Q1 2026 Kraft Heinz Co Earnings Call

May 6, 2026

Speaker #1: Greetings and welcome to Kraft Heinz Company first quarter 2026 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation.

Operator: Greetings, welcome to The Kraft Heinz Company Q1 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Anne-Marie Megela. Thank you. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: I would now like to turn the conference over to your host, Anne-Marie Megela. Thank you. You may begin.

Speaker #2: Thank you. And thank you all for joining us today. Welcome to the Q&A session for our first quarter 2026 business update. During today's call, we may make forward-looking statements regarding our expectations for the future.

Anne-Marie Megela: Thank you. Thank you all for joining us today. Welcome to the Q&A session for our Q1 2026 business update. During today's call, we may make forward-looking statements regarding our expectations for the future. These statements are based on how we see things today, and actual results may differ materially due to risk and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release and our most recent SAC filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures. Please refer to today's earnings release and the non-GAAP information available on our website for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Joining me today to answer your questions is our Chief Executive Officer, Steve Cahillane, and our Chief Financial Officer, Andre Maciel.

Speaker #2: These statements are based on how we see things today, and actual results may differ materially due to risk and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release and our most recent SAC filings for more information regarding these risk and uncertainties.

Speaker #2: Additionally, we may refer to non-GAAP financial measures. Please refer to today's earnings release and the non-GAAP information available on our website for discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures.

Speaker #2: Joining me today to answer your questions is our chief executive officer, Steve Cahelain, and our chief financial officer, Andre Maciel. Operator, please open the call for the first question.

Anne-Marie Megela: Operator, please open the call for the first question.

Speaker #3: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Peter Galbo with Bank of America. Your line is now live.

Speaker #3: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker #3: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #3: Our first question comes from Peter Galbo with Bank of America. Your line is now live.

Speaker #4: Hey, good morning, everybody. Thanks for the, the questions. Steve, I was actually hoping to start with, with Hold Win and, and Win Big. just comparing kind of what you said at, at Cagney a few months ago to what you're presenting today, at least in, in the slides.

Peter Galbo: Hey, good morning, everybody. Thanks for the question. Steve, I was actually hoping to start with hold win and win big, just comparing kind of what you said at CAGNY a few months ago to what you're presenting today, at least in the slides. I think there's been a few shifts of some of the platforms and/or sub-platforms between kind of the different categories. I was hoping you could kinda touch on the decision to make some of those changes. Then kind of as a part B to that question, just whether that signals anything in terms of how you're viewing potential asset sales of different platforms.

Speaker #4: I think there's been a, a few shifts of some of the, the platforms and/or sub-platforms between kind of the, the different categories. So I was hoping you could kind of touch on the decision, to make some of those, those changes, and, and then kind of as a part B to that question, just whether that signals anything.

Speaker #4: in terms of how you're viewing potential asset sales of, of different platforms.

Speaker #5: Yeah. Thanks for the question, Peter. You know, as I said, in the outset, you know, we res we reserve the right to continue to get smarter.

Steve Cahillane: Yeah. Thanks for the question, Peter. You know, as I said in the outset, you know, we reserve the right to continue to get smarter, and that's what we've done is we've made some of these changes. A couple of examples. You know, we did downgrade our frozen from win big to hold, and we think that's based on what the category's showing us, what our real opportunities are, and really confronting, you know, the facts as they stand, and being realistic about them. Equally, we look at hydration. We moved that from win to win big. We see strong category growth. We really like our brands in this space. We really like Capri Sun, its ability to go from, you know, following the cohort that's young and aging with them with our new hydration platform that's coming out now.

Speaker #5: And that's what we've done is we've made some of these changes. And a couple of examples. You know, we did downgrade our frozen from Win Big to Hold, and we think that's based on what the category's showing us, what our real opportunities are, and really confronting you know, the, the facts as they stand, and being realistic about them.

Speaker #5: Equally, we look at hydration. We moved that from Win to Win Big. We see strong category growth. We really like our brands in this space.

Speaker #5: We really like Capri Sun. Its ability to go from, you know, following the cohort that's young and aging with them with our new hydration platform that's coming out now.

Speaker #5: So we see a real opportunity to Win Big there based on our brands and our, our place in the category. Equally, we've moved cheese from Hold to Win.

Steve Cahillane: We see a real opportunity to win big there based on our brands and our place in the category. Equally, we've moved cheese from hold to win. We like the margins there. We like our brands. We like our opportunities. Those are some of the changes that we've made. I think they're all positive, and they point to, you know, the fact that we're continuing to look at our portfolio, challenge our portfolio, invest in our portfolio, and look for those areas where we can grow.

Speaker #5: We like the margins there. We like our brands. We like our opportunities. So those are some of the changes that we've made. I think they're all positive.

Speaker #5: and they point to, you know, the fact that we're continuing to look at our portfolio, challenge our portfolio, invest in our portfolio, and look for those areas where we can grow.

Speaker #4: Great. thanks, thank you for that. And, and Andre, maybe just as a as a follow-up, I know, the guidance is, is largely unchanged, after what was a, you know, probably a better-than-expected Q1.

Peter Galbo: Great. Thank you for that. Andre, maybe just as a follow-up, I know the guidance is largely unchanged after what was a, you know, probably a better than expected Q1. You called out some timing factors. Maybe just you can expand a little bit on your prepared remarks from the, you know, the commentary around Q2 and how you kind of view the evolving inflation outlook. I know you bumped that up a little bit today. Thanks very much, guys.

Speaker #4: you called out some, some timing factors. But maybe just, you can expand a little bit on your prepared remarks from the from, you know, the, the commentary around Q2.

Speaker #4: and how you kind of view the evolving, inflation outlook. I know you, you bumped that up a little bit today. Thanks very much, guys.

Andre Maciel: Sure. Good morning, Peter. Thanks for the question. Look, we expect Q2 to have top line between -3% and -5%. This is a consequence of the Easter shift that we have explained a few times, combined with we still anticipate and expect SNAP to be 100 BPS headwind in the year, starting in Q2. There's nothing that we have seen so far that indicates otherwise. We do expect continue to see the market share improving like we observed in Q1, but given softness in the category, we still expect this should be a headwind in Q2. This will be all partially offset by continuous improvement in away from home business worldwide and in emerging markets. When it comes to inflation, we initially guided the year to be approximately 4%.

Speaker #5: Okay. Good morning, Peter. Thanks for the question. Look, we expect second quarter to have top line between minus 3 and minus 5 percent. These are consequences of the, the Easter shift that we have, explained a few times.

Speaker #5: Combined with, with still anticipate and expect these NAPs to be 100 bips headwind in the year, starting in the second quarter. There's nothing that we have seen so far that indicates otherwise.

Speaker #5: We, we do expect the continue to see the, the market share improving like we observed in Q1, but given softness in the category, we still expect this to be a headwind, in the second quarter.

Speaker #5: This will be all partially offset by continuous improvements and away from home business worldwide. And in emerging markets. when it comes to inflation, we initially guided the year to be approximately 4%, like, in fact, o-our number implied in the outlook was a little lower than that.

Andre Maciel: In fact, our number implied in the outlook was a little lower than that. We are now seeing, mainly because of the conflict, inflation around energy and resins spiking up. We are well hedged in energy for the year. Resins, we are hedged through mid Q3. We do expect if situation remains the same, there is still a lot of volatility out there, which can get better or even worse. We do anticipate in Q3 to start to suffer the impact from that inflation.

Speaker #5: We are now seeing, mainly because of the conflict, inflation around energy and resins spiking up. We are well hedged in energy for the year.

Speaker #5: Resins, we are hedged through mid-Q3. So I do expect, if situation remains the same, there is still a lot of volatility out there, which can be can get better or even worse.

Speaker #5: But we do anticipate in the third quarter to start to suffer the imp-impact from that inflation.

Speaker #4: Great. Thanks very much. I'll pass it on.

Peter Galbo: Great. Thanks so much. I'll pass it on.

Speaker #3: Our next question comes from Steve Powers with Deutsche Bank. Your line is now live.

Operator: Our next question comes from Steve Powers with Deutsche Bank.

Speaker #4: Great. Thanks. And good morning, everybody. you know, Steve, i-if we just look at the, the, the improvement you started to show, you know, through and exiting the first quarter, I, I guess, as you dig into it, are you able to, parse out, y-you know, where there is, you know, more meaningful, true underlying progress that you think can really, y-you know, is momentum that you can build on versus, versus maybe, maybe some transitory impacts just a-areas where Easter timing or, or, or weather or what have you, flattered the quarter?

Steve Powers: Great. Thanks. Good morning, everybody. You know, Steve, if we just look at the improvement you started to show, you know, through and exiting Q1, as you dig into it, are you able to parse out, you know, where there is, you know, more meaningful, true underlying progress that you think can really, you know, is momentum that you can build on versus maybe some transitory impacts, just areas where Easter timing or weather or what have you, flattered the quarter? Just is there a way to parse out what's most promising versus maybe where we should just kinda temper our thinking a bit?

Speaker #4: Just is there a way to, parse out what's, what's, most promising versus maybe where we should just kind of temper-temper our thinking a bit?

Speaker #5: Yeah. Steve, the definitely we benefited from Easter shift. There's no question about that. And the winter storms caused some pantry loading, no doubt about that.

Steve Cahillane: Yeah, Steve, definitely we benefited from Easter shift. There's no question about that. The winter storms caused some pantry loading, no doubt about that. Underlying that, we've seen real improvement in our share trajectory and performance. As we said in the prepared remarks, the total business last year held or gained share in only 21%. In Q1, that moved to 35%, and in March, that moved all the way up to 58%. If you look at our taste elevation, where we were investing earlier last year, that moved from 24% holding or gaining share last year all the way to 81% in Q1 of 2026 and exited March at 87%.

Speaker #5: but underlying that, we've s-seen real improvement in our share trajectory and performance. As we said in the prepared remarks, the total business last year, held or gained share in only 21%.

Speaker #5: In the first quarter, that moved to 35%. And in March, that moved all the way up to 58%. And then if you look at our taste elevation where we were investing, earlier last year, that moved from 24%, holding or gaining share last year all the way to 81% in the first quarter of March at 87%.

Speaker #5: And that's really a function of the investments that we've made, the product improvements that we've made, the distribution that we've, you know, been able to hold or gain, based on the activities that we're putting in place.

Steve Cahillane: That's really a function of the investments that we've made, the product improvements that we've made, the distribution that we've, you know, been able to hold or gain based on the activities that were put in place. The totality of the business and, you know, the good start to the quarter, I think can also be attributed to the fact that for the last at least 60 days, this organization has been maniacally focused on growth and execution. Pausing the split freed up lots of resources, as we said it would, and we turned our attention and the attention of this entire organization to get off to a strong start, and that's exactly what we've did.

Speaker #5: And the totality of the business and, you know, the good start to the quarter, I think, can also be attributed to the fact that for the last at least 60 days, this organi-organization has been maniacally focused on growth and execution.

Speaker #5: Pausing the split freed up lots of resources as we said it would. And we turned our attention and the attention of this entire organization to get off to a strong start.

Speaker #5: And that's exactly what we've did. So we're being very realistic about what flattered the quarter, as you said, but we also see the underlying strength that's building and that's important because that's where we're gonna continue to invest and the vast majority of our 600 million is still dry powder that is being deployed as we speak from, from now through the rest of the year.

Steve Cahillane: We're being very realistic about what flattered the quarter, as you said, but we also see the underlying strength that's building, and that's important because that's where we're gonna continue to invest. The vast majority of our $600 million is still dry powder that is being deployed as we speak from now through the rest of the year. We're holding guidance, but we're very encouraged by the start to the year, and we plan on continuing our maniacal focus against our consumer, our customer, and execution.

Speaker #5: So we're holding guidance, but we're, we're very, encouraged by the start to the year. And we plan on continuing our maniacal focus against our consumer and our customer and execution.

Andre Maciel: To complement a little bit.

Steve Powers: Very clear.

Speaker #5: Very clear.

Speaker #4: With, with the numbers. So last year, we, we started the year losing 90 bips of market share mix adjusted. Which was really the bottom the last 10 years.

Steve Powers: with the numbers. Last year, we started the year losing 90 BPS of market share, mix adjusted, which was really the bottom the last 10 years. We, as we started to step up investment in the second half, we're able to exit last year losing 50 to 60 BPS of market share. Now year to date, we are at 30 BPS. That is, I think definitely a good improvement happening right now, led by taste elevation, but also by hydration, as Steve mentioned, and desserts. These places where you have stepped up investments in marketing, in renovating the product are starting to show some signs of paying off.

Andre Maciel: with the numbers. Last year, we started the year losing 90 BPS of market share, mix adjusted, which was really the bottom the last 10 years. We, as we started to step up investment in the second half, we're able to exit last year losing 50 to 60 BPS of market share. Now year to date, we are at 30 BPS. That is, I think definitely a good improvement happening right now, led by taste elevation, but also by hydration, as Steve mentioned, and desserts. These places where you have stepped up investments in marketing, in renovating the product are starting to show some signs of paying off.

Speaker #4: We, we as we started to step up investment the second half, we're able to exit last year losing 50 to 60 bips of market share.

Speaker #4: And now year to date, we are at 30 bips. So th-there is thinking defi-definitely a, a good improvement happening right now. Led by taste elevation, but also by hydration, as Stevie mentioned, and desserts.

Speaker #4: If these places where you have step up investment in, in marketing, in renovating the product, are starting to show some signs of paying off.

Speaker #4: Great. Thank you. And, and Andrei, w-while I have you, just on, on free cash flow, th obviously a strong quarter, but some working capital, you know, and, and marketing accrual timing benefits.

Steve Powers: Thank you. Andre, while I have you, just on free cash flow, obviously a strong quarter, but some working capital, you know, and marketing accrual timing benefits, just obviously you've maintained the free cash flow outlook for the year. As you think about the balance of year, you know, Q2 through Q4, anything to call out in terms of, you know, timing of year to go free cash flow?

Speaker #4: Just, obviously, you've, you've called the you've maintained the, the free cash flow outlook for the year. But as you think about the, the balance of year, you know, 2Q through 4Q, anything to call out in terms of, you know, timing of, year to go free cash flow?

Speaker #5: Look, our cash flow con remains very strong. I think, all the changes we have done to incentives, a couple of years ago, w-we have now the organization focus on, on really being disciplined in deploying CapEx and, and managing working capital better.

Andre Maciel: Look, our cash flow point remains very strong. I think all the changes we have done to incentives a couple years ago, we have now the organization focused on really being disciplined in deploying CapEx and managing working capital better. We're seeing that translated again in Q1. Because of the step-up in investments happening in H2, we should expect cash flow potentially to go down in H2 of the year. I mean, that's anticipated. Now, we exited the year, exited the quarter with a very strong cash on hand. You will see us now in Q2 paying down debt. The debt is maturing now in Q2, and we are strongly considering anticipating paying back part of the debt that is maturing next year.

Speaker #5: So we're seeing that translated again in the first quarter. Because of the step up in investments, happening in the second half, we should expect cash flow, potentially to go, down, in the second half of the year.

Speaker #5: but, I mean, that's, that's anticipated. Now, we exited the, the year, exited the quarter with a very strong cash on hand. So you will see us now in the second quarter, paying down that, th-that is maturing now in, in Q2.

Speaker #5: And we are, strongly considering anticipating paying back part of the debt that is maturing, next year. We have 1.9 billion dollars next year again.

Andre Maciel: We have $1.9 billion next year again. We are considering anticipating a portion of that as well. There are a couple other things we are doing in terms of managing better our debt tower, which will allow us to reduce interest expense. What is, I think, is a good position that we put ourselves in and allow us even to invest $600 million in the business and still generate strong cash flow.

Speaker #5: So we're anticip we're, we're considering anticipating a portion of that as well. And there are a couple other things we are doing in terms of managing better our debt tower, which will allow us to reduce interest expense.

Speaker #5: But, but it's, I think, it's a good position that, that we put ourselves in. And, and allow us even to invest 600 million dollars in the business and still generate strong cash flow.

Speaker #4: Yeah. Okay. Very good. Thank you so much.

Steve Powers: Yeah. Okay. Very good. Thank you so much.

Operator: Our next question comes from Michael Lavery with Piper Sandler. Your line is now live.

Speaker #6: Our next question comes from Michael Levary with Piper Sandler. Your line is now live.

Michael Lavery: Thank you. Good morning. Just curious how to think about the pricing environment. You've obviously started the year with plans that include price adjustments, and it looks like there's early signs in this quarter that where they look like they're in place already. That's working. Then there's of course shifts in the input cost environment. Does that do anything to change how you think about your plans? How kind of fluid and dynamic would your pricing expectations be?

Speaker #7: thank you. Good morning. just curious how to think about the pricing environment. You, you've obviously, started the year with plans that include price adjustments and it looks like there's early signs, in, in this quarter that where t they, they look like they're in place already.

Speaker #7: That's working. b-but then there's, of course, shifts in the input cost environment. Does that do anything to change how you think about your plans or, w-w-w how kind of fluid and dynamic w-would your pricing expectations be?

Speaker #5: Yeah. Thanks, Michael. I'd say the pricing environment can be best characterized as very rational. You know, we've come through this inflationary cycle, which was obviously unprecedented.

Steve Cahillane: Yeah. Thanks, Michael. I'd say the pricing environment can be best characterized as very rational. You know, we've come through this inflationary cycle, which was obviously unprecedented. The consumer is under a lot of pressure, our focus is very much on value, creating value and affordability. We have looked at opportunities to adjust pricing where we think it's gone a little too far, and you're seeing some results in that. We'll always look at the input cost environment and say our first line of defense is productivity. We're really looking to ramp up our productivity and have, you know, a top-notch productivity year this year because it's really needed because the consumer can only absorb so much price. We'll be looking at productivity.

Speaker #5: The consumer is under a lot of pressure. And so our focus is very much on value, creating value, and affordability. And we have looked at opportunities to adjust pricing where we think it's gone a little too far, and you're seeing some results in that.

Speaker #5: But we'll always look at the input cost environment and say our first line of defense is productivity. And we're really looking to ramp up our productivity and have, you know, a top-notch productivity year this year because it's really needed, because the consumer can only absorb so much price.

Speaker #5: And so we'll be looking at productivity. Ideally, you know, business like ours would take about half of input cost in-inflation in price. And then, the rest in productivity.

Steve Cahillane: Ideally, you know, a business like ours would take about half of input cost inflation in price and then the rest in productivity. If we can do better than that, this is the year to do it because the consumer's under a tremendous amount of pressure. You know, we look at it as very much our goal to be affordable and be there for our consumers in an environment like this.

Speaker #5: And if we can do better than that, this is the year to do it because the consumer's under a tremendous amount of amount of pressure.

Speaker #5: And, you know, we look at it, as, as very much our goal to be affordable and be there for our consumers, in an environment like this.

Speaker #5: Yeah. And I think just to complement o-our Steve said, in the in the guidance for the year, we have contemplated initially that would price only 20% of the inflation.

Andre Maciel: Yeah. I think to complement what Steve said, in the guidance for the year, we have contemplated initially that would price only 20% of the inflation. Okay, this was already anticipated. I think Steve's point, we are relying on another strong year of productivity. We started Q1 strong, again, above 4% of COGS, and we do expect to be able to maintain that pace.

Speaker #5: Okay? So this was already anticipated. And, and I think to Steve's point, we are relying on another strong year of productivity. We started Q1 strong.

Speaker #5: Again, above 4% of COGS. And we do expect to be able to maintain that pace.

Speaker #7: No, that-that's really helpful. And r-related to that, I just wanted to follow up on I, I think it's slide eight you flagged, a simplified operating model as, as part of, the, the turnaround for the US.

Michael Lavery: No, that's really helpful. Related to that, I just wanted to follow up on, I think it's slide 8, you flagged a simplified operating model as part of the turnaround for the US. I guess, want to make sure we understand kind of similar what that means. It has the Ore-Ida logo there. It could be referring to the sim plot, how much opportunity is there to simplify the operating model? I guess part of the question is through the lens of history, knowing that cost-cutting can obviously go too far. How should we just think about what opportunities there are and maybe the risks and how you think about that approach?

Speaker #7: And, I, I guess wanna make sure we understand kind of some of what that means. And it has the or write a logo there.

Speaker #7: It could be r-referring to the SIMPLOT. But, how much opportunity is there to simplify the operating model? And I, I guess part of the question is through the lens of history knowing the cost-cutting can, can obviously go too far.

Speaker #7: So, how should we just think about what opportunities there are and, and maybe the risks and, and how you, think about that approach?

Speaker #5: Yeah. You know, we, we made a terrific hire in bringing, Nicholas Amaya, to run our North American business. And he has been hard at work looking at the operating model as have we all.

Steve Cahillane: Yeah. You know, we made a terrific hire in bringing Nicolas Amaya to run our North American business, and he has been hard at work looking at the operating model, as have we all. We see real opportunities to have stronger accountabilities, stronger empowerment, at the people who are running the business. We also see big opportunities to supplement our commercial activities, our commercial people, and we've been doing a lot of that, hiring people in sales and marketing. Really with a focus on the consumer and the customer and very strong objectives that are aligned around our business objectives. The chief one is growing organic sales and improving market share performance. Simplifying everything that we do in service of the consumer and the customer and our goal to drive profitable volume-led value market share.

Speaker #5: And we see real opportunities to have stronger accountabilities, stronger empowerment, at the people who are running the business. We also see big opportunities to supplement our commercial activities, our commercial people.

Speaker #5: And we've been doing a lot of that, hiring people in sales and marketing. but really with a focus on the consumer and the customer and very strong objectives that are aligned around, our business objectives, the chief of chief one is growing organic sales.

Speaker #5: And improving market share performance. And so simplifying everything that we do in service of the consumer and the customer and our goal to drive profitable volume-led value market share.

Speaker #7: Very helpful. Thank you.

Michael Lavery: Very helpful. Thank you.

Speaker #6: Our next question comes from Ki Chris Carey with Wells Fargo. Your line is now live.

Operator: Our next question comes from Chris Carey with Wells Fargo. Your line is now live.

Speaker #8: Hi. Thank you, everybody, for the question. W if you just, you know, think about the back half acceleration, and top line that you're embedding for the year, can you just unpack that a little bit across the most meaningful drivers, you know, as it pertains to, y the, the lapping of Indonesia, the step-up that you're expecting from investments, the improvement, you know, a-and the and the subsequent improvement in, in market share, that, that you're expecting, perhaps some of this acceleration in Western Europe post-pricing.

Chris Carey: Hi. Thank you, everybody, for the question. If you just think about the H2 acceleration in top line that you're embedding for the year, can you just unpack that a little bit across the most meaningful drivers? As it pertains to the lapping of Indonesia, the step up that you're expecting from investments, the improvement and the subsequent improvement in market share that you're expecting, perhaps some of this acceleration in Western Europe post-pricing. Can you just give us a sense of how to think about the complexion of the major contributors to the H2 improvement that you would expect in the top line? Thanks.

Speaker #8: Can you just give us a sense of, you know, h-how to think about the complexion of the major contributors to, to the back half improvement that you would expect in the top line?

Speaker #8: Thanks.

Speaker #5: Yeah. Chris, I-I'll start and, Andre can help with, you know, more details and the numbers. We're not really calling for an acceleration. You know, we got off to a very good start.

Steve Cahillane: Yeah, Chris, I'll start, and Andre can help with more details in the numbers. We're not really calling for an acceleration. You know, we got off to a very good start, and we're being prudent about the way we think about the rest of the year. Of course, we'd always like to overdeliver on our top-line goals. Definitely would like to overdeliver on our market share objectives. We're being prudent in the way we think about the rest of the year, and not embedding, you know, the Q1 overdelivery into our guidance for the top line.

Speaker #5: And we're being prudent about the way we think about the rest of the year. Of course, we'd always like to over-deliver on our, top line goals and definitely would like to over-deliver on our market share objectives.

Speaker #5: but we're being prudent in the way we think about the rest of the year, and not embedding, you know, the first quarter over-delivery into our guidance for the top line.

Speaker #5: Yeah. And in terms of the building blocks, you, you mentioned Indonesia. That's certainly a contributor, like in, in the first quarter, for example, Indonesia alone was at 700 was at was at 70 bips headwind to top line growth.

Andre Maciel: Yeah. In terms of the building blocks, you mentioned Indonesia. That's certainly a contributor. Like in Q1, for example, Indonesia alone was a 70 BPS headwind to top-line growth. We do expect that all to go away in H2 as we let the adjustments we have made in the business. Market share in the US, as we step up the investment should see an improvement versus where we are today. Similarly, we feel good about our European plans. Everything that we're doing behind Heinz, there is a lot of step-up investments as well. As part of the $600 million that is going against Heinz in Europe, we're gonna see that also helping improve performance over there.

Speaker #5: And we, we do expect that all to go away in the second half as, as we lap the all the adjustments we have made in the business.

Speaker #5: market share, in the US, as we step up the investment, should see, an improvement versus where we are today. Similarly, we feel good about our European plans, everything that we're doing behind Heinz.

Speaker #5: There is a lot of step-up investments as well as part of the $600 million that is going against Heinz in Europe. We're gonna see that also helping improve performance over there.

Speaker #5: And away from home, even though there is still overall softness in the category, we are now seeing, signs of market share improvement, in the US, w-which is quite encouraging, especially in the sources portfolio.

Andre Maciel: Away from home, even though there is still overall softness in the category, we are now seeing signs of market share improvement in the US, which is quite encouraging, especially in the sauces portfolio. I think all of those factors should allow us to see the step up. There'll be a balanced contribution across those levers.

Speaker #5: So I think all of all of those factors should allow us to see the step-up. So there'll be a balanced contribution across those levels.

Speaker #7: Okay, thank you. And it's been touched on a bit, but just as you think about the inflation exposure in Q4—obviously, this is going to imply a bigger exit rate going into 2027.

Chris Carey: Okay. Thank you. It's been touched on a bit, but just as you think about the inflation exposure in Q4, obviously this is going to imply bigger exit rates going to 2027. Michael Lavery touched on this a bit, but what does the toolkit look like for you to work through the state and higher inflation environment? Obviously, there's a pricing discussion, productivity, you have sustaining relatively high levels. Would you look at, you know, maybe harvesting some of the investments that you've made in SGA to protect the bottom line going to 2027? Obviously, this is a fluid environment. Inflation can certainly change.

Speaker #7: Just a-a-and Michael kinda, you know, slavery touched on this a bit. But w-w-what is the toolkit look like for you to work through, to stay in higher i inflation environment?

Speaker #7: Obviously, there's a pricing discussion, productivity, you know, sustaining relatively high levels. Would you look at, you know, maybe harvesting some of the investments that you've made in SG&A to protect the bottom line going into '27?

Speaker #7: Obviously, this is a fluid environment and inflation can certainly change. But, you know, can you just give us a bit more insight on how you, you'd be p-planning, from a from a cost offset perspective if we kinda look out eight, 18 months?

Chris Carey: You know, can you just give us a bit more insight on how you'd be planning from a cost offset perspective if we kind of look out 18 months? Thanks so much.

Speaker #7: Thanks so much.

Speaker #5: Yeah. Chris, so we wouldn't look at our investments, the 600 million dollars, and otherwise as a way to protect profit. in fact, we're looking, at opportunities to even invest more as we see good returns, against those investments and good, outcomes in terms of the top line.

Steve Cahillane: Yeah, Chris. We wouldn't look at our investments, the $600 million and otherwise as a way to protect profit. In fact, we're looking at opportunities to even invest more as we see good returns against those investments and good outcomes in terms of the top line. We'll protect that and in fact, even lean into it. As we said earlier, the first line of defense is always gonna be productivity. You know, it's unknown what the Q4 and 2027 will bring. It could be that the whole environment moves towards needing to take more price. I mean, we can't predict what the outcome will be in the Middle East and how that will, you know, affect, it's gonna be something that affects the entire environment.

Speaker #5: So we'll protect that. And in fact, even lean into it. as we said earlier, the first line of defense is always gonna be productivity.

Speaker #5: but, you know, th it's, it's unknown what the fourth quarter and 2027 will bring. It could be that the whole environment moves towards, needing to take more price.

Speaker #5: I mean, we can't predict what the outcome will be in the Middle East and how that will, you know, affect. But it's gonna be something that affects the entire environment.

Speaker #5: And, you know, we would be looking to, you know, go with that. But again, first line of defense is productivity, investing in our brands, and driving a good top line outcome, is what we'd be looking at.

Steve Cahillane: You know, we would be looking to, you know, go with that. Again, first line of defense is productivity, investing in our brands and driving a good top-line outcome, is what we'd be looking at.

Speaker #7: Okay. Thank you.

Chris Carey: Okay, thank you.

Speaker #6: Our next question comes from Thomas Palmer with JP Morgan. Your line is now live.

Operator: Our next question comes from Thomas Palmer with JP Morgan. Your line is now live.

Thomas Palmer: Good morning. Thanks for the question. Maybe could just start on the marketing side. You noted the 37% increase in Q1 on a year-over-year basis, also the plans for 5.5% spend. Maybe any framing on where that level of increase in Q1 kind of takes you relative to that annualized percent of sales. When we think about the magnitude of the increase, are there any timing considerations such as kind of having that earlier Easter impacting how that marketing spend flowed through? Last, any detail on kind of where that spend has really been focused, and if you're seeing when we look at the share improvements, disproportionate spend in kind of the areas that have inflected the most. Thanks.

Speaker #9: good morning. Thanks for the question. maybe could just start on the marketing side. Y-you noted the 37% increase in the first quarter on a year-over-year basis.

Tom Palmer: Good morning. Thanks for the question. Maybe could just start on the marketing side. You noted the 37% increase in Q1 on a year-over-year basis, also the plans for 5.5% spend. Maybe any framing on where that level of increase in Q1 kind of takes you relative to that annualized percent of sales. When we think about the magnitude of the increase, are there any timing considerations such as kind of having that earlier Easter impacting how that marketing spend flowed through? Last, any detail on kind of where that spend has really been focused, and if you're seeing when we look at the share improvements, disproportionate spend in kind of the areas that have inflected the most. Thanks.

Speaker #9: Also, the plans for 5 and a half percent spend. But maybe any, any framing on, on where that level of increase in the first quarter kinda takes you, relative to that, that annualized, percent of sales.

Speaker #9: And then, when we think about the magnitude of the increase, i are there any timing considerations, such as kinda having that earlier Easter i-impacting how you s how that marketing spend flowed through?

Speaker #9: And, and last, any detail on, on kinda where that spend ha-has really been focused. And if you're seeing when we look at the share improvements disproportionate spend in, in kinda the areas that have, inflected the most.

Speaker #9: Thanks.

Speaker #5: Yeah. So, a-as we said in our, preparing marks, we do expect marketing for the year to be at least 5 and a half percent of revenue.

Andre Maciel: Yeah. As we said in our prepared remarks, we do expect marketing for the year to be at least 5.5% of revenue. And Steve mentioned, we have been looking very close on how our performance is shaping up, and if things end up better than we anticipated, we will be willing to lean more on the investments, marketing being one of the key drivers. The reason why we see 37% in Q1, you might remember last year, we step up market investment in H2 of last year. You have this effect of now we have, in a certain way, a easy comp on the marketing front. Year-over-year, we're gonna see that gradually reducing that impact because of the step up in H2.

Speaker #5: w and, and Steve mentioned we, we have been looking very close on how our performance is shaping up. And if things, end up better than we anticipated, we will be, willing to lean in more o-on the investments, marketing being one of the key drivers.

Speaker #5: The reason why we see 37% in the first quarter, you might remember last year, we step up market investment in the second half of last year.

Speaker #5: So then you have this effect o-of now we have in a certain way a easy comp on the marketing front. So year over year, we're gonna see that gradually reducing that impact because of the step-up in the second half.

Speaker #5: But overall in the year, we do expect a-at least 20% of increase. in terms of where this money is going, we have been prioritizing, our win-beat categories.

Andre Maciel: Overall, in the year, we do expect at least 20% of increase. In terms of where this money is going, we have been prioritizing our win big categories. There is a disproportionate amount started last year that went against sauces, cream cheese, mac and cheese, and hydration. The reality is we do have the opportunity to step up marketing across the whole portfolio. We have been gradually stepping up the investments across different parts of the business to different extents, but we do believe that will be healthy to the whole portfolio.

Speaker #5: So there is a disproportionate amount starting last year that went against sauces, cream cheese, mac and cheese, hydration. But the reality is we do we, we do have the opportunity to step up marketing across the whole portfolio.

Speaker #5: So we have been gradually stepping up the investments across different parts of the business to different extents. But w-we do believe that will be healthy to the whole portfolio.

Speaker #9: Okay. Tha-thank you for that. on the snap side, you've noticed expected headwinds, especially ramping this quarter. I know it's still early in the quarter.

Thomas Palmer: Okay. Thank you for that. On the SNAP side, you've noticed expected headwinds, especially ramping this quarter. I know it's still early in the quarter. Are you already seeing signs of this incremental impact as we think about Q2? Just to confirm, there was not really impact in Q1? I know it wasn't a call-out. Thanks.

Tom Palmer: Okay. Thank you for that. On the SNAP side, you've noticed expected headwinds, especially ramping this quarter. I know it's still early in the quarter. Are you already seeing signs of this incremental impact as we think about Q2? Just to confirm, there was not really impact in Q1? I know it wasn't a call-out. Thanks.

Speaker #9: Are you already seeing signs o-of this incremental al e-incremental impact as we think about the second quarter? And, and just to confirm, th-there was not really impact in the in the first quarter?

Speaker #9: I, I know it wasn't a call out. Thanks.

Speaker #5: Yeah. So we definitely see an impact from snap already happening, in February and March. So if you look snap transactions, th-they are already down.

Andre Maciel: We definitely see an impact from the SNAP already happening in February and March. If you look SNAP transactions, they are already down in line, if not even a little more than expected. On the other hand, we saw strength in the non-SNAP households, which helped to offset that in the first quarter. It is hard to predict at this point if that strength that we saw in the non-SNAP households will hold into the remainder of the year. What we are anticipating is that we are going to start to see that SNAP household impact more pronounced into sell out year to go. That is why we have been calling for 100 BPS headwind. Obviously, they are not sitting on the problem, right? We do expect that. We have been expecting that for a while.

Speaker #5: in, in line, if not even a little more than, than expected. On the other hand, we saw strength in the non-snap households, which helped to offset that in the first quarter.

Speaker #5: But it's, it's hard to predict at this point if that strength that we saw in the non-snap households will hold i-into the remainder of the year.

Speaker #5: So what we are anticipating is that we're gonna start to see that more th-that, that snap household impact more pronounced into sell-out year to go.

Speaker #5: And that's why we have been calling for 100 bips headwind. Obviously, I'm not sitting on the problem, right? So w-we, we do expect that we have been expecting that for a while.

Speaker #5: So that's part that's why part of the price investments that we have deployed in the 600 million dollars were put against opening price points 'cause this part of the, the consumer base i-is definitely under a lot of pressure.

Andre Maciel: That's why part of the price investments that we have deployed in $600 million were put against opening price points. This part of the consumer base, it is definitely under a lot of pressure.

Speaker #9: Understood. Thank you.

Operator: Understood. Thank you. Our next question comes from Megan Clapp with Morgan Stanley. Your line is now live.

Tom Palmer: Understood. Thank you.

Speaker #6: Our next question comes from Megan Clapp with Morgan Stanley. Your line is now live.

Operator: Our next question comes from Megan Clapp with Morgan Stanley. Your line is now live.

Speaker #10: Hi. Good morning. Thanks so much. Ma-maybe to pick up on Tom's first question on the marketing investments and, and Steve's some of the comments you've made, you know, clearly you're seeing some benefits from things that were done kind of prior to you making this new plan.

Megan Clapp: Hi. Good morning. Thanks so much. Maybe to pick up on Thomas' first question on the marketing investments and Steve, some of the comments you've made, you know, clearly you're seeing some benefits from things that were done kind of prior to you making this new plan. Steve, I think you mentioned $600 million is still dry powder. As you see the improvements you've made in Q1 and then some of the areas you highlighted, you know, meats in particular, where there's still opportunity, can you just talk about whether anything you've seen so far has changed how you're thinking about concentrating some of those investments?

Megan Alexander Clapp: Hi. Good morning. Thanks so much. Maybe to pick up on Thomas' first question on the marketing investments and Steve, some of the comments you've made, you know, clearly you're seeing some benefits from things that were done kind of prior to you making this new plan. Steve, I think you mentioned $600 million is still dry powder. As you see the improvements you've made in Q1 and then some of the areas you highlighted, you know, meats in particular, where there's still opportunity, can you just talk about whether anything you've seen so far has changed how you're thinking about concentrating some of those investments?

Speaker #10: And, and Steve, I think you mentioned 600 million is still dry powder. So as you see the improvements you've made in the first quarter and then some of the areas you highlighted, you know, meets in particular where there's there's still opportunity.

Speaker #10: Can you just talk about whether anything you've seen so far has changed how you're thinking about concentrating some of those investments? You know, particularly as, you know, we've talked about a lot, the macro continues to shift and, you know, perhaps the cost inflation outlook gets more challenging as we go into the back half.

Megan Clapp: You know, particularly as, you know, we've talked about a lot, the macro continues to shift and, you know, perhaps the cost inflation out gets more challenging as we go into the back half. Thanks.

Megan Alexander Clapp: You know, particularly as, you know, we've talked about a lot, the macro continues to shift and, you know, perhaps the cost inflation out gets more challenging as we go into the back half. Thanks.

Speaker #10: Thanks.

Speaker #7: Yeah. Megan, what we've seen is good returns on the investments that we've made. And that's where we're leaning in. And if you look at some of the exciting things that we have going on right now, you can you can follow our investment against those.

Steve Cahillane: Yeah, Megan, what we've seen is good returns on the investments that we've made, and that's where we're leaning in. If you look at some of the exciting things that we have going on right now, you can follow our investment against those. For example, Power Mac & Cheese, which just came out in April, too early to see any sellout data, but the sell-in was outstanding, 35,000 accounts right now as we speak. I think that's a function of the commitment that we made to increase our investment substantially led to better distribution, and we're going to be investing against it. We anticipate a good launch there. We've got in our Ore-Ida business a nice shapes innovation that we're investing in.

Speaker #7: So for example, Power Mac and Cheese, which just came out in April, too early to see any sell-out data. But the sell-in was outstanding, 35,000, accounts, right now as we speak.

Speaker #7: And I think that's a function of the, commitment that we made to increase our investments substantially led to better distribution. And we're gonna be investing against it.

Speaker #7: And so we anticipate a good launch there. We've got in our Horizon business a nice, shapes innovation that we're investing in. The Capri Sun Hydrate that we mentioned earlier, I think, is a big opportunity to continue the momentum that was built last year on Capri Sun and new distribution and new doors there.

Steve Cahillane: The Capri Sun Hydrate that we mentioned earlier, I think a big opportunity to continue the momentum that was built last year on Capri Sun and new distribution and new doors there, so investing against that. We've got a Lunchables renovation which is coming next month. We'll be investing against that. We've seen good turnaround in Lunchables, which started at the end of last year. We've got, you know, things in the back half of the year like Philadelphia lactose free, which is, as we mentioned in the prepared remarks, we think a big opportunity given the number of people who suffer from lactose intolerance in the US and a great innovation there that we'll be investing against. You know, the brands where we think we have a real right to win, we'll be investing in.

Speaker #7: So investing against that. We've got a Lunchables renovation, which, is coming next month. We'll be investing against that. We've seen g-good turnaround in Lunchables, which started at the end of last year.

Speaker #7: and we've got, you know, things in the back half of the year like Philadelphia Lactose Free, which is, as we mentioned in the in the prepared remarks, we think a big opportunity given the, the number of, people who suffer from lactose intolerance in the US and a great innovation there that we'll be investing against.

Speaker #7: So, you know, the brands where we think we have a real right to win will be investing in. And you mentioned meats, you know, where we have things that we need to turn around.

Steve Cahillane: You mentioned meats, you know, where we have things that we need to turn around. Clearly we need to make some investments there. You know, we don't like leaky buckets, and we're gonna look to plug those at the same time as we lean against our biggest and best opportunities.

Speaker #7: Clearly, we need to make some investments there. you know, we don't like leaky buckets. And we're gonna look to, to plug those at the same time as we lean against our biggest and best opportunities.

Speaker #10: Great. Thank you. And, and Andre, maybe just a quick follow-up on, on the gross margin performance. You know, still down in the quarter, but significantly better than you know, I think what you were expecting certainly what the street was modeling, understand there was probably some, you know, fixed cost leverage benefits there just on, on the top line.

Megan Clapp: Great. Thank you. Andre, maybe just a quick follow-up on the gross margin performance. You know, still down in the quarter, but significantly better than, you know, I think what you were expecting, certainly what the street was modeling. Understand there was probably some, you know, fixed cost leverage benefits there just on the top line. Anything else in the quarter just in terms of, you know, the upside maybe versus your expectations to call out? Thanks.

Megan Alexander Clapp: Great. Thank you. Andre, maybe just a quick follow-up on the gross margin performance. You know, still down in the quarter, but significantly better than, you know, I think what you were expecting, certainly what the street was modeling. Understand there was probably some, you know, fixed cost leverage benefits there just on the top line. Anything else in the quarter just in terms of, you know, the upside maybe versus your expectations to call out? Thanks.

Speaker #10: But anything else in the quarter, just in terms of, you know, the upside—maybe versus your expectations—to call out? Thanks.

Andre Maciel: Sure. There is about 40 to 50 BPS of gains in the quarter that are non-recurring. Portion of that is selling excess byproducts, so we don't expect that to be repeated year-to-go. There is a small contribution from we expected to do a maintenance in a certain factory and then have to move production to a co-packer temporarily. We decided to move that to later in the summer. That's like a phasing thing. Cheese commodity came a little better than what we anticipated. We did see the peak in inflation that we expected across most of the commodities, including coffee and meats, but we had those other upsides that help in the quarter.

Speaker #5: Sure. there is a, about, about 40 to 50 bips of im of gains in the quarter that are non-recurring. portion of that is, selling excess by products.

Speaker #5: So w-we don't expect that to be, to be repeated year to go. There, there is, a s a some co small contribution from we're expected to do a maintenance in a certain factory and then have to move capa production to a co-packer temporarily.

Speaker #5: We decided to move that to later in the summer. So that's like a phasing thing. cheese commodity came a little better than what we anticipated.

Speaker #5: So we did see the peak i-in inflation that we expected, across most of the, the commodities including, coffee and meats. But we had those other, upsides that, that help in the quarter.

Speaker #5: But that's why we are maintaining also our expectation for the year of, of a headwind of 25 to 75 bips.

Andre Maciel: That's why we are maintaining also our expectation for the year of a headwind of 25 to 75 BPS.

Speaker #10: Perfect. Thank you. Andre.

Megan Clapp: Perfect. Thank you.

Megan Alexander Clapp: Perfect. Thank you.

Operator: Operator, we have time for one more question. Okay. Our last question comes from Scott Marks with Jefferies. Your line is now live.

Anne-Marie Megela: Operator, we have time for one more question.

Speaker #9: Andre? We have time for one more question.

Operator: Okay. Our last question comes from Scott Marks with Jefferies. Your line is now live.

Speaker #6: Okay. Our last question comes from Scott Marks with Jefferies. Your line is now live.

Speaker #11: Hey. Good morning. Thanks so much for squeezing me in here. in the interest of time, I'll just ask one. Wondering if you can give us a lay of the land in terms of the away from home environment.

Scott Marks: Hey, good morning. Thanks so much for squeezing me in here. In the interest of time, I'll just ask one. Wondering if you can give us a lay of the land in terms of the away from home environment. I know you called out some pressures in the US business, have certainly some clear paths to growth there. Just wondering if you can kinda help us understand what's happening both in the US and abroad and how you think about the improvements within that part of the business. Thanks.

Speaker #11: I know you called out some, some pressures in the US business, have certainly some, some clear paths to growth there. Just wondering if you can kinda help us understand what's happening both in the US and abroad and how you think about the improvements within that part of the business.

Speaker #11: Thanks.

Speaker #12: Yeah, Scott. So I'd say from a macro perspective, away from home is, you know, under, fair amount of pressure based on the macroeconomic environment both in this country and around the world.

Steve Cahillane: Yeah, Scott. I'd say from a macro perspective, away from home is, you know, under a fair amount of pressure based on the macroeconomic environment, both in this country and around the world. Having said that, we see tremendous opportunities for us and away from home based on the strength of our brands and the opportunities in front of us. This is one of the areas we're investing in. We see away from home as a strategic outlet. We see it as a strategic opportunity for us. We like the momentum that we're building early this year. We see a lot of opportunities both in this country and especially around the world, to continue to gain share and away from home.

Speaker #12: having said that, we see tremendous opportunities for us and away from home based on the strength of our brands, and the opportunities in front of us.

Speaker #12: And this is one of the areas we're investing in. So we see away from home as a strategic, outlet. We see it as a strategic opportunity for us.

Speaker #12: We like the momentum that we're building early this year. And we see a lot of opportunities both in this country and especially around the world to continue to gain share in away from home.

Speaker #12: And, you know, we've got one of the greatest away from home brands in Heinz. And we can do a lot more in leaning into Heinz.

Steve Cahillane: You know, we've got one of the greatest away from home brands in Heinz, and we can do a lot more in leaning into Heinz, and not just in ketchup. You know, Heinz has been successful in mayonnaise and other spreads as well. Big opportunities for us to continue to leverage our brands, especially Heinz, as we think about the away from home opportunity.

Speaker #12: And not just in ketchup. You know, Heinz is been successful in mayonnaise and other spreads as well. So big opportunities for us to continue to leverage our brands especially Heinz as we think about the away from home opportunity.

Speaker #11: Appreciate it. We'll leave it there. Thanks very much.

Scott Marks: Appreciate it. We'll leave it there. Thanks very much.

Speaker #6: We have reached the end of the question and answer session. And this concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.

Operator: We have reached the end of the question and answer session, and this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.