Q1 2025 Kraft Heinz Co Earnings Call Pre-Recorded
Business update.
Operator: to our first quarter 2025 business update.
During the following remarks, we will make forward looking statements regarding our expectations for the future.
Operator: During the following remarks, we will make forward-looking statements regarding our expectations for the future, including related to our business plans and expectations, strategy, efforts, and investments. and Related Timing and Expected Impact. These statements are based on how we see things today, and actual results may differ materially due to risk and uncertainty.
Including related to our business plans and expectations.
<unk> efforts in investments and related timing and expected impact.
These statements are based on how we see things today.
And actual results may differ materially due to risks and uncertainties.
Please see the cautionary statements and risk factors contained in today's earnings release, which accompanies these remarks as well as our most recent 10-K 10-Q and 8-K filings for more information regarding these risks and uncertainties.
Operator: Please see the Cautionary Statement and Risk Factors contained in today's earnings release, which accompanies these remarks, as well as our most recent 10-K, 10-Q, and 8-K filings for more information regarding these risks and uncertainties.
Additionally, we will refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP.
Operator: Additionally, we will refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information that accompany these remarks, which are available on our website at ir.kraftheinzcompany.com under News and Events for a discussion of our non-GAAP financial measures and reconciliation to the comparable GAAP financial measures.
Please refer to today's earnings release, and the non-GAAP information that accompanies these remarks, which are available on our website at IR Dot Kraft Heinz company Dot Com under news and events for a discussion of our non-GAAP financial measures and reconciliation.
The comparable GAAP financial measures.
Speaker Change: Today, our Chief Executive Officer, Carlos Abrams Rivera will provide an update on our overall business performance.
Carlos Abrams-Rivera: Today, our Chief Executive Officer, Carlos Abrams-Rivera, will provide an update on our overall business performance.
Speaker Change: And Andre Marcial, our global Chief Financial Officer, who will provide a financial review of the first quarter results and will discuss our 2025 outlook.
Andre Maciel: and Andre Maciel, our global chief financial officer, will provide a financial review of the first quarter results and will discuss our 2025 outlook.
Speaker Change: We have also scheduled a separate live question and answer session with analysts.
Operator: We've also scheduled a separate live question and answer session with analysts. You can access our question and answer session at ir.kraftheinzcompany.com. A replay will also be available following the event through the same website.
Speaker Change: You can access our question and answer session at IR Dot Kraft Heinz company Dot com.
Speaker Change: A replay will also be available following the event through the same website.
Carlos: With that I will turn it over to Carlos.
Carlos Abrams-Rivera: With that, I will turn it over to Carlos. Thank you, Anne-Marie, and thank you all for joining us. at Kraft Heinz. We know we play a vital role in families' lives and are proud to be a trusted partner in kitchens everywhere. We do know that in moments of uncertainty, our products provide comfort and connections from the kitchen table to the soccer fields to the family-owned Main Street restaurant. We source high-quality ingredients from local communities like California tomatoes, Ohio cucumbers, and Idaho potatoes. And our commitment to quality and community is reflected in the craftsmanship and the care that goes into every Kraft Heinz product.
Carlos: Thank you Anne Marie and thank you all for joining us.
Carlos: At Kraft Heinz we.
Carlos: We play a vital role in families' lives.
Carlos: To be a trusted partner to kitchen everywhere.
Carlos: We do know that in moments of uncertainty.
Carlos: Our product provide comfort and connection from the kitchen table to the soccer fields to the family owned Mainstreet restaurants.
Carlos: We source high quality ingredients from local communities like California, Tomatoes, Ohio cucumbers in Idaho potatoes.
Carlos: And our agreement to quality and community is reflecting the craftsmanship and care that goes into every Kraft Heinz products.
Carlos: In decent predictable times Kraft Heinz remains committed to controlling the controllable and making business our investments to deliver quality taste and value to our consumers through our global brands.
Carlos Abrams-Rivera: In these unpredictable times, Kraft Heinz remains committed to controlling the controllables and making necessary investments to deliver quality, taste and value to our consumers through our beloved brand. We are leveraging our unique insights gained from our brand growth system and are executing quickly through our agile ways of working. We believe everyone deserves access to delicious and nutritious food, which is why we are dedicated to making our products superior, affordable, and accessible to all. This is especially important now as consumer sentiment has reached its second lowest point in the last 70 years. Despite growing market pressures in the first quarter, we delivered results in line with our expectations.
Carlos: We are leveraging our unique insights gained from our brand growth system and are executing quickly through our agile ways of working.
Carlos: We believe everyone deserves access to delicious and nutritious food, which is why we are dedicated to making our products superior affordable and accessible tool.
Carlos: This is especially important now as consumer sentiment has reached its second lowest point in the last 70 years.
Carlos: Despite drilling market pressures in the first quarter, we delivered results in line with our expectations.
Carlos: We also delivered strong cash flow performance with an increasing free cash flow conversion of nine percentage points year over year.
Carlos Abrams-Rivera: We also delivered strong cash flow performance with an increasing free cash flow conversion of nine percentage points year over year. At the same time, we maintained our targeted leverage ratio of approximately three times, ensuring a healthy balance sheet as we returned nearly $900 million to our stockholders. We are encouraged by these results and will build on the progress we have made to drive consistent long-term growth and profitability. At the same time, we're also closely monitoring implications for market tensions, such as tariff inflation and the consequence to consumer behavior. And we have reflected these factors in our updated guidance.
Carlos: At the same time, we maintained our targeted leverage ratio of approximately three times, ensuring a healthy balance sheet as we've returned nearly $900 million to our stockholders.
Carlos: We are encouraged by these results and we will build on the progress we have made to drive consistent long term growth and profitability.
Carlos: At the same time, we're also closely monitoring implication for market tensions such as tariff inflation and the consequence to consumer behavior.
Carlos: And we have reflected this factored in our updated guidance.
Carlos: While we do still expect to see progress on recovery throughout the year, we have lowered our expected organic net sales range and widening our constant currency adjusted operating income guidance range.
Carlos Abrams-Rivera: Well, we do still expect to see progress on recovery throughout the year. We have lowered our expected organic net sales range and widened our constant currency adjusted operating income guidance range. Our revised outlook contemplates incremental costs from inflation, including the impact of tariffs and new regulations, as well as the impact on elasticity.
Carlos: Our revised outlook contemplate incremental costs from inflation, including the impact of tariffs and new regulations as well as the impact on the necessities.
Carlos: Andrew will provide more color in his remarks.
Carlos Abrams-Rivera: Andre will provide more color in his remarks. Looking at the quarter more closely, organic net sales declined 4.7% versus the prior year, and we're in line with our expectation of down mid-single digits. This performance was driven by continued growth in emerging markets and international away-from-home, more than offset by a decline in the U.S. retail, and to a lesser extent, softness in the U.S. away-from-home industry. We generated nearly $150 million in growth efficiency in the quarter, offsetting some of the pressure primarily from commodity inflation. This resulted in a 10 basis point margin contraction in year-over-year adjusted gross profit margin.
Carlos: Looking at the quarter more closely organic net sales declined four 7% versus the prior year and were in line with our expectations of down mid single digits.
Carlos: This performance was driven by continued growth in emerging markets and international away from home more than offset by a decline in the U S retail and to a lesser extent softness in the U S away from home industry.
Carlos: We generated nearly $150 million in growth efficiencies in the quarter offsetting some of the pressure primarily from commodity inflation.
Carlos: This resulted in a 10 basis point margin contraction in year over year adjusted gross profit margin.
Carlos: Constant currency adjusted operating income decreased by four 4% as a result of the topline and margin dynamics EPS came in at 62, including a <unk> <unk> impact from a higher tax rate.
Carlos Abrams-Rivera: Constant currency-adjusted operating income decreased by 4.4% as a result of the top-line and margin dynamics. EPS came in at $0.62, including a $0.05 impact from a higher tax rate. As we continue to control the controllables in this environment, our ability to deliver strong cash flow is a consistent bright spot. We generated $482 million in free cash flow for the quarter, slightly above last year's performance.
Carlos: As we continue to control the controllable in this environment, our ability to deliver strong cash flow is a consistent bright spot, we generated $482 million in free cash flow for the quarter slightly above last year's performance.
Carlos: Our 2025 priorities are aligned with our long term strategy to drive growth and value creation. We will do this by continuing to unlock efficiencies and reinvest in the business. This.
Carlos Abrams-Rivera: Our 2025 priorities are aligned with our long-term strategy to drive growth and value creation. We will do this by continuing to unlock efficiencies and reinvest in the business. This will power brain and product superiority and ultimately accelerate profitable growth. And when we have further to go in our journey, we have made meaningful progress. For example, we are making considerable strides in productivity. In 2023, we set a goal to unlock $2.5 billion in gross efficiency by 2027. And we have already unlocked $1.5 billion. As a reminder, we are not just looking to cut cost, but rather a commitment to continuous improvement, building this mindset into our culture, so it becomes a natural part of our DNA.
Carlos: This will power brands and products are priority and ultimately accelerate profitable growth.
Carlos: And while we have further to go on our journey. We have made meaningful progress. For example, we are making considerable strides in productivity in 2023, we set a goal to over $2 $5 billion of gross efficiency by 2027 and.
Carlos: And we have already owned luck $1 5 billion.
Carlos: As a reminder, we are not just looking to cut cost, but rather a commitment to continuous improvement building. This mindset into our culture. So it becomes a natural part of our DNA.
Carlos: And this commitment has paid off with a meaningful improvement in overall equipment effectiveness, reaching an all time high of 70% this quarter and <unk> five percentage point from 2023.
Carlos Abrams-Rivera: And this commitment has paid off, with a meaningful improvement in overall equipment effectiveness, reaching an all-time high of 70% this quarter and up by a percentage point from 2023.
Carlos: We recognize that consumers are increasingly seeking value and we are committed to delivering products that meet their needs at prices. They can afford in addition to marketing and innovation. We are stepping up our investments in value driving initiatives, which is reflected in part in our declining price gap relative to private label in the first.
Carlos Abrams-Rivera: We recognize that consumers are increasingly seeking value, and we are committed to delivering products that meet their needs at prices they can afford. In addition to marketing and innovation, we are stepping up our investment in value-driving initiatives, which is reflected in part in our declining price gap relative to private label in the first quarter. At the same time, we are creating a strong foundation to grow our brands. To drive brand superiority, we are harnessing the power of a brand growth system. And this framework is helping us pinpoint areas for growth acceleration, as well as inform smart investments and prioritize future initiatives.
Carlos: <unk>.
Carlos: At the same time, we are creating a strong foundation to grow our brands to drive brand superiority. We are harnessing the power of our brand growth system.
Carlos: In this framework is helping us pinpoint areas for growth acceleration as well as inform smart investments and prioritizing future initiatives we.
Carlos: We have expanded the system reach aiming to cover 40% of our sales by year end offer enough pilots in 2024, which cover approximately 10%.
Carlos Abrams-Rivera: We have expanded the systems reach, aiming to cover 40% of our sales by year end, up from our pilot in 2024, which covered approximately 10%. And finally, we are seeing progress in driving omnichannel execution across US retail. In this quarter, we increased share of shelf approximately 25% of our portfolio.
Carlos: And finally, we are seeing progress in driving omnichannel execution across U S. Retail in this quarter, we increased share of shelf approximately 25% of our portfolio.
Carlos: Now moving into our results by strategic pillar.
Carlos Abrams-Rivera: Now, moving into our results by fatigue pillars. In our North America retail accelerator platforms, organic net sales declined 8.1%. This was primarily driven by a decline in launchables, lapping competitors out of stocks in Philadelphia and Llorida in the previous year, and the Easter shift, which drove 110 basis points of the decline. This partially got fed by a strong performance in Canada, where accelerated platforms grew 5% versus the prior year. We expect a material improvement in the second quarter, doing part to the timing of Easter. We're also stepping up price investments, optimizing media spend, and launching innovation for the remaining of the year, which is expected to improve performance.
Carlos: In our North America retail accelerated platforms organic net sales declined eight 1%. This was primarily driven by a decline in lunchables lapping competitors out of stocks in Philadelphia and are either in the previous year and the Easter shift, which drove a 110 basis points of the decline.
Carlos: This partially offset by a strong performance in Canada would accelerate platforms grew 5% versus the prior year.
Carlos: We expect a material improvement in the second quarter due in part to the timing of Easter. We're also stepping up price investments optimizing media spend on launching innovation for the remaining of the year, which is expected to improve performance I will provide more details on that later.
Carlos Abrams-Rivera: I will provide more details on that later. Global away-from-home organic sales declined 0.8%, but we continue to see growth in international away-from-home and have for 16 quarters in a row now. At the same time, the U.S. away-from-home industry faced pressures due to slowing traffic, which led to a decline in the total U.S. away-from-home business. Turning to emerging markets, we grew 3.9% versus the prior year, primarily driven by recovery in Brazil, as we expected.
Carlos: Global away from home net sales declined 8%, but we continue to see growth in international and away from home and have for 16 quarters in a row now.
Carlos: At the same time, the U S away from home industry pressures due to slowing traffic, which led to a decline of total U S away from home business.
Carlos: Turning to emerging markets, we grew three 9% versus the prior year, primarily driven by recovery in Brazil as we expected.
Carlos: We anticipate continued improvement throughout 2025 in each quarter and we plan to exit the year, adding on algorithm pace.
Carlos Abrams-Rivera: We anticipate continuing improvements throughout 2025 in each quarter and we plan to exit the year at an on-algorithm pace.
Carlos: Now, let's go deeper into our North America retail business.
Carlos Abrams-Rivera: Now, let's go deeper into our North America retail business. Following the success of our Philadelphia and the Heinz UK pilots, we are scaling up our brand growth system to reach 40% sales coverage by year-end, up from only 10% in 2024. At Cagney, you may recall that we were expecting 30% coverage by year-end. Our revised expectations are grounded in our experience to date and the success we're seeing combining the brand growth system with our agile ways of work. Our brand growth system is a critical component of our created ecosystem, providing a systematic and repeatable framework that complements our disruptive marketing and innovation efforts to drive brand superiority.
Carlos: Following the success of our Philadelphia and the highest UK pilots, we are scaling up our brand grow system to reach 40 percentage sales coverage by year end up from only 10% in 2024.
Carlos: Cagny you may recall that we were expecting 30% coverage by year end.
Carlos: Our revised expectations are grounded in our experience to date and the success, we're seeing combined with the brand grow system with our agile ways of working.
Carlos: Our brand growth system is a critical component of our creative ecosystem, providing a systematic and repeatable framework that complements our disruptive marketing and innovation efforts to drive brand superiority.
Carlos: We have prioritized resources to drive improvement across four brands that are experiencing more significantly topline pressures.
Carlos Abrams-Rivera: We have prioritized resources to drive improvement across four brands that are experiencing more significant top-line pressures. Lunchables, Capri Sun, Kraft Mac and Cheese, and Kraft Mayonnaise.
Carlos: <unk> Capri Sun graph, Mac and cheese and <unk>.
Carlos: So let me walk you through each brand sharing the specific actions, we're taking and the encouraging traction we're already seen as we invest to drive superiority.
Carlos Abrams-Rivera: So let me walk you through each brand, showing the specific actions we're taking and the encouraging traction we are already seeing as we invest to drive superiority. You will then see how we are confident in the expected improvements contemplated in our 2025 guide. Starting with launchables, we remain committed to our number one market share. We are bringing bold innovation, delicious renovation, and executed and integrated omnichannel approach as part of our largest launchable fall season campaign ever. We recently launched our spicy nachos, which has already delivered over 30% incremental growth to the category. And be sure to stay tuned for a game-changing new launch still here in Q2.
Carlos: You will then see how we are confident in the expected improvements contemplated in our 2025 guidance.
Carlos: Starting with Lunchables, we remain committed to our number one market share we are bringing bold innovation delicious renovation and executed an integrated omnichannel approach as part of our largest multiple fall season campaign ever.
Carlos: We recently launched our spicy not just which has already delivered over 30% incremental growth to the category and be sure to stay tuned for a game changing new lunch still here in Q2.
Carlos: We are gear up for a successful full season like never before starting with an elevated loans held with experience.
Carlos Abrams-Rivera: We are geared up for a successful fall season like never before, starting with an elevated launchable experience. Our iconic brand now features a superior tasting cookie and both with a launchable logo, sure to excite everyone. Better crackers options are also on the menu, offering a delightful upgrade in our product. Plus, Lunchables is highlighting the fact that it is a great source of protein, giving parents confidence that they are providing nutritious and filling meals and snacks. And to amplify this message, we have built a targeted marketing campaign to drive trial and sample. This effort ensures that the value and quality of Lunchables resonates with people who matter most, consumers who love our brand.
Carlos: Our iconic brand now features a superior tasting cookie and both with the Lunchables logo shorts to accept everyone.
Carlos: Better crackers options are also on the menu offering at the lifestyle upgrade in our products.
Carlos: Plus lunchables is highlighting the fact that it is a great source of protein, giving parents confidence that they are providing nutritious and filling meals and snacks.
Carlos: And to amplify this message we have build a targeted marketing campaign to drive trial and sampling.
Carlos: This effort ensures that the value and quality of Lunchables resonates with people, who matter most consumers who love our brand.
Carlos: Our strategic focus on Omnichannel executions across Lunchables is already paying dividends with key customer partnerships, yielding a meaningful increase in distribution.
Carlos Abrams-Rivera: Our strategic focus on omni-channel executions across launchables is already paying dividends, with key customer partnerships yielding a meaningful increase in distribution. And to support a winning fall season for our consumers, we are doubling down on our marketing commitment and investing twice the national media spend, ensuring that this iconic brand is top of mind.
Carlos: And to support a winning full season for our consumers we are doubling down on a marketing commitment and investing twice the national media spend ensuring that this iconic brand is top of mind.
Carlos: Let's now look at Capri Sun.
Carlos: It is truly amazing the progress we are seeing in this turnaround story first we are driving process the priority with our newly renovated Capri Sun generating an eight percentage point improvement in year over year sales in Q1 for what we ended in 2024.
Carlos Abrams-Rivera: Let's now look at Kapustin. It is truly amazing the progress we are seeing in this turnaround story. First, we are driving product superiority with a newly renovated Capri Sun, generating an eight percentage point improvement in year-over-year sales in Q1 for when we ended in 2024. We are also expanding accessibility, new channels, and driving new occasions with our single-serve bottles. The early success is very encouraging, with initial sales coming in five times greater than we expected. Plus, we have entered the front of the store for the first time at checkout with our on-the-go Capri Sun bottles generating velocities at four times the rate of a key competitor.
Carlos: We are also expanding that FIS are building, new channels and driving new locations with a single serve bottles.
Carlos: The early success is very encouraging with initial sales coming in five times greater than we expected.
Carlos: Plus we have entered the front of the store for the first time at checkout, where our on the go accomplish some bottles generating velocities at four times the rate of a key competitor.
Carlos: And let's not forget all the new brand love, we are bringing by showing up and culturally relevant moments, we launched Capri Sun Moon punch, featuring our first ever glow in the dark pouch with eight collectible designs inspired by the different moon phases.
Carlos Abrams-Rivera: And let's not forget all the new brand love we are bringing by showing up in culturally relevant moments.
Carlos Abrams-Rivera: We launched Capri Sun Moon Punch, featuring our first ever glow-in-the-dark pouch with eight collectible designs inspired by the different moon phases. This limited time offer was a huge success, with sales exceeding two times the rate of our core products, leading to increased distribution with several top customers. Not only is it clear that kids and parents alike were over the moon for Caprizo Moon Punch, but that we are successfully executing on these relevant moments. And importantly, we have several more limited time offers on the way and are heavily investing in brand media over the summer hydration season.
Carlos: This limited time offer was a huge success with sales exceeding two times the rate of our core products, leading to increased distribution with several of our top customers.
Carlos: Not only is it cleared that kids and parents alike. We're over the Moon for Capri Sun Moon punch, but that we are successfully executing on with relevant moments and importantly, we have several more limited time offers underway and are heavily investing in brand media over the summer hydration season.
Carlos: At Kraft Heinz we have committed to revamping, our iconic Mac and cheese, Brian to meet the evolving needs and tastes of our consumers.
Carlos Abrams-Rivera: at Kraft Heinz, we are committed to revamping our iconic mac and cheese brand to meet the evolving needs and tastes of our consumers. Our approach to driving top-line growth is threefold. First, we are focused on driving incrementality to the category. Our Mario Shapes are driving total shape sales to the highest level we have seen in the last five years. We're also expanding our flavor portfolio, targeting younger consumers who are craving bold and venturous flavor within the comfort of familiar, trusted brands. Flavored mac and cheese has seen remarkable growth, outpacing the total category by seven times over the last five years.
Carlos: Our approach to driving top line growth is threefold first we are focused on driving incremental to the category. Our Mario shapes are driving total shape sales to the highest level. We have seen in the last five years. We're also expanding our flavor portfolio targeting younger consumers who are creating bolt.
Carlos: And dangerous flavor within the comfort of familiar trusted brands.
Carlos: Flavor Mac and cheese has seen remarkable growth outpacing the total category by seven times over the last five years.
Carlos: Second we are optimizing our packaging graphics to ensure consumers know that our Kraft Mac and cheese has been proudly made with no artificial flavors no preservative and no di's since 2016.
Carlos Abrams-Rivera: Second, we are optimizing our packaging graphics to ensure consumers know that our Kraft mac and cheese has been proudly made with no artificial flavors, no preservatives, and no dyes since 2016. We're also showcasing our cheesiness and taste because, let's be honest, who does not love more cheese? We know these attributes are important to our consumers. And to further showcase our superiority, we have a new product-focused creative rolling out in the market in the coming months with a large media investment behind it.
Carlos: We'll be showcasing our cheesiness on taste, because let's be honest, who does nothing more cheese.
Carlos: We know these attributes are important to our consumers and to further showcase our superiority we have a new product focus creative rolling out in the market in the coming months with the large media investment behind it.
Carlos: And third building on our commitment to deliver value. We are excited to introduce new value offerings that cater to evolving consumer needs and preferences.
Carlos Abrams-Rivera: and third, building on a commitment to deliver value. We are excited to introduce new value offerings that cater to evolving consumer needs and preferences. We recently launched an 11 ounce box, which provides 50% more at a price point that is 20% less per ounce. This larger size is of unbeatable value, feeding a family of five for less than $2. To serve across multiple meal locations, we are rolling out larger mac and cheese cups to capture the accelerating trend of mini meals. Our big cups are twice the size of the original and are perfectly suited to satisfy that larger-than-a-snack hunger.
Carlos: We recently launched an 11 ounce box, which provides 50% more at a price point that is 20% less per ounce.
Carlos: This larger sizes available value feeding a family of five for less than $2.
Carlos: To serve across multiple meal locations, we are rolling out larger Mac and cheese cups to capture the accelerating trend of mini meals.
Carlos: Our big hubs are twice the size of the original and are perfectly suited to satisfy the larger Dennis snack hunger.
Carlos: Now, let's look at Kraft Mayo needs to build on its great taste. Our initial focus is on investing in packaging and price. We're also executing our regional media strategy, a key moments and leveraging the success, we have had and mayonnaise in other parts of the world.
Carlos Abrams-Rivera: Now, let's look at Kraft Mayonnaise. To build on its great taste, our initial focus is on investing in packaging and price. We're also executing a regional media strategy at key moments and leveraging the success we have had in mayonnaise in other parts of the world. We are refreshing our packaging with new graphics, highlighting key attributes that are important to our consumers. We are also encouraging trial and driving confidence in your superior quality through a money-back guarantee. Through our brand growth system, we learned that for Mayonnaise, regionality matters. So to optimize our media spend, we are now using a targeted media approach focusing on three regions where 75% of our business is concentrated.
Carlos: We are refreshing our packaging with new graphics, highlighting key attributes that are important to our consumers.
Carlos: We are also encouraging trial and driving confidence in our superior quality through a money back guarantee.
Carlos: Through our brand growth system, we learned therefore, <unk> Vito nardelli matters, so to optimize our media spend we are now using a targeted media approach focusing on three regions, where 75% of our business is concentrated we are connecting with our target audience during key seasons like Easter and summer drilling.
Carlos Abrams-Rivera: We are connecting with our target audience during key seasons like Easter and summer grilling. and inspired by our global success, which includes reaching a 50% market share in Chile from 30% in 2020, we've had what it takes to win. In fact, we are taking the Heinz major line that has been extremely successful globally and launching it now in Canada.
Carlos: And inspired by our global success, which includes reaching a 50% market share in Chile from 30% in 2020, we have what it takes to win.
Carlos: In fact, we are taking the highest menu line that has been extremely successful globally and launching and now in Canada.
Carlos: I am very excited about the plans we have in store for this important brands. They are rooted in robust insight from our brand grow system and are being brought to life by our proven agile ways of working.
Carlos Abrams-Rivera: I am very excited about the plans we have in store for these important brands. They are rooted in robust insights from a brand growth system and are being brought to life by our proven agile ways of working. This powerful combination of what we are doing and how we are doing it, it would give me confidence in our ability to successfully execute our expected top-line recovery in the U.S. retail this year. At the same time, we are making great strides across our other accelerated categories, including pasta sauce, with a 5% increase in Q1 organic net sales, and our delicious Crave frozen meals in Canada increased 7% through innovation launches and more effective promotions.
Carlos: This powerful combination of what we're doing and how we are doing it is what gives me confidence in our ability to sexually execute I expect the top line recovery in the U S retail this year.
Carlos: At the same time, we are making great strides across our other accelerate categories, including pasta sauce with a 5% increase in Q1 organic net sales and a delicious crave frozen meals in Canada increased 7% through innovation launches and more effective promotions.
Carlos: And our focus on driving awareness and conversion contributor to 10% growth in primal kitchen.
Carlos Abrams-Rivera: and a focus on driving awareness and conversion contributed to 10% growth in Primal Kitchen. And finally, building on the growing Mexican cuisine trend, we grew Mexican food and sauces by 15%, the second year of double-digit growth in this category.
Carlos: And finally building on the growing Mexican cuisine train, we grew Mexican fruit and started by 15% the second year of double digit growth in this category.
Carlos: Our next strategic pillars global away from home in the U S. The away from home market is experiencing a downturn our consumers tightened their belt and navigate economic uncertainty how.
Carlos Abrams-Rivera: Our next strategic pillar is global away from home. In the US, the away from home market is experiencing a downturn as consumers tighten their belt and navigate economic uncertainty. However, despite the challenging environment, we are seeing progress across each aspect of our strategy. We are expanding our footprint in higher margin channels, growing beyond catch-up, and excelling in a go-to-market approach. In the U.S., we achieved 4% of sale growth in higher-margin, non-commercial channels, including notable wins in the entertainment and travel sectors. our recent partnership with the Chicago Cubs, which made Heinz the official condiment of Wrigley Field, has yielded incremental distribution of our ketchup, mustard, relish, and other products.
Carlos: However, despite this challenging environment, we are seeing progress across each aspect of our strategy. We are expanding our footprint in higher margin channels growing beyond ketchup and excelling and our go to market approach.
Carlos: In the U S. We achieved 4% of sales growth and higher margin noncommercial channels, including notable wins in the entertainment and travel sectors.
Carlos: Recent partnership with the checkout Cups, which may hinder the official condominium Wrigley field has yielded incremental distribution of our ketchup mustard rallies and other products.
Carlos: We also signed a new global contract earlier this year with Hilton hotels is designated Kraft Heinz as their preferred SaaS and condiment vendor.
Carlos Abrams-Rivera: We also signed a new global contract earlier this year with Hilton Hotels. It designates Kraft Heinz as their preferred sauce and condiment vendor. Furthermore, we are making strides in diversifying our portfolio beyond ketchup. Our Philadelphia cream cheese brand, for instance, has seen substantial growth in the U.S. away from home channel, up double digits in the quarter, driven in part by partnerships with Crumble and Dunkin' Donuts. Finally, we are leveraging our proven go-to-market model to expand our distribution network in the emerging markets away from home segment. In the first quarter, we successfully added 16,000 new distribution points.
Carlos: Furthermore, we are making strides in diversifying our portfolio beyond ketchup.
Carlos: Philadelphia Cream cheese brand for instance has seen substantial growth in the U S away from home channel up double digits in the quarter driven in part by a partnership with Grumble and Dunkin' Donuts.
Carlos: Finally, we are leveraging our proven go to market model to expand our distribution network in the emerging markets away from home segment in the first quarter, we successfully added 16000 new solution points.
Carlos: And while we're pleased with initial improvements in the first quarter relative to the fourth quarter of last year. The U S away from home industry continues to face challenging times with traffic declining across the sector.
Carlos Abrams-Rivera: And while we're pleased with the initial improvement in the first quarter relative to the fourth quarter of last year, the U.S. away from home industry continues to face challenging times, with traffic declining across the sector.
Carlos: As a result, our go forward expectation of industry growth is appropriately adjusted.
Carlos Abrams-Rivera: As a result, our go-forward expectation of industry growth is appropriately adjusted.
Carlos: Andrew will discuss the implication of now look in this guidance discussion.
Carlos Abrams-Rivera: Andrew will discuss the implication and outlook in this guidance discussion. Looking at emerging markets, as we expected, we grew organic net sales and accelerated pace year over year in the first quarter of 2025, as compared to the fourth quarter of 2024. Our growth drivers in emerging markets are twofold, leveraging the strong brand equity of our Heinz brand and expanding distribution through our go-to-market model. We grew Heinz Organic Net Sales in emerging markets approximately 11%. Heinz is our largest brand globally.
Speaker Change: Looking at emerging markets as we expected we grew organic net sales and accelerated pace year over year in the first quarter of 2025 as compared to the fourth quarter of 2024.
Speaker Change: Our growth drivers in emerging markets are twofold, leveraging the strong brand equity of our highest Bryan and expanded distribution through our go to market model. We grew Heinz organic net sales in emerging market approximately 11% Heinz is our largest brand globally and today represents over $1 billion.
Carlos Abrams-Rivera: And today, it represents over $1 billion in sales in emerging markets, but accounts for only 40% of total sales in the zone, reflecting meaningful room for growth. We also continue to expand distribution through our go-to-market model, adding approximately 21,000 distribution points compared to the first quarter of 2024.
Speaker Change: Sales in emerging markets, but account for only 40% of total sales in the zone, reflecting meaningful room for growth.
Speaker Change: We also continued to expand distribution through our go to market model, adding approximately 21000 distribution points compared to the first quarter of 2024.
Speaker Change: Shifting now to two key enablers of growth innovation and marketing.
Carlos Abrams-Rivera: Shifting now to two key enablers of growth, innovation and market. Let's begin with innovation. We are creating products that truly delight consumers, whether it's through our bold new flavors and cuisines, making our brands more accessible and relevant to a wider audience, or delivering benefits that make a real difference in people's lives. We have spent the last few years building a solid pipeline with over 75% of innovation sales in 2025, expected to come from proven innovation already launched. For example, as part of our Mexican food strategy, we have expanded our Taco Bell partnership, providing our consumers with restaurant-quality experiences at home.
Speaker Change: Let's begin with innovation, we are creating product that truly delight consumers, whether it's through a bold new flavors and cuisines, making our brands more accessible and relevant to a wider audience or delivering benefits to the make a real difference in People's lives. We have spent the last few years building a solid pipeline with over <unk>.
Speaker Change: 75% of innovation sales in 2025 expected to come from proven innovation will really launch.
Speaker Change: For example, as part of our Mexican fruit strategy, we have expanded our Taco Bell partnership providing our consumers with restaurant quality experiences at home building on the momentum from 2024, we grew dollar sales 12% in the first quarter of 2025, and we are now launching this great test and experienced in Canada.
Carlos Abrams-Rivera: Building on the momentum from 2024, we grew dollar sales 12% in the first quarter of 2025, and we are now launching this great testing experience in Canada.
Speaker Change: We're also expanding into new channels location and host fruits.
Carlos Abrams-Rivera: We are also expanding into new channels, location and host foods. After 150 years leveraging our extensive agricultural heritage and tomato expertise, we launched the first Heinz pasta sauce in the UK a couple of years ago. Now we continue to introduce new formats, disrupting and driving excitement in the pasta sauce category, and are expanding into new countries, and it's working, generating dollar sales growth of 26% in the first quarter. And in Indonesia, we introduce our ABC multipurpose peanut sauce, making our entrance into a $200 million peanut sauce market. This ready-to-use sauce takes meals to the next level.
Speaker Change: After 150 years, leveraging our extensive agricultural heritage and tomato expertise, we launched the first Heinz pasta sauce in the UK a couple of years ago now we continue to introduce new formats, disrupting and driving excitement in the pasta sauce category and are expanding into new countries and it's working dinners.
Speaker Change: <unk> dollar sales growth of 26% in the first quarter.
Speaker Change: And in Indonesia, we introduce our ABC multipurpose peanuts us, making our entrance into a $200 million Pinot sales market.
Speaker Change: This ready to use us takes meals to the next level with the rich nutty flavor opinions in elevate dishes in an instant and a super convenient just opened poor and enjoy.
Carlos Abrams-Rivera: With the rich, nutty flavor of peanuts, it elevates dishes in an instant. And it's super convenient. Just open, pour, and enjoy.
Speaker Change: Introducing me online our latest innovation in the health and wellness space.
Carlos Abrams-Rivera: Introducing Mio & Wine, our latest innovation in the health and wellness space. This on-the-go hydration solution helps consumers discover the zen and is made with zero sugar, zero artificial dyes, and zero calories. Plus, it is a good source of magnesium and B vitamins.
Speaker Change: On the go hydration solutions helped consumer discover design and is made with zero sugar. So.
Speaker Change: Artificial dyes and zero calories plus it is a good source of magnesium MB vitamins. This is a great example, how we are tapping into the increase in demand for wellness focused Catholic products.
Carlos Abrams-Rivera: This is a great example of how we are tapping into the increasing demand for wellness-focused cosmetic products. The $6 billion global magnesium market, projected to grow at 5% annually, presents a significant opportunity for us to capitalize on this exciting trend.
Speaker Change: The $6 billion below that leisure market projected to grow 5% annually presents a significant opportunity for us to capitalize on this exciting trend.
Speaker Change: Turning to our marketing engine.
Speaker Change: Each year, we are all about leveraging up our game and driving return on investment.
Carlos Abrams-Rivera: Turning to our marketing engine. This year, we're all about leveling up our game and driving return on investment. obsessed with making every marketing dollar count as we power our brand. Fueled by insights from the brand growth system, we are ensuring that creative excellence is a likely outcome, not a lucky one. We are marketing at the speed of culture and igniting relevance of great ideas by aligning them to key moments in culture. helping to bring this to life with our internal agency, The Kitchen. Here, the best internal talent is collaborating with external partners to create marketing that matters.
Speaker Change: Obsessed with making every marketing dollar count as we power brands.
Speaker Change: Fueled by insights from the brand growth system, we are ensuring that creative excellence is a likely outcome. Another lucky one we're marketing at the speed of culture, and igniting relevance of great ideas by lined and then to key moments in culture.
Speaker Change: Helping to bring this to lifestyle internal agency the kitchen here the best internal talents collaborating with external partners to create marketing the matters in Q1, we secured over 11 billion earned impressions for our North America brands, which is the highest in Kraft Heinz history.
Carlos Abrams-Rivera: In Q1, we secured over $11 billion earned impression for our North American brand, which is the highest in Kraft Heinz history. And we're not just reacting to trends. We're activating with agility to capitalize on real-time consumer insights. For example, when egg prices soar, our team swapped in with a genius solution, a Jeff Popp dip and decorate marshmallow kit for only $1.99. It was a total hit, and retailers are already asking for a repeat performance in 2026. Who knows, maybe we'll just start a new Eastern tradition. Just a week before March Madness, a new story dropped that BYU star player Richie Saunders was the great-grandson of the tater-tot inventor of Anglerida, a founder.
Speaker Change: And we're not just reacting to trends, we're activating with agility to capitalize on real time consumer insights.
Speaker Change: For example, when egg prices soar, our teams who have been with Virginia solution at Jeff up dip and decorate marshmallow kit for only 199. It was a total hip and retailers are already asking for a repeat performance in 2026, who knows maybe we'll just start a new eastern tradition.
Speaker Change: Just a week before March madness, and new storage dropped at BYU Star player reaches Anders was the great grandson of the tailored Todd inventor of annual rider founder.
Speaker Change: We knew we had to SaaS, but as a non <unk> partner breaking through the noise with the challenge.
Carlos Abrams-Rivera: We knew we had to act fast, but as a non-NCAA partner, breaking through the noise was a challenge. On the turf, we signed Ritchie to an NIL deal, captured a photo shoot, and launched the top clock national giveaway in under a week. The campaign went viral, driving 3 billion earned media impressions and a 9% regional sale rate. We have more engagement than all March sponsors combined with less than five basis points of the spend.
Speaker Change: Auditor.
Speaker Change: <unk> Richard to Nal deal capture photo shoot and largely to Todd Clark National Giveaway in under a week. The campaign went viral driving 3 billion earned media impressions and a 9% regional sales lift.
Speaker Change: We have more engagement that all March madness, and sponsor combined with less than five basis points of the spin.
Speaker Change: As you can see we are elevating our marketing and making a lasting impact by combining data driven insights with creative excellence. We are building brand relevance and sparking new consumer connections all at the speed of culture.
Carlos Abrams-Rivera: As you can see, we're elevating our marketing and making a lasting impact by combining data-driven insights with creative excellence, we are building brand relevance and sparking new consumer connections, all at the speed of culture.
Speaker Change: Let me hand, it over to Andrew to provide more details on our first quarter financial results and to discuss our 2020 outlook.
Andre Maciel: With that, let me hand it over to Andre to provide more details on our first quarter financial results and to discuss our 2025 outlook. Thank you, Carlos. In the first quarter, organic net sales declined 4.7% for total Kraft Heinz. price up 0.9 percentage points and volume mix down 5.6 percentage points. In North America, organic net sales declined 6.5%. Growth in our Canada business offset by lower sales in both U.S. retail and away from home.
Andrew: Thank you Carlos.
Andrew: In the first quarter organic net sales declined four 7% for total Kraft Heinz with price up by nine percentage points and volume mix down five six percentage points.
Andrew: In North America organic net sales declined six 5% with growth in our Canada business offset by lower sales in both U S retail and away from home.
Andrew: This includes an impact of 120 basis points driven by the timing of Easter.
Andre Maciel: This includes an impact of 120 basis points driven by the timing of In our international developed markets, organic net sales decline 1.7%. This was primarily driven by industry slowdown in the UK from weakening consumer sentiment.
Andrew: In our international developed markets organic net sales declined one 7%.
Andrew: This was primarily driven by interest physical down in the UK from weakening consumer sentiment.
Andrew: Keep in mind that this is an improvement from the fourth quarter year over year decline of 4%.
Andre Maciel: Keep in mind that this is an improvement from the 4th quarter year-over-year decline of 4%.
Andrew: In the emerging markets organic net sales were up three 9%.
Andre Maciel: Emerging Markets, Organic Net Sales were up 3.9%. an improvement from 2.2% year-over-year growth in the fourth quarter of 2020. These results were driven by pricing in line with inflation. These are the volumes impacted by the timing of Ramadan. progress in emerging markets and we expect double-digit growth by the fourth quarter of 2020.
Andrew: The improvement from two 2% year over year growth in the fourth quarter of 2024.
Andrew: Results were driven by pricing in line with inflation.
Andrew: With volumes impacted by the timing of Ramadan.
Andrew: We are pleased with the progress in emerging markets.
Andrew: Back to see this continue.
Andrew: Reaching double digit growth by the fourth quarter of 2025.
Andrew: Turning to the next slide.
Andrew: Kraft Heinz adjusted operating income declined five 2%, while our adjusted operating income margin increased.
Andre Maciel: Turn it to the next slide. Total Kraft Heinz Adjusted Operating Income declined 5.2% while Adjusted Operating Income Margin increased by 1.5%. 30 basis points. a result of strong performance and immersion.
Andrew: 30 basis points.
Andrew: Result of strong performance in emerging markets.
Andrew: North America.
Andrew: Adjusted operating income declined nine 4% versus the prior year.
Andre Maciel: North America. The projected operating income declined 9.4% versus the prior year. particularly in coffee, eggs. in international developed markets, adjusted operating income decreased seven. as well as softwares.
Andrew: Productivity gains and lower incentive compensation were more than offset by declines in sales and commodity inflation, particularly in coffee eggs.
Andrew: In international developed markets adjusted operating income decreased 7%.
Andrew: Mainly due to the lag between pricing and inflation as well as software sales.
Andrew: In the emerging markets.
Andrew: Adjusted operating income increased 23%.
Andre Maciel: Emerging Markets, adjusted operating income increased 20.3% and adjusted operating income margin expanded by 300 basis points. This growth and margin expansion was driven by revenue management initiatives in Brazil and operational efficiencies across the zone. As a result of these initiatives, we expect to be able to maintain these profitability levels throughout the year. as we navigate the current consumer landscape and macroeconomic conditions.
Andrew: Adjusted operating income margin expanded by 300 basis points.
Andrew: This growth and margin expansion was driven by revenue management initiatives in Brazil, and operational efficiencies across the zone.
Andrew: As a result of these initiatives, we expect to be able to maintain this profitability levels throughout the year.
Andrew: As we navigate the current consumer landscape and macroeconomic conditions.
Andrew: Our focus remains on delivering value to our consumers.
Andre Maciel: Our focus remains on delivering value to our community. By unlocking efficiencies and optimizing our marketing spend, we are able to invest in price and support our and many more.
Andrew: By unlocking efficiencies and optimizing our marketing spend we are able to invest in price and support our brands.
Andrew: Building on our previous commitment.
Andrew: We are increasing our investments in price in 2025.
Andre Maciel: Thank you.
Andre Maciel: We are increasing our investments in price in 2025. starting with re-establishing optimal price gaps in key categories. We are leveraging trade spend to support our product renovations. trial and drive awareness of superior product. We are also leveraging our Heinz Verified Loyalty Program to accelerate distribution gains in a way.
Andrew: Starting with establishing optimal price gaps in key categories.
Andrew: Additionally, we are leveraging trade spend to support our product renovations and boost trial and drive awareness of superior product attributes.
Andrew: We are also leveraging our highest verify and loyalty program to accelerate distribution gains in away from home.
Andrew: And finally.
Andrew: We are investing infrastructure areas, including our brands across Canada.
Andre Maciel: And finally... We are investing. strategic areas, including our brands across Canada and Philadelphia and Orida. the momentum and drive for their in addition to increasing our investment in price. We are working diligently to improve marketing efficiency and drive better. We expect marketing as a percentage of sales to be up versus the prior. with a media spend increase by at least 15%. We are also targeting a double-digit increase in returns on that spent by optimizing our media mix and brand allocation. Ultimately, our goal is to drive improvement in top-line trends. And we believe these efforts will help us to achieve.
Andrew: Philadelphia and are either.
Andrew: To keep the momentum and drive further growth.
Andrew: In addition to increasing our investments in price, we are working diligently to improve marketing efficiency and drive better returns.
Andrew: We expect marketing as a percentage of sales to be up versus the prior year.
Andrew: With our media spend increase by at least 50%.
Andrew: We are also targeting a double digit increase the returns on that spend by optimizing our media mix and Brenda location.
Andrew: Ultimately.
Andrew: Our goal is to drive improvement in top line trends.
Andrew: We believe these efforts will help us to achieve that.
Andrew: I'm extremely proud of the team's ability to unlock and two and efficiencies, which enables us to make the investments I just discussed.
Andre Maciel: I'm extremely proud of the team's ability to unlock and to under... which enables us to make the investments I just. In Q1, we generated 3.7% of growth efficiencies as a percentage of cost of goods sold. This exceeds the 3.5% goal we had for the And we are well on our way to achieving our goal of $2.5 billion in efficiencies by 2027. With $1.5 billion dollars on lock to date, we have significant runaway assets. These efficiencies helped mitigate commodity pressure and limited the decrease in year-over-year adjusted gross profit margin to 10 basis points in the first quarter.
Andrew: In Q1, we generated three 7% of gross efficiencies as a percentage of cost of goods sold.
Andrew: Is exceeds the three 5% goal we had for the year.
Andrew: And we are well on our way to achieving our goal of $2 $5 billion in efficiencies by 2027.
Andrew: With $1 $5 billion unlocked to date, we have significant runway ahead.
Andrew: These efficiencies helped mitigate commodity pressure and limited the decrease in year over year adjusted gross profit margin to 10 basis points in the first quarter.
Andrew: Turning to cash flow.
Andrew: We generated free cash flow conversion of 6% to 5%.
Andre Maciel: Turn into cash. generated free cash flow conversion of 65%. a nine percentage point increase versus the prior. This was primarily driven by lower cash outflows from variable compensation, partially offset by inventory.
Andrew: A nine percentage point increase versus the prior year.
Andrew: This was primarily driven by lower cash outflows from variable compensation, partially offset by even thought is facing.
Andrew: In terms of adjusted EPS, we declined 10, 1% or seven.
Andre Maciel: in terms of adjusted EPS. declined 10.1% or 7.1%. versus the first quarter of 2021. This was driven by favorable impacts from sherry purchases and other expenses. more than offset by negative impact from a higher effective tax rate and results of a Nesquadr. spoke about the expected 500 basis points to pop in our P&L tax rate starting in the first quarter.
Andrew: Versus the first quarter of 2024.
Andrew: This was driven by favorable impact from share repurchases and other expense income.
Andrew: More than offset by negative impact from a higher effective tax rate and results of operations.
Andrew: Last quarter, we spoke about the expected 500 basis point step up in our P&L tax rate starting in the first quarter.
Andrew: As a reminder, due to step up is related to the transfer of certain business operations that was completed in the fourth quarter of 2024.
Andre Maciel: As a reminder, this step up is related to the transfer of certain business operations that was completed in the fourth quarter of 2024. The transfer was part of our planning for the changes in the international tax environment.
Andrew: The transfer was part of our planning for the changes in the international tax environment.
Andrew: It also allowed us to achieve greater operational synergies.
Andre Maciel: also allowed us to achieve greater operational A healthy balance sheet and strong cash flow generation provide a foundation for financial stability and flexibility. We have been able to provide consistent cash generation as well as significantly reduce our net leverage. Positioning ourselves to better navigate this uncertain environment.
Andrew: Our healthy balance sheet and strong cash flow generation provide a foundation of our financial stability and flexibility.
Andrew: We have been able to provide consistent cash generation as well as significantly reduced our net leverage ratio.
Andrew: Positioning ourselves to better navigate this uncertain environment.
Andrew: As part of our ongoing effort to optimize our capital structure, we issued bonds to rebalance our debt towers.
Andre Maciel: As part of our ongoing effort to optimize our capital structure, we issued bonds to rebalance our debt tower. The net effect on our P&L is minimal, and we are able to reinvest. We continue to be excellent stewards of capital. by taking a disciplined approach to financial management, we have created optionality for capital.
Andrew: Then that the effect on our P&L was minimal and we are able to reinvest the funds raised.
Andrew: We continue to be excellent stewards of capital.
Andrew: By taking a disciplined approach to financial management, we have created optionality for capital allocation.
Andrew: Our priorities remain the same.
Andrew: To continue to invest in organic growth.
Andre Maciel: Our priorities remain the same. Thank you to Invest in Organic Growth. actively manage our portfolio and return incremental capital to our shareholders. who have maintained a strong balance. earned nearly $900 million in capital to stockholders year-to-year. and maintain our net leverage target of approximately three times. of the $900 million return to stockholders. $500 million was through our competitive... with a yield that exceeds 5%. and $400 million through our Shari Purchase Program.
Andrew: Actively manage our portfolio.
Andrew: And return on incremental capital to our shareholders.
Andrew: We have maintain a strong balance sheet returned nearly $900 million in capital to stockholders at year to date.
Andrew: And maintain our net leverage target of approximately three times.
Andrew: Of the $900 million return to stockholders.
Andrew: 500 million was through our competitive dividend with a yield that that exceeds 5% and 400 million through our share repurchase program.
Andrew: This demonstrates our confidence in the improved trajectory of the company.
Andre Maciel: This demonstrates our confidence in the improved trajectory of the Currently, we have about $1.5 billion dollars remaining against our $3 billion dollar authorization. As a reminder, our share repurchase program is non-programmatic, a function of excess cash, and takes into consideration the macroeconomic environment.
Andrew: Currently we have about $1 $5 billion remaining against our $3 billion authorization.
Andrew: As a reminder, our share repurchase program non programmatic a function of excess cash and takes into consideration the macroeconomic environment.
Andrew: Now turning to our full year 2025 outlook.
Andre Maciel: Now turning to our full year 2035. We are lowering our organic net sales expectations and are widening our guidance range for constant currency-adjusted operating income as a result of the growing macroeconomic challenges, including potential tariffs and the regulatory environment. We're now expecting organic net sales in the range of down 1.5% to down 3.5% compared to our previous outlook of flat to down 2.5%. This guidance contemplates growth in emerging markets, which is expected to reach a double-digit pace by year-end. And it also reflects a relatively flat-top line performance in global away-from-home relative to last year.
Andrew: We are lowering our organic net sales expectations and are widening our guidance range for constant currency adjusted operating income as a result of the growing macroeconomic challenges, including potential tariffs and the regulatory environment.
Andrew: We're now expecting organic net sales in the range of down one 5% to down three 5% compared to our previous outlook of flat to down two 5%.
Andrew: This guidance contemplates growth in emerging markets, which is expected to reach a double digit basis by year end.
Andrew: And it also reflects a relatively flat top line performance in global away from home relative to last year.
Andrew: And then elongated recovery in U S retail challenged categories.
Andre Maciel: and an Elongated Recovery in U.S. Retail Challenged Category. relative to our previous expectations. The change in organic net sales is primarily driven by worsening consumer sentiment and changes in volume elasticity.
Andrew: Relative to our previous expectations the changing organic net sales is primarily driven by a worsening consumer sentiment and changes in volume elasticity, particularly in the United States.
Andre Maciel: particularly in the United for full year constant currency adjusted operating income. We are now anticipating a decline of 5% to 10%. compared to our previous expectation to decline 1 to 4%. Our lower expectations contemplate increased costs of doing business, including elevated inflation and tariffs. The wider range reflects a larger degree of uncertainty given the underlying volatility and unpredictability of macroeconomic dynamics.
Andrew: Our full year constant currency adjusted operating income.
Andrew: We are now anticipating a decline of 5% to 10%.
Andrew: Compared to our previous expectation should decline 124%.
Andrew: Our lower expectations contemplate increased cost of doing business, including elevated inflation and tariffs.
Andrew: The wider range reflects a larger degree of uncertainty given the underlying volatility and unpredictability of macroeconomic dynamics as.
Andrew: As well as a change in policy landscape.
Andre Maciel: as well as a change in policy then. It also provides us with the necessary flexibility to dial in on investments as deemed appropriate. Our constant currency adjusted operating income expectations include the impact of lapping lower variable compensation 2024. It's an approximate 150 basis point head. It also contemplates an adjusted gross profit margin that is down 25 to 75 basis points year-over-year, driven by our gross efficiency. Tariff mitigation efforts, and additional pricing that are expected to be more than offset by inflation and incremental investments in price and product. We expect adjusted EPS to be in the range of $2.51 to $2.67 as compared to our previous expectation of $2.63 to $2.74.
Andrew: It also provides us with the necessary flexibility to dialed in on investments as deemed appropriate.
Andrew: Our constant currency adjusted operating income expectations, including backed off lapping lower variable compensation in 2024, which is an approximate 150 basis point headwind.
Andrew: It also contemplates an adjusted gross profit margin that is down.
Andrew: 25% to 75 basis points year over year, driven by our gross efficiencies tariff mitigation efforts and additional pricing that or expect it should be more than offset by inflation and incremental investments in price and product.
Andrew: We expect adjusted EPS to be in the range of $2.51 to $2 six to seven cents as compared to our previous expectation of $2 63 to $2.74.
Andrew: The change in guidance reflects the revised organic net sales and constant currency adjusted operating income estimates.
Andre Maciel: The changing guidance reflects the revised organic net sales and constant currency adjusted operated income estimate. partially upset by the impact of year-to-date share repurchase. Our adjusted EPS expectation also contemplates an effective tax rate of approximately 26%. which is a 23-cent headwind on adjusted EPS year-over-year.
Andrew: Actually offset by the impact of year to date share repurchases.
Andrew: Our adjusted EPS expectation also contemplates an effective tax rate of approximately 26%.
Andrew: Which is up 23% headwind on adjusted EPS year over year.
Andrew: From a free cash flow perspective, we expect 2025 to be flat versus prior year with free cash flow conversion of approximately 95%.
Andre Maciel: From a free cash flow perspective, we expect 2025 to be flat versus prior year. This is driven by working capital efficiencies and lower cash outflows for variable compensation. partially offset by the net cash impact of a higher tax rate. Our outlook does not reflect any impact from future potential share And as a reminder, we have $1.5 billion remaining on our $3 billion share repurchase plan.
Andrew: This is driven by working capital efficiencies and lower cash outflows for variable compensation.
Andrew: Partially offset by the net cash impact of a higher tax rate.
Andrew: Our outlook does not reflect any impact from future potential share repurchases and as a reminder, we have $1 $5 billion remaining on our $3 billion share repurchase plan.
Andrew: Looking at the second quarter, we expect year over year organic net sales to come in better relative to the first quarter of 2025.
Andre Maciel: Looking at the second quarter, we expect year-over-year organic net sales to come in better relative to the first quarter of 2025. is driven primarily by an approximate 100 basis points benefit due to Easter. but also from improvements in cream cheese and Ore-Ida as we left headwinds in the first quarter that were driven by competitor out-of-stocks in the prior year. and also continued sequential improvement in eMERGE-MI.
Andrew: This is driven primarily by an approximate 100 basis points of benefit due to Easter shift.
Andrew: But also from improvements in cream cheese, and a rider as we lapped the headwinds in the first quarter that were driven by competitor out of stocks in the prior year.
Andrew: And also continued sequential improvement in emerging markets.
Andrew: We expect adjusted gross profit margin to be down approximately 200 basis points in the second quarter.
Andre Maciel: We expect a just-across-profit margin to be down approximately 200 basis points in the second quarter. The pressure is primarily driven by continuing inflation in coffee and the timing of commodity hedging. as a result of the pressure on adjusted gross profit margins.
Andrew: The pressure is primarily driven by continued inflation in coffee and the timing of commodity hedges.
Andrew: As a result of the pressure on adjusted gross profit margin, we expect adjusted operating income to be down double digits versus the prior year.
Carlos Abrams-Rivera: We expect adjusted operating income to be down double digits versus the prior With that, I will pass it back to Carlos for some closing comments. Well, thank you, Andre. Let me wrap up by saying we are acutely aware of the building pressures across food, from incremental inflation to tariff implications, and the concern our consumers have regarding a potential recession. We're actively working on solutions. I sincerely believe that our improving ability to unlock efficiencies and generate cash, along with our value-adding innovation and renovation, plus the strategic investments we're making across marketing and our brands, provide us with a robust toolkit to navigate and adapt to the ever-changing environment.
Carlos: With that I will pass it back to Carlos for some closing comments.
Carlos: Well, thank you andriy.
Speaker Change: Let me wrap up by saying, we are acutely aware of the building pressures across food from incremental inflation tariff implications and the concerning our consumers have regarding a potential recession.
Speaker Change: We're actively working on solutions.
Speaker Change: Sincerely believe that are proving our ability to unlock efficiencies and generate cash along with a value, adding innovation and renovation plus the strategic investments, we're making across marketing and our brands provide us with a robust toolkit to navigate and adapt to the ever changing environment.
Speaker Change: By doing so we will continue to serve our consumers delicious food from trusted brands at a price they can afford all while returning value to our stockholders. Thank.
Carlos Abrams-Rivera: And by doing so, we will continue to serve our consumers delicious food from trusted brands at a price that they can afford, all while returning value to our stockholders.
Speaker Change: Thank you for joining us and for your interest in Kraft Heinz.
Carlos Abrams-Rivera: Thank you for joining us and for your interest in Kraft Heinz.