Q2 2026 Kraft Heinz Co Earnings Call

August 5, 2026

Speaker #1: Good evening, and welcome to the Kraft Heinz Company Q2 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: Greetings and welcome to The Kraft Heinz Company Q2 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne-Marie Megela. Thank you. You may begin.

Operator: Greetings and welcome to The Kraft Heinz Company Q2 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anne-Marie Megela. Thank you. You may begin.

Speaker #1: If anyone should require operator assistance, please press star or zero on your telephone keypad. As a reminder, this conference is being recorded. It is not my pleasure to introduce your hosts, 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 second 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 Q2 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 risks and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release and our most recent SEC 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 in 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 are most recent SEC 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 a 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 K. Helane, 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 #1: Thank you. And as we conduct the question-and-answer session, if you'd like to ask a question, please press star or one on your telephone keypad.

Operator: Thank you. As we conduct the 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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Operator: Thank you. As we conduct the 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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Speaker #1: And a confirmation tone will indicate you're lined in the question queue. And you may press star or two to remove yourself from the queue.

Speaker #1: And for participants using speaker equipment, it may be necessary to pick up their handset. Before pressing the star keys. Our first question comes from the line of Angela Lazar with Barclays.

Speaker #1: Please proceed with your question.

Speaker #3: Great. Thanks so much. it's encouraging to see some of the incremental investments starting to pay off. I know I know much can still change, the time we get to 2027.

Andrew Lazar: Great. Thanks so much. It's encouraging to see some of the incremental investments starting to pay off. I know much can still change by the time we get to 2027. In the prepared remarks, you mentioned expected inflation next year in a 4% to 5% range, and that Kraft will try and offset as much as possible through incremental productivity. I know you'd mentioned previously that 2026 would also be the margin trough year, I'm trying to get a sense of whether we should read that inflation commentary for next year maybe as implying that perhaps this year won't be the margin trough. I guess some of the incremental investment now planned for H2 of this year will also have to wrap in H1 of next year, too.

Speaker #3: In the prepared remarks, you mentioned expected inflation next year in a 4% to 5% range. And that Kraft will try and offset as much as possible through incremental productivity.

Speaker #3: I know you'd mentioned previously that 26 would also be the margin trough year. So I'm trying to get a sense of if whether we should read that inflation commentary for next year maybe as implying that perhaps this year won't be the margin trough.

Speaker #3: And I guess some of the incremental investment now planned for next for the second half of this year will also have to wrap in the first half of next year too.

Speaker #3: So, I'm just trying to get a sense of how we should sort of read the commentary about next year in the prepared remarks. Thanks so much.

Andrew Lazar: I'm just trying to get a sense of how we should sort of read the commentary about next year in the prepared remarks. Thanks so much.

Speaker #1: Yeah, Andrew, this is Steve. Thanks for the question. I think, you know, what we were trying to get across in those comments was that despite the macroeconomic uncertainty, despite all the challenges that we're facing, that the inflation outlook for next year is not anything that we're fearful of.

Steve Cahillane: Yeah, Andrew, this is Steve. Thanks for the question. I think what we were trying to get across in those comments was that despite the macroeconomic uncertainty, despite all the challenges that we're facing, that the inflation outlook for next year is not anything that we're fearful of. In fact, we can absolutely manage it. As always, our first line of defense is productivity. If we could cover all of the inflation with productivity, we would do that. We are looking to maintain and strengthen our margins over time. That's the way we're looking at it. It's a manageable year next year, despite all of that. We like the way we've set ourselves up. It's more than halfway through the year with this incremental investment coming in.

Speaker #1: In fact, we can absolutely manage it. But as always, our first line of defense is productivity. If we could cover all of the inflation with productivity, we would do that.

Speaker #1: but we're, you know, we are looking to maintain and strengthen our margins over time. So, that's the way we're looking at it. It's a manageable year next year despite all of that.

Speaker #1: We like the way we've set ourselves up. It's, you know, more than halfway through the year with this incremental investment coming in. We like the setup.

Steve Cahillane: We like the setup, we like the momentum, and we like the way we're setting ourselves up for 2027, including on the COGS line.

Speaker #1: We like the momentum. and we like the way we're setting ourselves up for 2027, including on the COGS line.

Speaker #3: Got it. Thanks so much.

Andrew Lazar: Got it. Thanks so much.

Speaker #1: Thank you. Our next question comes from the line of Peter Galbo with Bank of America. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Peter Galbo with Bank of America. Please proceed with your questions.

Speaker #4: Hey, good morning, Steve. Andre, thanks for the question. I I wanted to ask a little bit about just the the consumption rates. I know there's a bit of noise, you know, with the inventory pull forward in in Q2 that's that's also kind of disrupting Q3.

Peter Galbo: Hey, good morning, Steve, it's Andre. Thanks for the question. I wanted to ask a little bit about just the consumption rates. I know there's a bit of noise with the inventory pull forward in Q2 that's also kind of disrupting Q3. I think if I back all that out, your consumption was something like down two in Q2. I think that the Q3 guidance implies it improves to something like down one in Q3. Just want to make sure I understand that cadence correctly. Maybe just as a follow-up, what that says about how you feel about the exit rate on the year from consumption. Are we going from this down two to down one to something improved in Q4?

Speaker #4: But I think if I back all that out, you know, your your consumption was something like down 2 in in the second quarter. I think that the 3Q guidance implies it improves to to something like down 1 in in 3Q.

Speaker #4: So I just want to make sure I I understand that cadence correctly. And and then maybe just as a as a follow-up, like what that says about how you feel about the exit rate on the year from consumption.

Speaker #4: So are we going from, you know, this this down 2 to down 1 to to something improved in Q4? I know there's there's comparables, I think, about, but there's a lot in there.

Peter Galbo: I know there's comparables to think about, so there's a lot in there, but maybe you can just speak to the consumption more broadly and the cadence over the balance of the year. Thanks very much.

Speaker #4: But but maybe you can just speak to the consumption, more more broadly in in the cadence over the balance of the year. Thanks very much.

Speaker #1: Yeah, thanks for the question, Pete. I, you know, I'll I'll start and Andre can certainly fill in. But you're reading it right. You know, we had obviously a first quarter that was flattered by Easter, the second quarter that reversed.

Steve Cahillane: Yeah, thanks for the question, Pete. I'll start, and Andre can certainly fill in, you're reading it right. We had obviously, Q1 that was flattered by Easter, Q2 that reversed. We had snowstorms that we tried to adjust for in Q1 as well. By and large, the consumption rate is improving. The amount of our business that is maintaining or holding share is also improving. We're seeing real green shoots in part of our taste elevation portfolio, certainly in Capri Sun, even in Mac and Cheese in terms of consumption rates. We hope to exit the year with the best consumption rates in Q4 and enter 2027 with real momentum. Now it's too early to give guidance, obviously, and talk about 2027, but you're reading the consumption puts and takes exactly right, and the momentum is growing.

Speaker #1: We had snowstorms that we tried to adjust for in the in the first quarter as well. But by and large, the consumption rate is improving.

Speaker #1: And the amount of, you know, our business that is maintaining or holding share is also improving, and we're seeing real green shoots in, you know, part of our Taste Elevation portfolios—certainly in Capri Sun.

Speaker #1: Even in, Mac and, you know, Mac and cheese in terms of, consumption rates. And so we hope to exit the year, with the best consumption rates in the fourth quarter.

Speaker #1: And enter 2027 with real momentum. Now, it's too early to give guidance, obviously, and talk about 2027. But you're reading the consumption puts and takes exactly right.

Speaker #1: And the the momentum is growing. Nobody's doing a victory lap that we're declining less than, you know, we anticipated. But it is moving in the right direction.

Steve Cahillane: Nobody's doing a victory lap that we're declining less than we anticipated, it is moving in the right direction, and that's what gives us the confidence to invest even more, to double down on improving consumption and improve on our share performance.

Speaker #1: And that's what gives us the confidence to invest even more, you know, to double down on improving consumption and improve on, our share performance.

Speaker #5: Yeah, I think just to complement, Peter, I think you're actually right. In Q2, there's about a 2.5% decline in consumption as we started to ramp up investments around the end of Q2.

Andre Maciel: Yeah. I think just to complement, Peter, I think directionally you're right. In Q2 is about 2.5% decline on the consumption. As we started to ramp up investments about the end of Q2, now we're going to be a lot more intense in the H2. We do expect a gradual step up. I don't want to set up an expectation about the specific sell out are going to be in Q3 and Q4, but we should expect an improvement in Q3, then under the sequential improvement in Q4. July, just to put a perspective, we were about -1%. There is already an improvement that we observed in July, and the market share even more important. We were in the H1, we lost 30 bps, which is in a way is good because we go back to the historical levels.

Speaker #5: And now we're going to be a lot more intense in the second half. We do expect a gradual step up, I don't want to set up an expectation about the specific sell-out.

Speaker #5: We're going to be in Q3 and Q4, but we should expect an improvement in Q3. And then under the sequential improvement in Q4. July just to put the perspective, we we were about minus 1%.

Speaker #5: So that is already an improvement that we observed in July. And the market share even more important. We were in the first half lo lost 30 bips, which is in a way is good because we go back to the historical levels.

Speaker #5: Remember that in 2025 at some point we're losing 90 bips of market share at the beginning of the year. So it's it's a very significant improvement.

Andre Maciel: Remember that in 2025, at some point, we're losing 90 bps of market share at the beginning of the year. It's a very significant improvement. Look at the most recent weeks, we are now at 20 bps, even a little bit better. It's good to see that things are moving in the right direction.

Speaker #5: Look at the most recent weeks. We are now 20 bips, even a little bit better. So it's good to see that things are moving the right direction.

Speaker #4: Great. Thanks so much.

Peter Galbo: Great. Thanks so much.

Speaker #1: Thank you. Our next question comes from the line of Steve Powers with Deutsche Bank. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Steve Powers with Deutsche Bank. Please proceed with your question.

Speaker #6: Yes. Hey, great. actually, I want to kind of follow up on that and just get a better sense of how you're thinking about the market share progression.

Steve Powers: Yes. Hey, great. Actually, want to kind of follow up on that and just get a better sense of how you're thinking about the market share progression. As you say, Andre, down 30 bps in H1 certainly improved versus where we were in 2025. If I compare kind of where you were coming out of Q1, it looks like there wasn't a whole lot of progress made in Q2. Certainly percentage of win big, gaining or holding share went down, especially versus the March exit rates that you shared coming out of Q1.

Speaker #6: Because as you as you say, Andre, you know, down 30 bips in the first half certainly improved versus where we were in '25. But if I compare kind of where you were coming out of the first quarter, it looks, you know, it looks like there wasn't a whole lot of progress made, in the second quarter.

Speaker #6: And it certainly percentage of win big, gaining or holding share went down, especially versus the March exit rates that you shared coming out of 1Q.

Speaker #6: So just maybe a little bit more perspective on how you're seeing progression. And then as we look to the back half, if there are specific pockets of the business where, you expect to see the most tra traction that we should look for as as specific proof points, that'd be that'd be helpful to, to be able to highlight.

Steve Powers: Just maybe a little bit more perspective on how you're seeing progression, and then as we look to the H2, if there are specific pockets of the business where you expect to see the most traction that we should look for as specific proof points that'd be helpful to be able to highlight. Thank you.

Speaker #6: Thank you.

Speaker #5: Yeah, and you are correct. The share trend in Q2 and Q1 is similar, and if you remember the last earnings call, we already anticipated that.

Andre Maciel: Yeah. You are correct. The share trend Q2 and Q1 is similar, and if you remember the last earnings call, we already anticipated that. We said we do not expect, in part because, as we said, we built into the year 100 bps headwind from SNAP, and part of that would be a share pressure. In a way, it's good that we were able to offset that share pressure coming out of SNAP because we are seeing the SNAP headwinds, and we were able to protect the share as we anticipated. Now as the investments ramp up and we have all the innovations that we put to market gain traction, you saw in prepared remarks, I think there is very encouraging early signs coming out of Capri Sun Hydrate, out of the Power Mac & Cheese, out of the Ry Cry shape.

Speaker #5: We said we do not expect. In part because, as we said, we built into the year 100 bips headwind from Snap. And part of that would be a share pressure.

Speaker #5: So, in a way, it's good that we were able to offset that share pressure coming out of Snap because we are seeing the the Snap headwinds.

Speaker #5: And we were able to protect the share as we anticipated. now, as the investments ramp up and we have all the innovations that we put in market again in this direction, you saw in prepared remarks, I think there is very encouraging early signs coming out of Capri Sun Hydrate, out of the the power Mac and cheese.

Speaker #5: out of the Ryder Shape. So there so there's good momentum there. And and I think that's also contributing for the share improvement we are seeing.

Andre Maciel: There's good momentum there, and I think that's also contributing for the share improvement we are seeing. You should expect Mac & Cheese to continue to improve. We should expect taste elevation in general to continue to improve from where we are right now. We should expect momentum on the desserts business. We should expect cold cuts to start to improve the trends, given now that we're going to lap the decline that started in July 2023. All those things would be signs of progress.

Speaker #5: So you should expect, Mac and cheese to continue to improve. You should expect taste elevation in general, to to continue to improve from where we are right now.

Speaker #5: you should expect momentum on the dessert business. We should expect cold cuts to to start to improve the trends given now that we're going to lap the decline that started in July last year.

Speaker #5: So all those things would would would be, signs of progress.

Speaker #1: And if I just build on that—and Andre mentioned this—if you look at the last four weeks, we are seeing proof of that.

Steve Cahillane: If I just build on that, and Andre mentioned this, if you look the last four weeks, we are seeing proof of that. We're seeing that and only a third of our incremental first $600 million has been spent. We still have a lot in market to go, including the additional $100 million that we announced this morning.

Speaker #1: So we're seeing that, and only a third of our incremental first $600 million has been spent. So we still have a lot in market to go, including the additional $100 million that we announced this morning.

Speaker #6: Yeah. Okay. Very good. Thanks for that context. Appreciate it.

Steve Powers: Yeah. Okay. Very good. Thanks for that context. Appreciate it.

Speaker #1: Thank you. Our next question comes from the line of Scott Marks with Jefferies. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Scott Marks with Jefferies. Please proceed with your questioning.

Speaker #7: Hey, good morning all. Thanks very much for taking our questions. Wanted to just dive in a little bit on the the meets and deals side of the business.

Scott Marks: Hey, good morning, all. Thanks very much for taking our questions. Wanted to just dive in a little bit on the meats and meals side of the business. That's one area where you specifically called out plenty of work to do, talked about the targeted actions. Just wondering if you can kind of help us understand how you're approaching those actions and what we can expect in terms of timing for the improvements beyond just the lapping dynamic that you mentioned. Thanks very much.

Speaker #7: That's one area where you specifically called out. you know, plenty plenty of work to do. Talked about the targeted actions. Just wondering if you can kind of help us understand, you know, how you're approaching those actions and and, you know, what what we can expect in terms of of timing for the improvements beyond just just the lapping dynamic that you mentioned.

Speaker #7: Thanks very much.

Speaker #5: Yeah, so I'll start, and again, Andre can build on it. You know, one of the biggest issues that we've had are with our Oscar Mayer brand and specifically in DeliFresh.

Steve Cahillane: Yeah. I'll start, and again, Andre can build on it. One of the biggest issues that we've had are with our Oscar Mayer brand and specifically in Deli Fresh. We have new packaging, which is almost now complete, completely in the market, and we're seeing better performance based on that. Some of that has to do with now lapping the big declines that we saw. We know we have work to do clearly on the Oscar Mayer front, but the new packaging is in place, and early signs are encouraging. We want to plug that leaky bucket for sure. On bacon and hot dogs, better performances, much better than Deli Fresh. It's really isolated around Deli Fresh. Lunchables, we've also had some innovations coming in the market, Lunchables Snackables.

Speaker #5: We have new packaging, which is almost now complete. Completely in the market. And we're seeing better, performance based on that. And and some of that has to do with, you know, now lapping the the big declines that we saw.

Speaker #5: So, we know we have work to do—clearly on the Oscar Mayer front—but the new packaging is in place, and early signs are encouraging.

Speaker #5: And, you know, we want to plug that leaky bucket, for sure. On bacon and hot dogs, you know, better performances, much better than DeliFresh.

Speaker #5: So it's really isolated around DeliFresh. Lunchables, we've also had some innovations coming in the market market. Lunchables, snackables, we made some product improvements in Lunchables as well, which is showing early encouraging signs as well.

Steve Cahillane: We made some product improvements in Lunchables as well, which is showing early encouraging signs as well. You mentioned meals, so mac and cheese, obviously we already mentioned is showing significant improved consumption and Power Mac continues to be off to a good start. I think we mentioned on the last call, terrific distribution, 35,000 stores out there with Power Mac, and its consumption is in the first quartile of innovation. Feeling very good about that. The early read is it is very incremental to us and to the category. Retailers have been quite pleased with that. All in work to do, but progress being made.

Speaker #5: And, you you mentioned meals. So, you know, Mac and cheese, obviously, you know, we already mentioned is showing improved consumption significant improved consumption. And Power Mac is, continues to be off to a good start.

Speaker #5: I think we mentioned on the last call, terrific distribution, 35,000 stores. out there with Power Mac and its consumption is in the first quartile of innovations.

Speaker #5: So feeling very good about that. And the early, read is it is very, very incremental to us and to the category. so retailers have been quite pleased with that.

Speaker #5: So, all in, work to do, but progress is being made.

Speaker #7: Appreciate it.

Scott Marks: Appreciate it.

Speaker #1: Thank you. Our next question comes from the line of Michael Livery with Piper Sandler. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Speaker #8: Thank you. Good morning. I just was wondering if you could help us understand a little bit of what's working. Between some of the product investments, the price investments, and the marketing, what are you seeing be most effective that's running ahead of your expectations?

Michael Lavery: Thank you. Good morning. Just was wondering if you could help us understand a little of what's working. Between some of the product investments, the price investments, the marketing, what are you seeing be most effective that's running ahead of your expectations? How much can you transfer it across brands and categories, and how does it inform how you deploy the incremental $100 million?

Speaker #8: How much can you transfer it across brands and categories? And and how does it inform how you deploy the incremental 100 million?

Speaker #5: Yeah. I see, you know, i-it's working virtually everywhere we're putting it. And so, condiments is probably the first area where we've seen really market improvement.

Steve Cahillane: Yeah, it's working virtually everywhere we're putting it. Condiments is probably the first area where we've seen really market improvement. Heinz is back to growth as it should be. Strong consumption growth, which is terrific. Across the board in the US, we're seeing better performance. We haven't even mentioned, though, emerging markets and what's happening there. Emerging markets had a terrific quarter. Heinz is up 12% in the quarter in emerging markets, driven by distribution and consumption. You look at the totality of our portfolio, we've said the investment is largely in the US to turn around the US business. We're seeing early green shoots on that. The rest of the portfolio is performing well in emerging markets, as I already mentioned, and global away from home is back to growth as well.

Speaker #5: Heinz is back to growth as it should be. strong growth. strong consumption growth, which is terrific. so across the board in the US, we're seeing better performance.

Speaker #5: We haven't even mentioned, though, you know, emerging markets and what's happening there. Emerging markets had a had a terrific, quarter. Heinz is up 12% in the quarter in emerging markets driven by distribution and consumption.

Speaker #5: And so, you know, you look at the totality of our portfolio, we've said the investment is largely in the US. The turnaround in the US business, we're seeing early green shoots on that.

Speaker #5: but, you know, the the rest of the portfolio is performing well in emerging markets, as I already mentioned. And global away from home, is back to growth as well.

Speaker #5: That's a very strategic channel for us, one that we were not performing well in last year, and we're performing well now. And so, we're investing there in, you know, product, in customer, and in distribution.

Steve Cahillane: That's a very strategic channel for us, one that we were not performing well in last year, and we're performing well now. We're investing there in product, in customer, and in distribution, and it's paying off.

Speaker #5: And it's it's, paying off. Yeah. Just a a couple quick compliments. I think Hi Heinz is really having a very strong year. worldwide, we grew 3% year to date.

Andre Maciel: Just a couple of quick compliments. Heinz is really having a very strong year. Worldwide, we grew 3% year to date with the expectation to accelerate from where we are right now. Condiments in the US, which last year was flat, and that's one of the places where we started the step-up investments in H2 of this year. Condiments in total in the US is also growing 3% year to date, which is very good, again, with prospects to continue to improve.

Speaker #5: And with the expectation to accelerate from from where we are right now. Condiments in the US, which last year was flat, and that's one of the places where we started to step up investments in that second half of last year.

Speaker #5: Condiments in total in the US is also growing 3% year to date, which is very good. And again, with prospects to continue to improve.

Speaker #8: Okay. Great. Thanks so much.

Michael Lavery: Okay, great. Thanks so much.

Speaker #1: Thank you. Our next question comes from the line of Tom Palmer with JP Morgan. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Tom Palmer with JPMorgan. Please proceed with your question.

Speaker #6: Good morning, and thanks for the question. I wanted to follow up a little bit on Andrew's question on 2027, and maybe focus it a bit more on the investment side.

Tom Palmer: Good morning, and thanks for the question. I wanted to follow up a little bit on Andrew's question on 2027 and maybe focus it a bit more on the investment side. You noted earlier in the call that only around a third of the spend had kind of stepped up in H1 of the year. I think that would imply like a $200 million step up, $500 million then comes in H2 of the year. One, any help on kind of how much of that step up comes in Q3 versus Q4? When we start thinking about next year, is a reasonable starting point looking at kind of the Q4 run rate and then extrapolating what that would imply for kind of the step up next year? Are there more meaningful considerations on top of that? Thanks.

Speaker #6: You noted earlier in the call that only around a third of the, spend had kind of stepped up in in the first half of the year.

Speaker #6: So I think that would imply, like, a $200 million step up, $500 million then comes in the back half of the year. one, any any help on kind of how much of that step up comes in 3Q versus 4Q?

Speaker #6: And then when we start thinking about next year, is a reasonable starting point looking at kind of the 4Q run rate? And and then extrapolating, what that would imply for for kind of the step up next year?

Speaker #6: Or are there you know, more meaningful considerations on top of that? Thanks.

Speaker #5: Yeah, again, I'll start. I think you should think about the third quarter and the fourth quarter being broadly even in terms of how we spend that money.

Steve Cahillane: Yeah. Again, I'll start. I think you should think about Q3 and Q4 being broadly even in terms of how we spend that money. As you think about 2027, again, too early to give guidance, but you should think about not necessarily a Q4 run rate, but think about 2026 being the base year in terms of getting the investment level right. We mentioned this in the prepared remarks, but I would like to underscore that we're spending the additional $100 million because we can, from a position of strength. If you're a shareowner, would you rather we spend too much or too little? It's not an exactly precise science, but we felt $600 million was the right number, a very good number, and a strong number.

Speaker #5: and then as you think about 2027, again, too early to give guidance, but you should think about not necessarily a fourth quarter run rate, but think about 2026 being the base year, in terms of getting the investment level right.

Speaker #5: And, you know, we mentioned this in the prepared remarks, but I would like to underscore that, you know, we're spending the additional can, from a position of strength.

Speaker #5: And, you know, if you're a share owner, would you rather we spend too much or too little? And it's, you know, not a an exactly precise science, but we felt $600 million was the right number, a very good number and a strong number.

Speaker #5: The fact that we can add $100 million to it really helps us think about 2027 being the year that, you know, we've got it really right with a very strong marketing spend, you know, in order to drive our volume-led, sustainable, share-type growth.

Steve Cahillane: The fact that we can add $100 million to it really helps us think about 2027 being the year that we've got it really right with a very strong marketing spend in order to drive our volume-led, sustainable share type growth. We like the way we're setting ourselves up for 2027. When we get to the Q4 results, we'll obviously give guidance against that, but I like where we are and I think we're in a differentiated position versus some of our peers in terms of the investments that we're making and the momentum that we're starting to build.

Speaker #5: And so we like the way we're setting ourselves up for 2027. When we get to the fourth quarter results, we'll, you know, obviously give guidance against that.

Speaker #5: But, you know, I like where we are. And I think we're in a differentiated position, versus some of our peers in terms of the investments that we're making.

Speaker #5: and the momentum that we're starting to build. A-and just a bit, triple clear. Like, we do not expect any wrap-around of investments into next year.

Andre Maciel: Just to be crystal clear, we do not expect any wraparound of investments into next year. This 2026 is the base.

Speaker #5: So this '26 is the base.

Speaker #6: All right. Thank you.

Tom Palmer: All right. Thank you.

Speaker #1: Thank you. Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

Speaker #8: Great. Thanks. good morning. From a from a category and brand perspective, I wonder, i-is the best ROI on s on spending, the brands you highlighted in in the slides, Capri-Sun, Heinz, Orida, Mac and Cheese and Philly, th-those are getting the majority of incremental growth spending.

David Palmer: Great, thanks. Good morning. From a category and brand perspective, I wonder is the best ROI on spending the brands you highlighted in the slides, Capri Sun, Heinz, Ore-Ida, Mac & Cheese, and Philly. Those are getting the majority of incremental growth spending. If those are the highest ROI, why do you think that is? I can imagine some of it is the category responsiveness from a top-line perspective and some of it's the incremental margins of the category. Also, I would imagine a lot of this comes down to your own readiness with ideas and innovation and the marketing messages. Any color on why those guys, those particular brands are getting the incremental spend would be interesting to hear.

Speaker #8: If those are the highest ROI, w you know, why do you think that is? I can imagine some of it is the category response-of-ness from a top-line perspective.

Speaker #8: And some of it's the incremental margins of the category. And but also, I would imagine a lot of this comes down to your own readiness with ideas and innovation and in the marketing messages.

Speaker #8: So any color on, you know, why those guys those those particular brands are getting the, the incremental spend would be interesting to hear.

Speaker #5: Thanks for the question. And I think I already answered. So i-i-it is a combination of all of that, right? Those categories that that were highlighted, they they do have all very strong brand equity.

Andre Maciel: Thanks for the question. I think I already answered. It is a combination of all of that, right? Those categories that were highlighted, they do have all very strong brand equity. They do typically have very high gross margins, pretty much all of them. We did start earlier last year, if you remember, the first place where we started to step up investments in headcount, innovation, marketing was taste elevation. That's why you see those plans already come into fruition in a stronger way. We said in the earnings call, I believe in February, that some of these other categories we were catching up, and that's part of where the incremental headcounts, investments in marketing and R&D were for us to be able to build bolder plans.

Speaker #5: They do typically have very high gross margins, pretty much all all of them. we we did start earlier last year, if you remember, the first place where we started to step up investments in in in headcount, innovation, marketing was Taste Elevation.

Speaker #5: That's why you see those those plans already coming to fruition in a stronger way. And and we said in the in the earnings call, I believe in in February, that some of these other categories, we were catching up.

Speaker #5: And that's part of where the incremental headcount investments and marketing and R&D were for for us to be able to build bolder plans. And that's why we're starting to see some of those starting right now, but even more strongly towards the end of the year and and into next year.

Andre Maciel: That's why we're starting to see some of those starting right now, but even more strongly towards the end of the year and into next year. All right.

Speaker #5: So all right.

Speaker #8: Yeah. And I guess if I had to have a follow-up, it's it's really a follow-up not just on that one, but some of the other questions as well, because I think you're the incremental spend is a is $500 million or so, versus $200 million so far, or a third of the $600 million.

David Palmer: I guess if I had to have a follow-up, it's really a follow-up not just on that one, but some of the other questions as well, because I think the incremental spend is $500 million or so, versus $200 million so far or a third of the $600 million. If you're going to be doing that sort of spending and that half a billion works, I wonder how much you would try to keep the flywheel going into next year and make that a billion or more if you just keep that run rate. How should we think about how you're thinking about that and those decisions on incremental spend in 2027? Thank you.

Speaker #8: So if you're gonna be doing that sort of spending and that half of half a billion works, I wonder how much you would try to keep the flywheel going into next year and make that a a billion or more, if you just keep that run rate.

Speaker #8: You know, how how sh you know, w-what how should we think about how you're thinking about that and those decisions on incremental spend in '27?

Speaker #8: And thank you.

Speaker #2: Yeah. You should think about 2026 being the year where we got our base right. And, you know, the incremental $100 million just gives us that much more confidence that we've got the right amount of investment behind our brands, and we'll continue to, you know, turn our attention to getting the maximum ROI from those investments.

Steve Cahillane: You should think about 2026 being the year where we got our base right. The incremental $100 million just gives us that much more confidence that we've got the right amount of investment behind our brands, and we'll continue to turn our attention to getting the maximum ROI from those investments. We'll always be dynamic in the way we think about allocating that investment as we go forward. We feel like this has given us a great opportunity, being ahead of plan, to put the incremental $100 million in to just bolster our confidence that we've got the right amount of investment behind our brands to win in 2027.

Speaker #2: And we'll always be dynamic in the way we think about allocating that investment, as we go forward. But we feel like, you know, this is a is a br given us a great opportunity being ahead of plan to put the incremental $100 million in to just bolster our confidence that we've got the right amount of investment behind our brands to win in 2027.

Speaker #5: I think I've been all these investments in the base around '26 gives us the optionality next year. If you need to dial up marketing and do a little less in in price, or if you need to do more product and less marketing, I think we have the flexibility, but I think we're gonna have a very solid base to invest.

Andre Maciel: I think having all these investments in the base now in 2026 gives the optionality next year. If you need to dial up marketing and do a little less in price, or if you need to do more product and less marketing, I think we have the flexibility, but I think we're going to have a very solid base to invest in. I don't want to go unnoticed. We're showing the remarks that at the same time, we continued to work on the ROIs. We saw progress in both marketing and promotion ROIs year to date, which is also good.

Speaker #5: And I don't want to go unnoticed. We're showing prepared remarks, and at the same time, we continue to work on the ROI.

Speaker #5: So we saw progress in both marketing and promotion ROIs year to date, which is also good.

Speaker #8: Thank you.

David Palmer: Thank you.

Speaker #1: Thank you. Our next question comes from the line of Chris Carey with Wells Fargo. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Chris Carey with Wells Fargo. Please proceed with your question.

Speaker #7: Hi, everyone. I certainly don't want to belabor the investment point, but maybe just one final follow-up here. You know, there's this dynamic where you've made the decision to increase investment because you're running ahead of plan, which is certainly a great thing.

Chris Carey: Hi, everyone. I certainly don't want to belabor the investment point, maybe just one final follow-up here. There's this dynamic where you've made the decision to increase investment because you're running ahead of plan, which is certainly a great thing. As we mature in this strategy, ultimately, you're going to want to get back to organic sales growth, I would imagine. What if organic sales trails for longer than expected? Would you lean in more?

Speaker #7: As we mature in this strategy, you know, ultimately you're going to want to get back to organic sales growth, I would imagine.

Speaker #7: And so w-what if organic sales trails for longer than expected? W-would you lean in more? You know, or or is this more about making sure that your market shares are are, you know, back to healthy levels?

Chris Carey: Is this more about making sure that your market shares are back to healthy levels? Of course, the categories will always do what they do. Just that context between top-line evolution versus getting your market shares back to a good place, which I think was a core premise of the initial investment. Just as a kind of second question, that'd be more of a follow-up. You've got better momentum in the business, Steve. You've been there for a bit now, getting your arms wrapped around the business. Does a bit better underlying momentum give you more ability to consider portfolio reshaping? Clearly, there's been headlines in recent quarters and years about potential avenues for portfolio reshaping.

Speaker #7: And then, of course, the categories will always do what they do. So just that that, that that context between, you know, top-line evolution versus, you know, getting your market shares back to a good place, which I think was, was a core premise of the initial investment.

Speaker #7: And then just, a-as a as a kind of second question that that'd be more of a follow-up, y-you've got better momentum in the business, Steve.

Speaker #7: You've been there for a bit now, getting your arms wrapped around the business. Does a bit better underlying momentum give you more ability to consider headlines?

Speaker #7: in in recent, quarters and and and years about, you know, potential, avenues for portfolio reshaping. Does this, you know, better trend line give you a a line of sight into maybe being a bit more proactive about making those decisions that are gonna put you in a good place for the longer term?

Chris Carey: Does this better trend line give you a line of sight into maybe being a bit more proactive about making those decisions that are going to put you in a good place for the longer term? Thanks.

Speaker #7: Thanks.

Speaker #5: Yeah. So o-on the first one, I I just reiterate that we have, you know, increasing confidence that we're doing the right thing to drive better share performance and better organic sales growth.

Steve Cahillane: Yeah. On the first one, I just reiterate that we have increasing confidence that we're doing the right thing to drive better share performance and better organic sales growth. Feel very confident about that we're doing the right things. With the investment announced today, again, just bolsters our confidence. In terms of the second question, I think you're always wanting to operate from a position of momentum and strength, and we'll always continue to look at what's right for our shareowners as we think about our portfolio. We're very comfortable in looking at the portfolio, and if the right opportunities come to make moves that add shareowner value, we'll absolutely be in a place to do that.

Speaker #5: I feel very confident about that, that we're doing the right things. And with the investment announced today, again, just bolsters our confidence. In terms of the second question, you know, I think y-you're always wanting to operate from a position of momentum and strength.

Speaker #5: And we'll always continue to look at what's right for our share owners as we as we think about our portfolio. so, you know, we're very comfortable in looking at the portfolio.

Speaker #5: And if the right opportunities come to make moves that add share owner value, we'll we'll absolutely, be in a place to do that.

Speaker #8: A-and I I just wanna add a comment that's not directly linked to your question, but I think is worth mentioning as well. Y-you might y-you you have noticed that at the same time that you are stepping up the investments, we also protected the cash flow.

Andre Maciel: I just want to add a comment that's not directly linked to your question, but I think is worth mentioning as well. You have noticed that at the same time that we are stepping up the investments, we also protected the cash flow. We increased cash conversion expectation for the year. Free cash flow is the same dollar amount, essentially, that I have committed at the beginning of the year. We keep a close eye on the free cash flow. Our balance sheet remains very strong. You have seen that we have paid down $1.9 billion of debt in the quarter. After the quarter close, we also pay another $1 billion in 2027. We did a very successful refinancing of an expensive debt maturity that we have. Also that was very successful.

Speaker #8: So we increased cash conversion expectation for the year. So free cash flow is the same dollar amount, essentially, that have committed at the beginning of the year.

Speaker #8: that's, we we keep a close eye on the free cash flow. Our balance sheet remains very strong. You have seen that we have paid down 1.9 billion dollars of debt in the quarter.

Speaker #8: After the quarter close, we also pay another $1 billion in 2027. We did a very successful refinancing of an expensive debt maturity that you have.

Speaker #8: Also, that that was very successful. So it it is great for us to be able in a position to step up investments, get those returns, position the company for growth while at the same time preserving a very strong balance sheet and cash flow.

Andre Maciel: It is great for us to be in a position to step up the investments, get those returns, position the company for growth, while at the same time preserving a very strong balance sheet and cash flow.

Speaker #7: Okay. Thank you.

Chris Carey: Okay. Thank you.

Speaker #1: Thank you. Our next question comes from the line of Robert Moscow with TD Cowan. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Robert Moskow with TD Cowen. Please proceed with your question.

Speaker #9: Hi. Thanks for the question. i-it Andrea, I just wanna make sure I I understand the guidance range like what's in the low end and what's in the high end.

Robert Moskow: Hi. Thanks for the question. Andre, I just want to make sure I understand the guidance range, like what's in the low end and what's in the high end, because it sounds from the tone here that you're pretty confident that things will keep accelerating on from a sales perspective in Q3 and Q4. If I just go to the midpoint of the guidance, the total organization would have weaker sales growth in H2 than H1 just at the midpoint. Just to be consistent with the tone, it sounds like you have more confidence in the high end than the low end. Do I interpret that correctly?

Speaker #9: Because you know, it it sounds from the tone here that you're you're pretty confident that that things will keep accelerating on from a sales perspective.

Speaker #9: In third and fourth quarter, but if I—if I just go to the midpoint of the guidance, the total organization would have weaker sales growth in the second half than the first half, just at the midpoint.

Speaker #9: So it just to be consistent with the tone, it it it it sounds like, you know, that you have more confidence in the high end, than the low end.

Speaker #9: So, just to be clear, am I interpreting that correctly?

Speaker #5: Yeah. So first first, on on on the tone, yes. I think you you are hearing confidence. And I think we are stepping up investments because we are seeing early signs of traction.

Andre Maciel: Yeah. First on the tone, yes, I think you are hearing confidence, and I think we are stepping up investments because we are seeing early signs of traction. We do feel about emerging markets, and we believe our ability to continue to accelerate the growth from where we are, away from home back to growth. We believe this might be sustainable. On the rest day, we already talked about the places that we still have work to do and the places of strength. Industry is still a bit volatile, right? The industry, if you normalize by cost inflation and tariff-related inflation, the industry is still soft. That's always a point of pause for us.

Speaker #5: We do feel about emerging markets, and we believe our ability to continue to accelerate the growth from where we are, away from home, back to growth.

Speaker #5: We believe this might be, sustainable. And on on the US retail, you already talked about the the the places that we still have work to do and the places of strength.

Speaker #5: Industry is still a bit volatile, right? So the industry, if you normalize by coffee inflation, and and tariff-related inflation, the industry is still soft.

Speaker #5: So that's always a a point of pause for us. So that's why the t what we've been focusing a lot in the US in particular now is the share improvement.

Andre Maciel: That's why what we've been focusing a lot in the US in particular now is the share improvement and the industry, we believe over time will go back to what it was. In terms of the guidance, you are totally correct. At the midpoint, H2 implies worse performance in H1. However, remember that we did have in Q1 a relevant benefit related to snowstorms that in H1 represents about 0.7 percentage points, and we did have 0.8 in Q2. That is shipment phased into Q3. If you normalize those two effects, we're actually improving the performance, the underlying performance in H2 compared to H1, approximately 70, 80 basis points. You are right.

Speaker #5: And the industry we believe o-over time, we'll we'll we'll go back to what it was. Now, in terms of the guidance, you are totally correct.

Speaker #5: At the midpoint, the second half implies worse performance than the first half. However, remember that we did have in Q1 a relevant benefit related to snowstorms.

Speaker #5: That in the first half represents about 0.7 percentage points. And we did have a 0.8 in the second quarter that is is is shipment phase in QQ3.

Speaker #5: So if you normalize those two effects, we're actually improving the perform the underlying performance in the second half compared to the first half. Approximately 70, 80 beeps.

Speaker #5: but you are right.

Speaker #9: Okay. Thanks for the math. Appreciate it.

Robert Moskow: Thanks for the math. Appreciate it.

Speaker #1: Thank you. Our next question comes from the line of, Leah Jordan with Goldman Sachs. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Leah Jordan with Goldman Sachs. Please proceed with your question.

Leah Jordan: Hi. Good morning. Thank you for taking our question. I understand that more of your investments are still expected to ramp from here, but curious where you've already made investments on the pricing side so far, how do you view your price gaps? What are you seeing in terms of any competitive response? And then ultimately, how are they thinking about maintaining the right gaps in H2? We're also hearing retailers have recently stepped up price investments in their own private label and have plans to do even more in H2. Risk that those gaps could widen, and that's really incremental versus when you initially laid out your plan. How are you thinking about maintaining that with that change in the marketplace? Thank you.

Speaker #10: Hi. Good morning. Thank you for taking our question. so I understand that more of your investments are still expected to ramp from here. But but curious, where you've already made investments on the pricing side, so far, how do you view your price gaps?

Speaker #10: W-what are you seeing in terms of any competitive response? A-and then ultimately, how are you thinking about maintaining the ri the right gaps in the back half as we're also hearing retailers have recently stepped up price investments in their own private label and have plans to do even more in the back half?

Speaker #10: So so risk that those gaps could could widen? And and that's really incremental versus what you initially versus when you initially laid out your plans.

Speaker #10: So, how do you think about maintaining that with the change in the marketplace? Thank you.

Speaker #5: Yeah. So Leah, I'll start. And Andrea, you can certainly fill in. We we feel very good about the investments in price that we've made.

Steve Cahillane: Lee, I'll start, and Andre can certainly fill in. We feel very good about the investments in price that we've made, and we've been very surgical. It hasn't been just base price adjustments. It's been maintaining distribution. It's been opening price points. It's been price package architecture. It's been making sure that our gaps to private label and competitors are appropriate. We've done all that, and I think we've done it effectively. The incremental $100 million that we announced this morning is going to be almost entirely in marketing, because we feel like we've done the right thing on price, even given some of the commentary that you just made about what the future may hold.

Speaker #5: And we've been very surgical. So it hasn't been just base price adjustments. It's been maintaining distribution. It's been opening price points. It's been price package architecture.

Speaker #5: It's been making sure that our gaps to private label and competitors are appropriate. And so, we've done all that, and I think we've done it effectively.

Speaker #5: The incremental 100 million dollars that we announced this morning is going to be almost entirely in marketing. because we feel like we've done the right thing on price, even given some of the commentary that you just made about, you know, what the future may hold.

Speaker #5: So we feel like we've made the right investments. In terms of that surgical pricing that we've done, and it gives us the confidence to spend the 100 million dollars, in incremental marketing against our brands in the in the back half of the year.

Steve Cahillane: We feel like we've made the right investments in terms of that surgical pricing that we've done, and it gives us the confidence to spend the $100 million in incremental marketing against our brands in the H2.

Speaker #10: It's very helpful. Thank you.

Leah Jordan: That's very helpful. Thank you.

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

Speaker #11: Operator, we have time for one more question.

Operator: All right. Thank you. Our last question comes from the line of Rob Dickerson with US Bancorp BTIG. Please proceed with your question.

Speaker #1: All right. Thank you. Our last question comes from the line of Rob Dickerson with US Bancorp, BTIG. Please proceed with your question.

Speaker #12: great. Thanks a lot. thank all of my questions have been answered. So, ask maybe a fun one. could you just talk a little bit about the Disney partnership?

Rob Dickerson: Great. Thanks a lot. I think all my questions have been answered, so ask maybe a fun one. Could you just talk a little bit about the Disney partnership, just kind of the magnitude of that? Is that partnership such that, maybe even as soon as Q4, I would assume, in 2027, that we should be seeing some co-branding, and if so, where would we expect to see that? Thanks.

Speaker #12: Just kind of, you know, kind of the magnitude of that. Like, is that, you know, a partnership such such that, you know, maybe even as soon as Q4, I would assume you know, in '27, that we should be seeing some co-branding and if so, where would we expect to see that?

Speaker #12: Thanks.

Speaker #5: Yeah. So we're we're very excited about the Disney partnership. And you think about all the things that we can do with, the Walt Disney Company, the ic the iconic characters that they have and the things that we can do in a co-branding and merchandising and licensing, things that we can do to activate in their parks and their cruise lines and their hotels.

Steve Cahillane: Yeah. We're very excited about the Disney partnership. You think about all the things that we can do with The Walt Disney Company, the iconic characters that they have and the things that we can do in co-branding, in merchandising, and licensing. Things that we can do to activate in their parks, their cruise lines, and their hotels. There is a multitude of really exciting things that we can do with Disney. They're great partners. They're brilliant marketers. They mean so much to consumers in such meaningful, emotional ways. Making that emotional connection with Disney in partnership is something we're really excited about. We're also really excited about the NFL partnership.

Speaker #5: And so there is a multitude of really exciting things that we can do with Disney their great partners, their brilliant marketers, and they just you know, they mean so much, to consumers.

Speaker #5: In such meaningful, emotional ways. So making that emotional connection with Disney, in partnership, is something we're really excited about. We're also really excited about the NFL partnership.

Speaker #5: So I think, you know, we're showing up in a very different way, with consumers and with our retailers. And we're gonna use both of those properties to really drive, you know, consumer emotional connections and something we're we're very excited about.

Steve Cahillane: I think we're showing up in a very different way with consumers and with our retailers, and we're going to use both of those properties to really drive consumer emotional connections and something we're very excited about. Thanks for the question.

Speaker #5: So thanks for the question.

Speaker #12: Thank you.

Rob Dickerson: Thank you.

Speaker #1: Thank you. We have now reached the end of the question-and-answer session. I’ll turn it back over to management for closing remarks.

Operator: Thank you. We have reached the end of the question-and-answer session. Therefore, I'll turn it back over to management for closing remarks.

Speaker #10: Thank you. And thank you, everyone, for joining us.

Anne-Marie Megela: Thank you, thank you everyone for joining us.

Speaker #1: Thank you. And this concludes this this today's conference. And you may disconnect your lines at this time. We thank you for your participation. Have a great day.

Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation. Have a great day.

Q2 2026 Kraft Heinz Co Earnings Call

Request DemoDemo

Kraft Heinz

Earnings