement on industry.

Unknown Executive: We have seen that from different sources as I don't think that there's a general expectation of that.

Unknown Executive: Together with all the business wins that we have done, and I think that we're going to be past the situation with the plant as we had in the second half, on the retail trends. You know, I guess I'll go back to the point at the beginning, which is that we are seeing volume share improvements versus the last five weeks of the year to date. So we are seeing that the momentum is already happening.

Unknown Executive: Together, we thought the business wins that you have done.

Unknown Executive: And I think of that.

Unknown Executive: We're gonna be fast the situation with the plant as it had in the second half.

Speaker Change: Thank you Andrea.

Unknown Executive: Retail trends.

Unknown Executive: I guess.

Unknown Executive: Go back to the point at the beginning which is we are seeing volumes share improvements versus in the last five weeks with a year to date. So we are seeing the momentum it is happening already and.

Unknown Executive: For us, you know, what we are going to be doing is focusing on those things we can control, which is, as you go into the rest of the year, you'll see us continue to drive the renovation of our brands, like I mentioned, whether it's in our Protect platforms and Accelerate, which is driving more innovation, as you'll see now, again, in Q2, as we continue to step up for the rest of the year, and then Andre mentioned earlier that part of the reason we're taking some of those growth margin dollars and investing back in the business is because now we are deploying a brand growth system that allows us to think about how we make sure we're being smart about where to spend and places that maybe we haven't been spending at sufficient levels. So you are in fact going to see that continued focus on not deriving the right dollars against the right priorities for us to drive retail growth.

Unknown Executive: For US you know what we are going to be doing is <unk>.

Unknown Executive: Focus on those things, we can control, which is as you go into the year to go and Youll see US continue to drive the renovation of our brands like I mentioned, whether it's in our protect platforms and accelerate with this driving more innovation.

Unknown Executive: You'll see now the game now in Q2, we continued to step up through the rest of the year and then be smart in our marketing investments Andrew I mentioned earlier that part of the reason, we're taking some of those gross margin dollars and invest them back into the business is because now we are deploying a brand growth system that allow us to think about how do we make sure we're being smart.

Unknown Executive: About where to spend places that maybe we haven't been spending at sufficient levels. So you are in fact going to see that continued focus on both driving the right dollars against the right priority for us to drive their retail growth.

Unknown Executive: And thank you for the question, Rob. And thank you everyone for joining us. This concludes our earnings call for the first quarter of 24. Thank you. Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Speaker Change: And thank you for the question Ralph.

Speaker Change: Thank you and thank you everyone for joining US. This concludes our earnings call for the first quarter 'twenty four thank you.

Unknown Executive: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.

Unknown Executive: Okay.