Q3 2024 Kraft Heinz Co Earnings Call - Q&A
Good day and thank you for standing by. Welcome to the Craft Times Company third quarter results conference call. At this time all participants are in a listen only mode. Please be advised that today's conference is being recorded. After the speakers presentation there will be a question and answer session.
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. I would not like to hand the conference over to your speaker today, and Marie Miguelah, Global Head of Investor Relations.
Marie Miguelah: Thank you and hello everyone. Welcome to our Q&A session for a third quarter, 2024 Business Update.
Marie Miguelah: During today's call, we need to make four working statements, starting our expectations for the future, including items related to our business plans and expectations, strategy, efforts and investments, and related timing and expected impacts.
Marie Miguelah: These statements are based on how we see things today. Actual results may differ materially due to risk and uncertainties.
Marie Miguelah: Please see the cautionary statements and risk factors contain the today's earnings release. It's a company's call, as well as our most recent 10K. Thank you. An 8K file for more information was brought in these risks in the uncertainties.
Marie Miguelah: Additionally, we may refer to non-gap, the actual measures, which exclude certain items from our financial results reported in accordance with GAP.
Marie Miguelah: Please refer to today's earnings release and the non-gap information available on our website at IR.crattimescum.com.
Speaker Change: and Renews in events. We're discussion of our non-gap financial measures and reconciliation to the comparable gap financial measures. I will now hand over and we'll now hand it over to our chief executive officer, Carlos Abrams Rivera, for opening comments. Carlos, over to you.
Speaker Change: Thank you, Mary, and thank you everyone for joining us today.
Speaker Change: We report after a quarter of results.
Speaker Change: I first want to recognize the entire craft science team for their continued education to make in life the wishes for our consumers.
Speaker Change: In today's uncertain environment, people are increasingly seeking value. I commitment to serving them with our iconic brand remains own way-bring.
Speaker Change: For our stockholders, our focus remains on executing against our strategic pillars, driving profitable growth and generating strong cash flow.
Speaker Change: Bloss, what will away from home and emerging markets are growing? And gaining momentum. And we are addressing areas for improvements in US retail.
Speaker Change: By maintaining a discipline management approach and long-term perspective, we're able to navigate a new-term volatility while generating strong cash flow and reinvesting in the business.
Speaker Change: We have the rush strategy, we have amazing talent and competitive advantage culture.
Speaker Change: did give me a great confidence that we can drive consistent, long-term, profitable growth. And with that, I have Android joining me, so let's open the call for the Q&A.
Speaker Change: Thank you. As a reminder, task a question, please press star 1, 1 on your telephone and wait for your name to be announced. Two with a dryer question, please press star 1 again. One moment for questions.
Speaker Change: [inaudible]
Speaker Change: Our first question comes from Andrew Lazar of Barclays. He may proceed.
Andrew Lazar: Great, thanks. Good morning, everybody.
Speaker Change: Morning, morning.
Andrew Lazar: So Carlos, I know initially, right, Kraft Heinz expected to return to sort of an on algorithm pace in the latter part of this year.
Andrew Lazar: Your comments in the preparator mark suggest you now don't expect to reach an on-algorithm pace during 25. So first, just to clarify, is that a comment on the totality of the year, or you don't expect to hit your algorithm at any point during the year?
Andrew Lazar: And then as you diagnose the elongated recovery in U.S. retail, how much of this is sort of execution-related or simply a consumer that has not yet fully adjusted their reference price points to the new levels and you having to sort of nudge them along a bit more than you might have initially thought? Thanks so much.
Speaker Change: Thank you, Andrew. Let me start and then maybe pass it off to Andrew to get the details of how we see the impact of the long-term algorithm.
Speaker Change: I guess, first of all, I'll say certainly this year has been very different than I think many of us in the industry expected. So I think when we think about what we thought was going to be the exit versus what we see now, a number of circumstances have changed, but I think we are frankly
Speaker Change: better reacting to what the reality of the consumer, particularly in the U.S. And that has implication to a long-term algorithm. So I think, Andrew, if you can just cover to that, and then I can go back and talk about the execution aspect of your question. Sure. So...
Speaker Change: Thanks for the question, Andrew, as you.
Speaker Change: rightly pointed out, we do not expect at this moment to reach ALGO on any part of next year.
Speaker Change: And, as we said in prepared remarks, we do expect away from home, globally, and emerging markets to continue to improve and continue to grow, and we're going to see it migrating closer and closer to the long-term algorithm.
Speaker Change: Emerging markets continue to deliver volume growth that has been throughout the entire year and the pressure will be mostly concentrated on the U.S. retail part of the business.
Speaker Change: We, as Carlos said, in the industry dynamics this year did not go the way that we initially anticipated and we're exiting the year.
Speaker Change: continue to be very elevated, at similar if not higher levels than what we have this year, which continues to put pressure on SHERP. The good thing among that is we
Speaker Change: We remain very confident in what we are doing and our strategy for the long term. We are being very disciplined in how we want to grow the business. For us, it's critical to be focused on growing our base volume.
Speaker Change: in a healthy way, better innovation, better innovation, renovation, higher marketing, and being surgically very prudent and surgical on where promotions make sense or not.
Speaker Change: And because the problem is very concentrated in four categories, you see that represent the vast majority of the West Retail Challenge. Some of them, as we have said also in prior learnings, they take longer time to recover. You got.
Speaker Change: Capri Sun, for example, where it did a form of renovation, as we have said that it takes time until the trial gets generated and the repeat happens. So we need to be prudent. We are confident in what we are doing, but there is a longer trajectory out there.
Speaker Change: Let me just start by saying, as I said in the prepared remarks, we do feel like we have the right strategy and frankly, if you look at two out of our three strategic pillars for growth, they're working and gaining momentum.
Speaker Change: So that also gives me quite a bit of confidence in terms of our ability to execute.
Speaker Change: and in fact
Speaker Change: The reality is that we have also delivered consistent best-in-class productivity levels for five conservative quarters above the 4% of COGS. Again, our ability to execute shows up that way.
Speaker Change: And if you think about away from home, you think about the way that the year began and how we're able to kind of navigate that storm and be able to now gain momentum as we go into the second half, again, our ability to execute in that area.
Speaker Change: If I think about emerging markets, the fact that we're growing volume, we're gaining share, we're increasing distribution, again, our ability to drive execution in that area as well, too.
Speaker Change: So
Speaker Change: We have a number of things that I think are going well that give us the confidence. And now we are also diagnosing kind of their specific areas in US retail. The frankly, we know what we have to address, and we are gonna be putting our entire company focused on making sure we make the right turnaround on those businesses.
Speaker Change: Thank you, Andrew. Those thoughts. Thank you.
Andrew Lazar: Thank you.
Speaker Change: Our next question comes from Ken Goldman with J.P. Morgan. You may proceed.
Ken Goldman: Hi, thank you. I wanted to ask about Lunchables. On the one hand, you're optimistic you can turn the brand around. I can certainly appreciate some of the challenges and I guess your upcoming efforts in a positive direction.
Ken Goldman: On the other hand, you did take a pretty large charge today, which is related to Lunchables.
Ken Goldman: And I guess that doesn't really happen if there's an internal belief that the brand can fully come back So can you kind of walk us through how to balance?
Ken Goldman: You know, I don't want to say it's an optimistic tone, but certainly you're encouraged about the, you know, the ultimate path for Lunchables and how to balance that with the charge you took today. And, you know, is it fair to say that that charge reflects your belief, I guess, that the brand may not ever return to what it once was? I guess that's the underlying question here.
Ken Goldman: Thank you Ken, I appreciate the question. You know, first of all, let me just be clear. Launchables is a very important part of our business and defending a number one market share is a top priority. Full stop.
Ken Goldman: Now, we are expected to see gradual improvements, but at the same time, we also recognize where we are right now. And part of that, I would say, is
Ken Goldman: The negative publicity that we receive from that misleading interest group appears to be lingering longer. And remember, this is a brand that is focused on families and kids, so rebuilding that trust just takes some time.
Ken Goldman: At the same time, we are seeing some competitive entry coming into the category, and in particular, and again, this is only for this particular quarter, we are managing a particular supplier ingredient issue that we know that is a short-term focus on.
Ken Goldman: So, let me, I guess more importantly, let me tell you what the things that we are doing to recover.
Ken Goldman: First of all, we are continuing to invest to expand the category penetration in this changing competitive environment.
Ken Goldman: We are expanding flavors and formats. We just introduced a new spicy nachos that is launching nationwide as we speak.
Ken Goldman: We are reimagining how we think about value at the shelf.
Ken Goldman: We actually launched a new campaign for both parents and kids as we go into the first half of 2025. And at the same time, we are investing to renovate our entire line as we go into the first half of next year.
Ken Goldman: Now, beyond this, we are also pulling forward a brand growth system to deploy against launchables to make sure that we have brand superiority for now and the future. And just for
Ken Goldman: Make sure that we have the right kind of nomenclature. Brand growth system, if you recall, is a repeatable global model for growing our brands. It is essentially a process to solve consumer pain points with superior products delivered in a convenient way at the best value possible.
Ken Goldman: So we are using the best brand growth system that we have developed against the opportunity for us to drive this brand into next year.
Speaker Change: So, as Andrew said, some of the things do take some time. We recognize the moment right now is being more challenged because of the one challenge in this particular quarter. But we believe this is a brand that will continue to continue to grow and continue to be a hugely important part of our portfolio.
Speaker Change: Just to add, so regarding the charge, that's mostly a function of the decline that we're facing this year and the consequence of the allocated recovery. So when you do the cash flows
Speaker Change: that they landed at a different spot. Because remember, if you just look at Q3 alone, the sellout of Lunchables is down about 15%. So.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Peter Galbo with Bank of America. You may proceed.
Peter Galbo: Hey guys, good morning. Thanks for taking the question.
Peter Galbo: Maybe to follow up there, as it relates to Lunchables, if you could give us a bit more detail just on the ingredient supplier issue. I mean, I know
Speaker Change: Certainly in Oscar Mayer, right? There's an overhang from kind of the Lysteria outbreak in the category that's probably impacting Oscar Mayer sales. But is that having any sort of upstream impact into Lunchables as well? And any detail there would be appreciated.
Speaker Change: Now what I would say is, you know, if essentially one of our suppliers was unable to fulfill one particular ingredient and it actually impacts essentially one SKU of Lunchable but it's an important one and again we impact to be limited to this year so
Speaker Change: Got it. No, that's helpful. Thank you.
Speaker Change: If I could sneak in a second one, just on spoonables, I think that was an addition in terms of one of the challenges.
Speaker Change: Andre, I think, you know, in the past quarters you've talked about.
Speaker Change: You thought it was kind of a pass-through issue on some of the raw materials that some of your competitors were seeing, but now it seems like maybe there's more of a brand problem or a product, you know, lingering issue. So maybe you can expand a bit on Spoonables, what changed in the quarter, again, as that's kind of been added to the list of headwinds.
Speaker Change: I've been facing a soft sellout now for...
Speaker Change: several months. And as we said before,
Speaker Change: We believe it's not only, but mostly linked still to price gaps out there in the market. And we, I don't think we have executed everything the way that we anticipated. And that is what we should do on that front.
Speaker Change: But we still see, versus historical levels, certain price gaps that are at disadvantage. That's just where the EU should be.
Speaker Change: Got it. Thanks very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Tom Palmer with Citi. You may proceed.
Tom Palmer: Good morning, and thanks for the question. I wanted to follow up quickly on 2025 assumptions. When you look at some of the challenged areas of your portfolio, I think for 2025, you said you're assuming better category performance, but
Tom Palmer: assume continued trade-down. So I guess to what extent do you see price adjustments as a way to address this continued trade-down versus innovation and you know packaging things like that?
Speaker Change: Listen, I think for us
Speaker Change: We know that the right way for us to continue to build our brands is by driving superior products with better marketing and making sure that we have a full value format for all consumers, which is why
Speaker Change: We have continued to drive innovation in our products while we continue to focus on expanding distribution both in Club Channel, Dollar General, as well as continue to expand our distribution in Omni-Channel. So that's number one.
Speaker Change: I think what the question behind your question might be in terms of us thinking through whether we need anything else that we need to do in terms of managing price, you know, I guess what I'll tell you is that there are moments in which it does make sense for us to promote more.
Speaker Change: what the way we kind of think through it is let's make sure we do that in the right consumer occasion that ultimately leads to kind of better base growth for the brand.
Speaker Change: So we need to do that intentional so that we have the right investments returned on those promotions. So that we avoid areas like barking, hunting behavior that ultimately do not have real incremental sale for the brands.
Speaker Change: So, but at the same time, there are two places where, in fact, we have promoted more, and we see that it makes sense for us to continue to see positive returns.
Speaker Change: So areas like Mac and Cheese Cups, in which we're driving significant growth as we are now making sure we have the right price gaps and the right kind of attractive starting price points in the category. Areas like Cool Whip, what we know can also lead to better base growth for the future.
Speaker Change: So, it is a combination of, again, making sure we grow the brand, leveraging a brand growth system, focusing innovation, renovation, better marketing, and at the same time, be thoughtful about the places in which it makes sense for us to manage those price gaps in a way that leads to that base growth going forward.
Speaker Change: What I'll add is our long-term algorithm contemplates continuous gross margin expansion.
Speaker Change: We feel very confident and proud about what we have done on the supply chain efficiency side. We have now four consecutive years of very strong delivery coming from there and that's in this year in particular the highest.
Speaker Change: ever for us. We feel confident about the pipeline to continue to sustain very good levels of productivity.
Speaker Change: And this productivity is critical to allow us to reinvest in the business.
Speaker Change: And base volume, you do it to continue to innovate, bring new news to consumers, renovate the portfolio like we have been doing, do more and great marketing. And that's what we want to do. And that's what we continue to do.
Speaker Change: So, our priority is there. So, look, we're not going to talk in detail guidance of 25. We're going to talk a lot about that in the next quarter. I think we've said enough about 25 to give you just a flavor of how we are seeing big picture.
Speaker Change: But nothing changes in our strategy and nothing changes in terms of expectations to continue to expand Grasmaj in a prudent way.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from David Palmer with Evercore ISI. You may proceed.
David Palmer: Thanks. I just want to build upon the discussion you're having, which has been helpful.
David Palmer: You've protected profitability pretty well in spite of inching up promotional activity in the U.S. retail data that we see. And it sounds like, from what you're saying, that you're open to doing some tactical shifts in promotion spending from here, if you see the returns. But I'm wondering, do you see more significant...
David Palmer: spending level investments potentially in the horizon.
David Palmer: It might not be promotion, it might be other marketing. Or conversely, are you seeing any sort of tactics or content?
David Palmer: that could be improved upon, you know, that could really improve the base trends as you're talking about. Is there anything in the pipeline that you think might cause one of your key platforms to materially improve?
David Palmer: Really a good old-fashioned innovation and marketing Improvements that you can make. Thanks very much
Speaker Change: Let me start, thank you for the question. First of all I would just say if you put into context again we have three growth pillars, two of them we have put the effort and now are both growing and gaining momentum.
Speaker Change: And if we think about their U.S. business,
Speaker Change: You know, we have kind of diagnosed the problem exactly to about, you know, four to five brands.
Speaker Change: So for us is very much focused on those areas and we went to attack.
Speaker Change: and hopefully you got to see in our prepared information that we sent out that already we are seeing how Capri Sun and Mac and Cheese, we are seeing the improvements in trends in sales as we have renovated, innovated, and invested in both of those brands.
Speaker Change: We are seeing places like our Philadelphia business, Orida, Taco Bell, places where we have turned around those businesses and now driving significant amount of momentum as we go into the year.
Speaker Change: And we've seen that even outside of the U.S. as well.
Speaker Change: So, that idea of us continuing to understand how we play to our strengths.
Speaker Change: by focusing on renovating, innovating, and investing is something that has been a proven model for us, and we already see evidence of that. I mean, and frankly, if you look at our highest business globally...
Speaker Change: Today, you know, it is a brand that globally for us is four and a half billion dollars and actually grew 4% in this particular quarter.
Speaker Change: So, we know we have kind of the right replicable model for us to apply and we will continue to do so, which is continue to make sure we have the right level of investment in marketing. Not only the levels, but also continue to focus on the effectiveness of the marketing.
Speaker Change: And then support them with the right investments in terms of technology, R&D, in order for us to kind of fully, completely drive the innovation or renovation that we want to see.
Speaker Change: So, in terms of promotion, as I mentioned, it has a role. It is something that actually supports.
Speaker Change: the business in certain locations in which can lead to that base growth. But frankly, our commitment to making sure that we invest in the things that will drive the brand's trends over the long term is the number one priority.
Speaker Change: Thank you for the question.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Robert Mosca with TD Cowan. You may proceed.
Robert Mosca: Hi, thanks. I guess I'd like to drill down on one of the product lines as well as mac and cheese. Carlos, you said that where you're making investments it's really working, but it is showing up as one of the drivers of the declines in the quarter. And I want to know, like, you know, there's a lot of elements of mac and cheese and, you know, Kraft is really...
Robert Mosca: a big innovator, but what elements are you kind of struggling?
Robert Mosca: in Mac and Cheese, because the data shows market share losses.
Robert Mosca: And I see a lot of premium products being entered into the market by your competitors. Is that the part of it that is more difficult for Kraft to compete in?
Speaker Change: Well, first of all, Rob, thanks for the question.
Speaker Change: expands a number of formats. Like, if you see our mac and cheese cups, already seeing a significant amount of improvements as we have gone into Q3.
Speaker Change: So that particular part of the business now is growing and gaining momentum as well.
Speaker Change: At the same time, we just launched new flavors to attract millennials, so a ranch product, a jalapeno product, and expect us to continue to work on those type of new flavors.
Speaker Change: We're also now bringing new shapes into the category, and I think, again, the idea of also bringing properties like Super Mario Brothers will be an opportunity for us to continue to drive that in terms of attractiveness into the category.
Speaker Change: So I think for us in making sure that we continue to focus on what are those consumers and what are the right formats and flavors that we can bring into the category. And at the same time, making sure that we talk to consumers, we do it in a culturally relevant way.
Speaker Change: What I'll tell you is that, you know, one of the things that we're proud of is that a brand like ours at Mac and Cheese is a brand that is built for the many, not the few.
Speaker Change: So we know the role that we have in today's families, in which we wanted to make sure that we provide affordable and approachable solutions that everybody can enjoy. So there's a role for us to continue to live in, at the same time that we're bringing new formats at different opening price points.
Speaker Change: with different new flavors that attract a different type of consumers.
Speaker Change: So, again, we're seeing the progress already in Mac and Cheese cups, and I can see us continue to build on this as we go into next year. I feel very good about the path we're taking.
Speaker Change: That's a good example, Rob, of items that require longer recovery, if you will, because innovation...
Speaker Change: You need to ramp up. Consumers should try. They should repeat. So if you're great about the products that are there in the market But they take time and you need to be patient That's something that we have not been in the past is patient with our innovation and and we are changing that
Speaker Change: but we feel good about what we're doing. And to your specific example, that's like one of the core examples of just promoting more is not it, you know.
Speaker Change: Well, thanks for the question
Speaker Change: Operator, we have time for one more question.
Speaker Change: Thank you.
Speaker Change: And our last question comes from Chris Carey with Wells Fargo Securities. You may proceed.
Chris Carey: Hi, everyone. Thanks for the question.
Chris Carey: As I digest, you know, the conversation
Chris Carey: in the call this morning. I think really what, you know, I'm trying to understand is
Chris Carey: This concept that I think Lunchables has been a headwind we have known about
Chris Carey: Capri Sun was a headwind and I think I'm trying to understand what your perspective is on sort of the underlying X those items and whether
Chris Carey: that specific bucket or a large bucket.
Chris Carey: has changed relative to a few months ago.
Chris Carey: and perhaps how you see that going forward and if it has, if things have changed.
Chris Carey: what do you think are the core drivers, right? So I appreciate the focus on some of these items, but when you take a step back on the rest of the business, what are the things that are happening?
Chris Carey: that are pushing you to feel one way or the other. If you could just maybe expand on that, I think would be helpful to kind of understand the trajectory of the underlying business exercise. Thanks.
Speaker Change: Sure, I think and it sounds like you're referring mostly to the U.S. retail business. Yeah, that's correct.
Speaker Change: If you think about Capri Sun, this is a product that over the summer, we renovated the product.
Speaker Change: We are seeing now the momentum is starting to improve.
Speaker Change: We are saying that the fact that we are...
Speaker Change: bringing a new format into new channels, whether that is multi-serving club, new bottles, single bottles into retail, going into convenience, going into vending. That allows us to continue to build a momentum of the holistic part of the brand. So.
Speaker Change: new formula
Speaker Change: Consumers are trying it, we are seeing that actually it's helping us continue to
Speaker Change: start growing base volume. And at the same time, our focus continues to be at how do we actually build a brand beyond just a typical retail channel in the 10 fact that for a long time has been the core part of the business.
Speaker Change: Now, in the case of Lunchable, I think the headwinds have really kind of offset some of the great work that is happening across Crab Hines.
Speaker Change: And I'll tell you that as we think about Q3, the back-to-school period proved to be more challenging than we had expected, and why we're actually taking — we recognize that it's going to take longer for us to do this.
Speaker Change: the recovery of Lunchables. Now, that doesn't change the fact that we are completely committed to it. We recognize that this idea of us making sure we continue to build the trust with parents and families.
Speaker Change: It is part of what our job has to be done.
Speaker Change: But as I mentioned earlier, we are, if you go into first half of next year, we're bringing new products
Speaker Change: renovated our quality, making sure that we have a new campaign that talks to both parents and kids. And at the same time, already in stores, we're launching nationwide new products for us to expand to a better, a bigger audience. In this case, we relaunched kind of the spicy nachos.
Speaker Change: As we know, that is an opportunity for us with bringing new kids into our franchise.
Speaker Change: So,
Speaker Change: It is a short-term situation that is making what was a difficult headwind more challenging because of the supply ingredient that we have in Q4. But over time, you'll see us continue to invest behind this to make sure that, in fact, launchables be the overall tremendous brand that we have created and shaped into this category.
Speaker Change: But just outside of those brands, how do you feel about the business on an underlying? Sorry to ask another, you know, but it's just...
Speaker Change: With respect to the rest of the business, excluding those two brands, have things materially changed? Or should we think about these really being the core headwinds on the relative trajectory from here? Thanks so much and sorry for interjecting again.
Speaker Change: No, thank you. I appreciate the question. Again, if I go back to what is it that we intended to do, what we intend to do is drive the growth of our company through three key areas. Making sure we continue to drive global away from home superior than anyone else. We are doing that and we're getting momentum.
Speaker Change: We continue to drive emerging markets. We are seeing the growth that we saw in the quarter, that gave us confidence that we can continue to, for us to drive that particular pillar.
Speaker Change: And in the U.S. retail, really is about those few brands that we know we can act on. And in fact, a couple of those brands already, whether that is our Capri Sun business, whether it's our mac and cheese business.
Speaker Change: We already are seeing improvements as we go through the quarter that we believe are in the right path for us to continue to gain into the future.
Speaker Change: So, overall, I feel very good about the fact that we know where the situations that we have to address are, that we have the tools in-house.
Speaker Change: by leveraging a brand growth system to actually build on the momentum of those businesses as we go into 2025. And also feel good that we can deliver the accelerate platforms and growth that we expect as a third pillar of our overall growth for the company.
Speaker Change: And the last thing I will say is...
Speaker Change: This is also underlined by us continuing to deliver great productivity that is helping us fuel the gross margin. So we're doing all this as we are delivering world-class level of productivity. We're investing back in the business by investing in marketing, R&D, and technology, and not compromising in the long-term growth of our company.
Speaker Change: And at the same time, also making sure that we are thoughtful about continuing to deliver great cash flow for our shareholders.
Speaker Change: Thank you so much for the question.
Speaker Change: Thank you. I would now like to turn the call back over to Anne Marie Miguela for any closing remarks.
Speaker Change: Thank you very much, and thank you everyone for joining us today. We appreciate your interest in Kraft Heinz.
Speaker Change: Thank You!
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Speaker Change: 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. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session.
Speaker Change: 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. I would now like to hand the conference over to your speaker today, Anne-Marie Magella, Global Head of Investor Relations.
Speaker Change: C.D. Meehan, B.E. A.C. C.E. F. R. N. A. O. A. O. A. C.E. F. R. N. A. O. A. C.E. F. R. N. A. O. A. O. A.
Anne-Marie Magella: Thank you and hello everyone. Welcome to our Q&A session for our third quarter 2024 business update.
Anne-Marie Magella: During today's call, you may make 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.
Anne-Marie Magella: These statements are based on how we see things today and actual results may differ materially due to risk and uncertainties.
Anne-Marie Magella: You can see the cautionary statements and risk factors 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.
Anne-Marie Magella: Additionally, we may refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP.
Anne-Marie Magella: Please refer to today's earnings release and the non-GAAP information available on our website at ir.kratheinzcompany.com under News and Events for discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures.
Anne-Marie Magella: I will now hand it over to our Chief Executive Officer, Carlos Abrams-Rivera, for opening comments. Carlos, over to you. Thank you, Anne-Marie, and thank you everyone for joining us today.
Carlos Abrams-Rivera: We've reported our third quarter results. I first wanna recognize the entire Kraft Heinz team for their continued dedication to making life delicious for our consumers.
Carlos Abrams-Rivera: In today's uncertain environment, people are increasingly seeking value. Our commitment to serving them with our iconic brand remains unwavering.
Carlos Abrams-Rivera: For our stockholders, our focus remains on executing against our strategic pillars, driving profitable growth, and generating strong cash flow.
Carlos Abrams-Rivera: Both global away from home and emerging markets are growing and gaining momentum, and we are addressing areas for improvement in U.S. retail.
Carlos Abrams-Rivera: By maintaining a disciplined management approach and long-term perspective, we're able to navigate to date near-term volatility while generating strong cash flow and reinvesting in the business.
Carlos Abrams-Rivera: We have the right strategy, we have amazing talent and competitive advantage culture.
Carlos Abrams-Rivera: This gives me great confidence that we can drive consistent, long-term, profitable growth. And with that, I have Andrea joining me, so let's open the call for the Q&A.
Speaker Change: 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.
Speaker Change: Our first question comes from Andrew Lazar of Barclays. He may proceed.
Andrew Lazar: Great, thanks. Good morning, everybody.
Speaker Change: Morning. Morning.
Andrew Lazar: So Carlos, I know initially, right, Kraft Time is expected to return to sort of an algorithm pace in the latter part of this year.
Andrew Lazar: Your comments in the preparator mark suggest you now don't expect to reach an on-algorithm pace during 25. So first, just to clarify, is that a comment on the totality of the year, or you don't expect to hit your algorithm at any point during the year?
Andrew Lazar: And then as you diagnose the elongated recovery in U.S. retail, how much of this is sort of execution-related or simply a consumer that has not yet fully adjusted their reference price points to the new levels and you having to sort of nudge them along a bit more than you might have initially thought? Thanks so much.
Speaker Change: Thank you Andrew. Let me start and then maybe pass it off to Andrew to get the details of how we see the impact of the long-term algorithm. I guess first of all I'll say certainly this year has been very different than I think many of us in the industry expected. So I think when we think about what we thought was going to be the exit versus what we see now, a number of circumstances have changed that I think we are frankly
Speaker Change: better reacting to what the reality of the consumer, particularly in the U.S., and that has implications to a long-term algorithm. So I think, Andrew, if you can just cover to that, and then I can go back and talk about the execution aspect of your question. Sure. So...
Speaker Change: Thanks for the question, Andrew. As you rightly pointed out, we do not expect at the moment to reach ALGO on any part of next year.