Q2 2026 Kraft Heinz Co Earnings Call - Pre-Recorded

August 5, 2026

Speaker #1: And uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release which accompany these remarks, as well as our most recent 10-K, 10-Q, and 8-K filings for more information regarding these risk and uncertainties.

Anne-Marie Megela: Uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release, which accompany these remarks, as well as our most recent 10-K, 10-Q, and 8-K filings for more information regarding these risks and uncertainties. Additionally, we will refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information that accompany these remarks, which are available on our website at ir.kraftheinzcompany.com under News & Events, for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Today, our Chief Executive Officer, Steve Cahillane, will provide an update on our business performance and overall strategy. Andre Maciel, our Chief Global Financial Officer, will then provide a financial review of the Q2 results, and we will conclude by discussing our 2026 outlook.

Speaker #1: Additionally, we will refer to non-GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non-GAAP information that accompany these remarks, which are available on our website at ir dot kraftheinzcompany dot com under News and Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures.

Anne-Marie Megela: Please refer to today's earnings release and the non-GAAP information that accompany these remarks, which are available on our website at ir.kraftheinzcompany.com under News & Events, for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Today, our Chief Executive Officer, Steve Cahillane, will provide an update on our business performance and overall strategy. Andre Maciel, our Chief Global Financial Officer, will then provide a financial review of the Q2 results, and we will conclude by discussing our 2026 outlook.

Speaker #1: Today, our chief executive officer, Steve Cahillane, will provide an update on our business performance and overall strategy; Andre Maciel, our chief global financial officer, will then provide a financial review of the second quarter results; and we will conclude by discussing our 2026 outlook.

Speaker #1: We have also scheduled a separate live question-and-answer session with analysts. You can access our question-and-answer session at ir dot kraftheinzcompany dot com. A replay will also be available following the event through the same website.

Anne-Marie Megela: We've also scheduled a separate live question and answer session with analysts. You can access our question and answer session at ir.kraftheinzcompany.com. A replay will also be available following the event through the same website. With that, I will now turn it over to Steve.

Speaker #1: With that, I will now turn it over to Steve.

Speaker #2: Thank you, Anne-Marie, and thank you all for joining us. The momentum we built in the first quarter continued into the second quarter as we delivered results ahead of our expectations.

Steve Cahillane: Thank you, Anne-Marie, and thank you all for joining us. The momentum we built in the Q1 continued into the Q2 as we delivered results ahead of our expectations. On the top line, our over delivery was broad-based, driven by better than expected performance in US retail, global away from home, and emerging markets. Our traction reflects the work we've done to meet consumers where they are, ensuring our brands remain relevant at a time when consumers continue to prioritize value and affordability. We are seeing continued progress on share recovery, and we know our investments are working. This gives us the confidence to raise our outlook for organic net sales. To build on this progress, we are increasing our 2026 incremental spend by $100 million to approximately $700 million.

Speaker #2: On the top line, our overdelivery was broad-based, driven by better-than-expected performance in U.S. retail, global away-from-home, and emerging markets. Our traction reflects the work we've done to meet consumers where they are, ensuring our brands remain relevant at a time when consumers continue to prioritize value and affordability.

Speaker #2: We are seeing continued progress on share recovery, and we know our investments are working. This gives us the confidence to raise our outlook for organic net sales.

Steve Cahillane: We are seeing continued progress on share recovery, and we know our investments are working. This gives us the confidence to raise our outlook for organic net sales. To build on this progress, we are increasing our 2026 incremental spend by $100 million to approximately $700 million.

Speaker #2: To build on this progress, we are increasing our 2026 incremental spend by 100 million dollars to approximately 700 million dollars. We know that investing behind our brands is the right decision and that it sets us up for an even stronger 2027.

Steve Cahillane: We know that investing behind our brands is the right decision and that it sets us up for an even stronger 2027. Let me be clear, we are increasing investments from a position of strength, not because what we are doing is not working, but precisely because it is, and we intend to build on that momentum. As a result of the increased investments, we are narrowing our guidance range for constant currency adjusted operating income. Overall, we are ahead of our 2026 operating plan and our goal is unchanged. We are making investments in the business to position ourselves to return to volume-led, sustainable, and profitable growth. As encouraging as it is that we are running ahead of our expectations, there is still more work to be done.

Speaker #2: And let me be clear: we are increasing investments from a position of strength. Not because what we are doing is not working, but precisely because it is, and we intend to build on that momentum.

Speaker #2: As a result of the increased investments, we are narrowing our guidance range for constant currency, adjusted operating income. Overall, we are ahead of our 2026 operating plan, and our goal is unchanged.

Steve Cahillane: Overall, we are ahead of our 2026 operating plan and our goal is unchanged. We are making investments in the business to position ourselves to return to volume-led, sustainable, and profitable growth. As encouraging as it is that we are running ahead of our expectations, there is still more work to be done.

Speaker #2: We are making investments in the business to position ourselves to return to volume-led, sustainable, and profitable growth. As encouraging as it is that we are running ahead of our expectations, there are still more work to be done.

Speaker #2: Organic net sales were down 1.3%, driven by a decline in U.S. retail, partially offset by gross and emerging markets and global away-from-home. These results included a 100 basis point headwind from Easter timing.

Steve Cahillane: Organic net sales were down 1.3%, driven by a decline in US retail, partially offset by growth in emerging markets and global away from home. These results included a 100 basis point headwind from Easter timing. Compared to Q1, our underlying performance improved when adjusting for this shift. Adjusted gross profit margin was flat versus the prior year, a result of strong productivity that helped to offset the impact from inflation. Constant currency adjusted operating income declined 18.4%, reflecting our planned increase in marketing and higher variable compensation expense. Taken together, these factors drove adjusted EPS of $0.56 in the quarter. On cash, we again delivered strong results, with free cash flow up 10% versus the prior year, led by working capital gains. Combined with a healthy balance sheet, this allows us to constantly support our dividend while managing leverage. Turning to our market share performance.

Speaker #2: Compared to the first quarter, our underlying performance improved when adjusting for this shift. Adjusted gross profit margin was flat versus the prior year, a result of strong productivity that helped to offset the impact from inflation.

Speaker #2: Constant currency adjusted operating income declined 18.4%, reflecting our planned increase in marketing and higher variable compensation expense. Taken together, these factors drove adjusted EPS of 56 cents in the quarter.

Steve Cahillane: Constant currency adjusted operating income declined 18.4%, reflecting our planned increase in marketing and higher variable compensation expense. Taken together, these factors drove adjusted EPS of $0.56 in the quarter. On cash, we again delivered strong results, with free cash flow up 10% versus the prior year, led by working capital gains. Combined with a healthy balance sheet, this allows us to constantly support our dividend while managing leverage. Turning to our market share performance.

Speaker #2: On cash, we again delivered strong results, with free cash flow up 10% versus the prior year, led by working capital gains. Combined with a healthy balance sheet, this allows us to constantly support our dividend while managing leverage.

Speaker #2: Turning to our market share performance: overall, the percentage of our revenue that is gaining or holding share is improving, from 21% in 2025 to 36% year to date.

Steve Cahillane: Overall, the percentage of our revenue that is gaining or holding share is improving from 21% in 2025 to 36% year to date. This reflects improving trends from last year across all three portfolio groups, Hold, Win, and Win Big. When we look specifically at Win Big, 45% of our revenue is gaining or holding share year to date. This is led by our Heinz brand, which is gaining or holding share across market and category combinations, reflecting over 70% of revenue. Underscoring the breadth of Heinz, we grew sales across each region, North America, international developed markets and emerging markets, and across categories including ketchup, mayonnaise, pasta sauce, and soups. In US retail, we are also moving in the right direction. We ended 2025 with 12% of our revenue gaining or holding share. Year to date, we are now at 30%.

Speaker #2: This reflects improving trends from last year across all three portfolio groups: hold, win, and win big. When we look specifically at win big, 45% of our revenue is gaining or holding share year to date.

Speaker #2: This has led by our Heinz brand, which is gaining or holding share across market and category combinations, reflecting over 70% of revenue. Underscoring the breadth of Heinz, we grew sales across each region: North America, international developed markets, and emerging markets, and across categories including ketchup, mayonnaise, pasta sauce, and soups.

Steve Cahillane: Underscoring the breadth of Heinz, we grew sales across each region, North America, international developed markets and emerging markets, and across categories including ketchup, mayonnaise, pasta sauce, and soups. In US retail, we are also moving in the right direction. We ended 2025 with 12% of our revenue gaining or holding share. Year to date, we are now at 30%.

Speaker #2: In U.S. retail, we are also moving in the right direction. We ended 2025 with 12% of our revenue gaining or holding share, year to date we are now at 30%.

Speaker #2: Through investments made in 2025 and early 2026, we have driven improvements across taste elevation, hydration, and desserts. That said, we still have work to do to address declines across meats and meals, where we are taking targeted action.

Steve Cahillane: Through investments made in 2025 and early 2026, we have driven improvements across Taste Elevation, hydration, and dessert. That said, we still have work to do to address declines across meats and meals where we are taking targeted action. This includes price, product, and packaging investments across Oscar Mayer and stepping up innovation and media across Kraft Mac & Cheese, where we are starting to see market share trends improve. We believe the investments we're making will continue to translate into stronger performance in US retail. As a reminder, we're prioritizing investments by market share goal. Where we aim to hold share in brands like Oscar Mayer and Maxwell House, we're spending to defend. Where we aim to win, brands like Lunchables and JELL-O, we are investing selectively. And where we have the right to win big, like our Taste Elevation brands, Heinz and Philadelphia, we are distorting investments accordingly.

Speaker #2: This includes price, product, and packaging investments across Oscar Meyer, and stepping up innovation and media across Kraft Mac and Cheese, where we are starting to see market share trends improve.

Speaker #2: We believe the investments we're making will continue to translate into stronger performance in U.S. retail. As a reminder, we're prioritizing investments by market share goal, where we aim to hold share in brands like Oscar Meyer and Maxwell House, where spending to defend, where we aim to win, brands like Lunchables and Jell-O, where investing selectively, and where we have the right to win big like our taste elevation brands, Heinz and Philadelphia, where distorting investments accordingly.

Steve Cahillane: We believe the investments we're making will continue to translate into stronger performance in US retail. As a reminder, we're prioritizing investments by market share goal. Where we aim to hold share in brands like Oscar Mayer and Maxwell House, we're spending to defend. Where we aim to win, brands like Lunchables and JELL-O, we are investing selectively. And where we have the right to win big, like our Taste Elevation brands, Heinz and Philadelphia, we are distorting investments accordingly.

Speaker #2: Now, turning to our 2026 operating plan: our goal is to drive volume-led sustainable and profitable top-line growth while continuing to generate attractive free cash flow.

Steve Cahillane: Now, turning to our 2026 operating plan. Our goal is to drive volume-led, sustainable and profitable top-line growth while continuing to generate attractive free cash flow. To do this, we have built and are executing against clear plans to drive the turnaround of our US business and accelerate momentum across our international markets, both in retail and away from home channels. Starting with the US. Building on the investments we made in 2025, earlier this year, we announced an incremental $600 million across product superiority, select pricing, marketing, sales, and R&D, of which the majority is focused on turning around our US business. As we over-delivered our expectations in H1 of the year, we are now increasing investments by allocating an additional $100 million. This incremental $100 million is an opportunistic acceleration and will be concentrated in marketing, building brand equity across our core, and supporting innovation.

Speaker #2: To do this, we have built and are executing against clear plans to drive the turnaround of our U.S. business and accelerate momentum across our international markets, both in retail and away-from-home channels.

Speaker #2: Starting with the U.S., building on the investments we made in 2025, earlier this year we announced an incremental 600 million dollars across product superiority, select pricing, marketing, sales, and R&D, of which the majority is focused on turning around our U.S.

Steve Cahillane: Building on the investments we made in 2025, earlier this year, we announced an incremental $600 million across product superiority, select pricing, marketing, sales, and R&D, of which the majority is focused on turning around our US business. As we over-delivered our expectations in H1 of the year, we are now increasing investments by allocating an additional $100 million. This incremental $100 million is an opportunistic acceleration and will be concentrated in marketing, building brand equity across our core, and supporting innovation.

Speaker #2: business. As we over-delivered our expectations in the first half of the year, we are now increasing investments by allocating an additional 100 million dollars.

Speaker #2: This incremental 100 million dollars is an opportunistic acceleration and will be concentrated in marketing, building brand equity across our core and supporting innovation. We know our brand's respond well when we invest behind them.

Steve Cahillane: We know our brands respond well when we invest behind them. We've seen the early green shoots, and we are going to build on that while continuing to improve how we allocate dollars and sharpen our execution. We are deploying these incremental dollars with discipline, and our strong balance sheet and robust free cash flow position us well to fund them. We also have continued to simplify our North America operating model, driving stronger accountability and faster decision-making throughout the organization. We have separated Taste Elevation and Away From Home into two distinct business units, giving them each dedicated focus and resources. At the same time, we have consolidated our supply chain and procurement function to improve efficiency and align with the new global structure. Turning to our international business.

Speaker #2: We've seen the early green shoots, and we are going to build on that while continuing to improve how we allocate dollars and sharpen our execution.

Speaker #2: We are deploying these incremental dollars with discipline. And our strong balance sheet and robust free cash flow position, as well, to fund them. We also have continued to simplify our North America operating model, driving stronger accountability and faster decision-making throughout the organization.

Steve Cahillane: We also have continued to simplify our North America operating model, driving stronger accountability and faster decision-making throughout the organization. We have separated Taste Elevation and Away From Home into two distinct business units, giving them each dedicated focus and resources. At the same time, we have consolidated our supply chain and procurement function to improve efficiency and align with the new global structure. Turning to our international business.

Speaker #2: We have separated taste elevation and away-from-home into two distinct business units, giving them each dedicated focus and resources. At the same time, we have consolidated our supply chain and procurement functions to improve efficiency, and align with the new global structure.

Speaker #2: Turning to our international business, as we look to accelerate momentum, growth will be led by our Heinz brand along with distribution expansion in emerging markets.

Steve Cahillane: As we look to accelerate momentum, growth will be led by our Heinz brand, along with distribution expansion in emerging markets. In the H2 of 2026, we expect emerging markets growth to further accelerate. Now, let me walk you through how we're deploying our investment. As consumers continue to face economic pressure, affordability remains a major focus for us. That focus is shaping how we approach pricing, pack sizes, promotions, and innovation across our portfolio. Across price, we are making disciplined investments to improve the ROI of our promotional spend, expand access to opening price points, and in select cases, implement base price adjustments. Over the course of the year, we have improved the ROI of our promotional spend.

Speaker #2: In the second half of 2026, we expect emerging markets growth to further accelerate. Now, let me walk you through how we're deploying our investments.

Speaker #2: As consumers continue to face economic pressure, affordability remains a major focus for us. That focus is shaping how we approach pricing, pack sizes, promotions, and innovation across our portfolio.

Steve Cahillane: That focus is shaping how we approach pricing, pack sizes, promotions, and innovation across our portfolio. Across price, we are making disciplined investments to improve the ROI of our promotional spend, expand access to opening price points, and in select cases, implement base price adjustments. Over the course of the year, we have improved the ROI of our promotional spend.

Speaker #2: Across price, we are making disciplined investments to improve the ROI of our promotional spend, expand access to opening price points, and in select cases, implement base price adjustments.

Speaker #2: Over the course of the year, we have improved the ROI of our promotional spend. At the same time, we have been laying the groundwork for our second half's price investments.

Steve Cahillane: At the same time, we have been laying the groundwork for our H2 price investment, partnering with retailers on stronger joint business plans, ensuring that we are building quality merchandising through display and features. We have also introduced smaller and more accessible pack sizes in categories such as pasta sauce, cheese, and salad dressings. Within our portfolio, where commodity costs have come down, we're passing those savings on to the consumer, for example, in coffee. A portion of our investment is also geared towards people. We are increasing headcount throughout the organization, with a focus on our marketing and sales teams. As we assess our progress on this front, we are on track, having hired approximately half of our North America commercial needs. This includes investments across e-commerce, where we grew approximately 14% year to date through May.

Speaker #2: Partnering with retailers on stronger joint business plans, ensuring that we are building quality merchandising through display and features. We have also introduced smaller and more accessible pack sizes in categories such as pasta sauce, cheese, and salad dressings.

Speaker #2: And within our portfolio, we're commodity costs have come down, where passing those savings onto the consumer. For example, in coffee. A portion of our investment is also geared towards people.

Steve Cahillane: A portion of our investment is also geared towards people. We are increasing headcount throughout the organization, with a focus on our marketing and sales teams. As we assess our progress on this front, we are on track, having hired approximately half of our North America commercial needs. This includes investments across e-commerce, where we grew approximately 14% year to date through May.

Speaker #2: We are increasing headcount throughout the organization, with a focus on our marketing and sales team. As we assess our progress on this front, we are on track, having hired approximately half of our North America commercial needs.

Speaker #2: This includes investments across e-commerce, where we grew approximately 14% year to date through May. We are also making a significant step up in our marketing investment, increasing spend to at least 6% of net sales and putting our marketing dollars to work.

Steve Cahillane: We are also making a significant step up in our marketing investment, increasing spend to at least 6% of net sales and putting our marketing dollars to work. We are strengthening brand equity through new campaigns like Heinz's It Has to Be Heinz, and Philadelphia's Really Philly Good. We are putting more media behind consumer-led innovation, including Power Mac, Capri Sun Hydrate, and Ora-Ida. We are building strategic partnerships that elevate key moments and enable us to showcase our brands. As part of our America250 sponsorship, we unveiled The United Tastes of America, our largest portfolio campaign ever. At the heart of the campaign is a new national TV spot that brings multiple brands together in a single creative, featuring favorites like Heinz, Oscar Mayer, Kraft Singles, Kraft Mayo, and Kraft Dressings.

Speaker #2: We are strengthening brand equity through new campaigns, like Heinz's It Has to Be Heinz, and Philadelphia's Really Philly Good. We are putting more media behind consumer-led innovation, including Power Mac, Capri Sun Hydrate, and Orora Shapes.

Speaker #2: And we are building strategic partnerships that elevate key moments and enable us to showcase our brand. As part of our America 250 sponsorship, we unveiled United Tastes of America, our largest portfolio campaign ever.

Steve Cahillane: As part of our America250 sponsorship, we unveiled The United Tastes of America, our largest portfolio campaign ever. At the heart of the campaign is a new national TV spot that brings multiple brands together in a single creative, featuring favorites like Heinz, Oscar Mayer, Kraft Singles, Kraft Mayo, and Kraft Dressings.

Speaker #2: At the heart of the campaign is a new national TV spot that brings multiple brands together in a single creative, featuring favorites like Heinz, Oscar Meyer, Kraft singles, Kraft Mayo, and Kraft dressings.

Speaker #2: Going beyond the screen, we brought the celebration to life with a lineup of limited-time, summer-ready innovations at retailers nationwide. And just a couple of weeks ago, we also announced a landmark, multi-year strategic alliance with the Walt Disney Company.

Steve Cahillane: Going beyond the screen, we brought the celebration to life with a lineup of limited time, summer-ready innovation at retailers nationwide. Just a couple of weeks ago, we also announced a landmark multi-year strategic alliance with The Walt Disney Company. Brands including Heinz, Philadelphia, and Kraft Mac and Cheese will become part of moments tied to Disney's iconic franchises that guests and fans love most. Not only are we spending more to support our brands, but we are spending more efficiently. We've reallocated dollars towards higher return brand media, improved efficiency through fewer, more effective media partners, and launched stronger consumer-driven creative. Importantly, we're measuring direct sales impact, and we are seeing clear improvements. In addition to marketing, we are also stepping up investments in R&D to drive product superiority and value.

Speaker #2: Brands including Heinz, Philadelphia, and Kraft Mac and Cheese will become part of moments tied to Disney's iconic franchises that guests and fans love most.

Speaker #2: Not only are we spending more to support our brands, but we are spending more efficiently. We've reallocated dollars towards higher return brand media, improved efficiency through fewer, more effective media partners, and launched stronger consumer-driven creatives.

Steve Cahillane: Not only are we spending more to support our brands, but we are spending more efficiently. We've reallocated dollars towards higher return brand media, improved efficiency through fewer, more effective media partners, and launched stronger consumer-driven creative. Importantly, we're measuring direct sales impact, and we are seeing clear improvements. In addition to marketing, we are also stepping up investments in R&D to drive product superiority and value.

Speaker #2: Importantly, we're measuring direct sales impact, and we are seeing clear improvements. In addition to marketing, we are also stepping up investments in R&D to drive product superiority and value.

Speaker #2: These investments are increasing both capacity and capabilities to support our growth agenda across consumer experience, packaging innovation, and process development, all further enabled by digital advancement.

Steve Cahillane: These investments are increasing both capacity and capabilities to support our growth agenda across consumer experience, packaging innovation, and process development, all further enabled by digital advancements. Our R&D investments directly support our strategy of bigger and fewer as it pertains to innovation. We are continuing to launch, support, and scale innovation that is focused on consumer-driven platforms, including convenience, new occasions, and nutrition. Earlier this year, we launched Kraft Mac and Cheese Power Mac nationwide. We drove a lot of retailer excitement with distribution coming in very strong, over 35,000 stores. We are supporting the launch with media and promotions, both of which are live, and initial results are encouraging. While still early, velocities are in the top quartile and initial results show sales are highly incremental to our base and the overall category.

Speaker #2: Our R&D investments directly support our strategy of bigger and fewer as it pertains to innovation. We are continuing to launch, support, and scale innovation that is focused on consumer-driven platforms, including convenience, new occasions, and nutrition.

Speaker #2: Earlier this year, we launched Kraft Mac and Cheese Power Mac nationwide. We drove a lot of retailer excitement with distribution coming in very strong over 35,000 stores.

Steve Cahillane: Earlier this year, we launched Kraft Mac and Cheese Power Mac nationwide. We drove a lot of retailer excitement with distribution coming in very strong, over 35,000 stores. We are supporting the launch with media and promotions, both of which are live, and initial results are encouraging. While still early, velocities are in the top quartile and initial results show sales are highly incremental to our base and the overall category.

Speaker #2: We are supporting the launch with media and promotions, both of which are live. An initial results are encouraging. While still early, velocities are in the top quartile, and initial results show sales are highly incremental to our base and the overall category.

Speaker #2: Capri Sun Hydrate is another innovation we've talked about, and one that I am really excited about. This is one of the first-to-market drinks with electrolytes designed specifically for kids.

Steve Cahillane: Capri Sun Hydrate is another innovation we've talked about, and one that I'm really excited about. This is one of the first to market drinks with electrolytes designed specifically for kids. We rolled out to major retailers early in Q2, and it has quickly become the fastest turning innovation in kids' single-serve beverages, with top flavors turning at second quartile velocities and driving incrementality. Just now, we are starting to ship Philadelphia Lactose Free Cream Cheese. With lactose intolerance affecting up to 50 million Americans, Philadelphia is well-positioned to deliver our signature creaminess and taste without compromise. Customer sell-in has been strong, and we expect distribution to further ramp up as customer resets continue to roll out. Targeting a new set of consumers, we expect sales to be highly incremental to our base business. Now turning to our international markets.

Speaker #2: We rolled out to major retailers early in the second quarter and it has quickly become the fastest-turning innovation in kids' single-serve beverages. With top flavors turning at second quartile velocities and driving incrementality.

Speaker #2: And just now, we are starting to ship Philadelphia lactose-free cream cheese. With lactose intolerance affecting up to 50 million Americans, Philadelphia is well positioned to deliver our signature creaminess and taste without compromise.

Steve Cahillane: With lactose intolerance affecting up to 50 million Americans, Philadelphia is well-positioned to deliver our signature creaminess and taste without compromise. Customer sell-in has been strong, and we expect distribution to further ramp up as customer resets continue to roll out. Targeting a new set of consumers, we expect sales to be highly incremental to our base business. Now turning to our international markets.

Speaker #2: Customers selling has been strong, and we expect distribution to further ramp up as customer resets continue to roll out. Targeting a new set of consumers, we expect sales to be highly incremental to our base business.

Speaker #2: Now turning to our international markets. Our focus remains on growing the core through our Heinz brand and distribution expansion in our emerging markets. Heinz grew approximately 12% in emerging markets in the second quarter.

Steve Cahillane: Our focus remains on growing the core through our Heinz brand and distribution expansion in our emerging markets. Heinz grew approximately 12% in emerging markets in Q2. Around the world, we are expanding Heinz across new occasions and geographies while catering to local preferences and trends. Early in Q2, we launched Heinz Zero Ketchup in Brazil. With no added sugar, 50% fewer calories, 25% less sodium, a higher proportion of tomatoes, and selling for the same price as the original version, this is a great example of how we are meeting the consumer where they are. In the short time since launch, we are already capturing market share, with media support just turning on, we expect to further accelerate sales velocities. We also continue to grow in emerging markets through increased distribution, with distribution points up approximately 4% in Q2.

Speaker #2: Around the world, we are expanding Heinz across new occasions and geographies, while catering to local preferences and trends. Early in the second quarter, we launched Heinz Zero Ketchup in Brazil.

Speaker #2: With no added sugar, 50% fewer calories, 25% less sodium, a higher proportion of tomatoes, and selling for the same price as the original version, this is a great example of how we are meeting the consumer where they are.

Steve Cahillane: With no added sugar, 50% fewer calories, 25% less sodium, a higher proportion of tomatoes, and selling for the same price as the original version, this is a great example of how we are meeting the consumer where they are. In the short time since launch, we are already capturing market share, with media support just turning on, we expect to further accelerate sales velocities. We also continue to grow in emerging markets through increased distribution, with distribution points up approximately 4% in Q2.

Speaker #2: In the short time since launch, we are already capturing market share, and with media support just turning on, we expect to further accelerate sales velocities.

Speaker #2: We also continue to grow in emerging markets through increased distribution. With distribution points up approximately 4% in the second quarter. This includes continued expansion into the away-from-home channel, which grew over 5% in the quarter.

Steve Cahillane: This includes continued expansion into the away-from-home channel, which grew over 5% in the quarter. Taking a closer look at our global away-from-home performance, we grew organic net sales 2.9%. This was driven by a return to growth in the US and continued growth in our emerging markets. This growth reflects an approximate 150 basis point benefit in the US from World Cup-driven demand, in addition to lapping a prior year inventory deload. Outside of those impacts, which we do not expect to repeat, performance was driven by ongoing net new business wins. Away from home remains a strategic channel for us, where we see significant opportunities, including growing beyond ketchup, expansion into non-commercial channels, and increased penetration in QSRs. As we look at the H2 of the year, we anticipate continued growth in our global away-from-home business.

Speaker #2: Taking a closer look at our global away-from-home performance, we grew organic net sales 2.9%. This was driven by a return to growth in the US and continued growth in our emerging markets.

Speaker #2: This growth reflects an approximate 150 basis point benefit in the US from World Cup-driven demand, in addition to lapping a prior year inventory deload.

Speaker #2: Outside of those impacts, which we do not expect to repeat, performance was driven by ongoing net new business wins. Away-from-home remains a strategic channel for us, where we see significant opportunities, including growing beyond ketchup, expansion into non-commercial channels, and increased penetration in QSRs.

Steve Cahillane: Outside of those impacts, which we do not expect to repeat, performance was driven by ongoing net new business wins. Away from home remains a strategic channel for us, where we see significant opportunities, including growing beyond ketchup, expansion into non-commercial channels, and increased penetration in QSRs. As we look at the H2 of the year, we anticipate continued growth in our global away-from-home business.

Speaker #2: As we look at the second half of the year, we anticipate continued growth in our global away-from-home business. As you can see, we have built momentum in the first half of the year.

Steve Cahillane: As you can see, we have built momentum in the H1 of the year. With the bulk of our investments set to be in market in the H2, we remain focused on execution and delivering against our updated 2026 outlook. With that, Andre will now walk you through our Q2 financial performance in more detail and our outlook for the year.

Speaker #2: With the bulk of our investment set to be in market in the second half, we remain focused on execution and delivering against our updated 2026 outlook.

Speaker #2: With that, Andre will now walk you through our second quarter financial performance in more detail and our outlook for the year.

Speaker #1: Thank you, Steve. Starting with our second quarter results. Organic net sales for Kraft Heinz declined 1.3%. Price contributed 1.3 percentage points, while volume mix declined 2.6 percentage points.

Andre Maciel: Thank you, Steve. Starting with our Q2 results. Organic net sales for Kraft Heinz declined 1.3%. Price contributed 1.3 percentage points, while volume mix declined 2.6 percentage points. Higher pricing was primarily driven by our emerging markets and North America coffee and kids single-serve beverage categories. Declining volume mix largely reflects softness in meats, in addition to 100 basis point headwind from the timing of Easter. Our top-line performance came ahead of expectations driven by US retail, emerging markets, and global away from home. In US retail, we also benefit from a pull forward of inventory by customers related to summer grilling and in anticipation of strong Fourth of July holiday activations. We estimate this benefit to be approximately 80 basis points for total Kraft Heinz. Now breaking down performance by region. North America organic net sales declined 2.7% versus the prior year.

Speaker #1: Higher pricing was primarily driven by our emerging markets and North America coffee and kids' single-serve beverage categories. Declining volume mix largely reflects softness in meats, and in addition to 100 basis point headwind from the timing of Easter.

Speaker #1: Our top-line performance came ahead of expectations driven by US retail, emerging markets, and global away-from-home. In US retail, we also benefit from a pull-forward of inventory by customers related to summer grilling and an anticipation of strong 4th of July holiday activations.

Andre Maciel: Our top-line performance came ahead of expectations driven by US retail, emerging markets, and global away from home. In US retail, we also benefit from a pull forward of inventory by customers related to summer grilling and in anticipation of strong Fourth of July holiday activations. We estimate this benefit to be approximately 80 basis points for total Kraft Heinz. Now breaking down performance by region. North America organic net sales declined 2.7% versus the prior year.

Speaker #1: We estimate this benefit to be approximately 80 basis points for total Kraft Heinz. Now breaking down performance by North America organic net sales declined 2.7% versus the prior year.

Speaker #1: Growth in Canada and away-from-home was offset by declines in US retail, which were primarily driven by meats. In our international developed markets, organic net sales declined 0.7%.

Andre Maciel: Growth in Canada and away from home was offset by declines in US retail, which were primarily driven by meats. In our international developed markets, organic net sales declined 0.7%. This was driven by market share pressure following customer negotiations in select regions, in addition to promotional phasing. These headwinds were partially offset by growth in Benelux and in the UK, where we also gained share in the quarter. In emerging markets, organic net sales were up 8.5%, with positive contribution from both price and volume mix. This was driven by solid growth across most countries in the region and was partially offset by 100 basis point impact from the decline in Indonesia. We expect to further accelerate growth in the H2 of the year, having fully left the headwind in Indonesia by the Q3. Turning to the next slide.

Speaker #1: This was driven by market share pressure following customer negotiations in select regions, in addition to promotional phasing. This headwinds were partially offset by growth in Benelux and in the UK, where you also gain share in the quarter.

Speaker #1: In emerging markets, organic net sales were up 8.5%, with positive contribution from both price and volume mix. This was driven by solid growth across most countries in the region and was partially offset by 100 basis point impact from the decline in Indonesia.

Andre Maciel: In emerging markets, organic net sales were up 8.5%, with positive contribution from both price and volume mix. This was driven by solid growth across most countries in the region and was partially offset by 100 basis point impact from the decline in Indonesia. We expect to further accelerate growth in the H2 of the year, having fully left the headwind in Indonesia by the Q3. Turning to the next slide.

Speaker #1: We expect to further accelerate growth in the second half of the year having fully lapped the headwind in Indonesia by the third quarter. Turning to the next slide, Kraft Heinz adjusted operating income decline 18.4%, and our adjusted operating income margin decreased 350 basis points.

Andre Maciel: Kraft Heinz adjusted operating income declined 18.4% and our adjusted operating income margin decreased 350 basis points. Of the 18.4% decline, over 8 percentage points was driven by an increased market investment, and nearly 7 percentage points was due to higher variable compensation expense. In North America, adjusted operating income declined 15.8% versus the prior year. This was primarily driven by investments in marketing and higher variable compensation. In international developed markets, adjusted operating income declined 9.1%. This was primarily driven by increased investments in marketing and higher variable compensation, with strong productivity offsetting inflationary pressures. In emerging markets, adjusted operating income increased 6.7%. This was driven by strong top-line performance, productivity, and a one-time gain from indirect tax recovery. These impacts were partially offset by inflation and investments in marketing. As you may recall, in Q2, we announced a change to our global operating structure.

Speaker #1: Of the 18.4% decline, over 8 percentage points was driven by an increased market investment and nearly 7 percentage points was due to higher variable compensation expense.

Speaker #1: In North America, adjusted operating income decline 15.8% versus the prior year. This was primarily driven by investments in marketing and higher variable compensation. In international developed markets, adjusted operating income decline 9.1%.

Speaker #1: This was primarily driven by increased investments in marketing and higher variable compensation. With strong productivity offsetting inflationary pressures. Adding emerging markets, adjusted operating income increased 6.7%.

Andre Maciel: This was primarily driven by increased investments in marketing and higher variable compensation, with strong productivity offsetting inflationary pressures. In emerging markets, adjusted operating income increased 6.7%. This was driven by strong top-line performance, productivity, and a one-time gain from indirect tax recovery. These impacts were partially offset by inflation and investments in marketing. As you may recall, in Q2, we announced a change to our global operating structure.

Speaker #1: This was driven by strong top-line performance, productivity, and a one-time gain from indirect tax recovery. This impacts were partially offset by inflation and investments in marketing.

Speaker #1: As you may recall, in the second quarter, we announced a change to our global operating structure. Effective July 1, 2026, under this new structure, the European countries currently included in emerging markets will move into Europe and Pacific developed region.

Andre Maciel: Effective 1 July 2026, under this new structure, the European countries currently included in emerging markets will move into Europe and Pacific developed region. The results we cover today are in our previous structure, and we will begin reporting under the new operating structure in Q3. Now, going deeper into how we are tracking against some of our investments. We have generated improvements in our return on promotions. Year to date, we have increased ROI by 3.4 percentage points versus prior year and have increased the percent of promotional spend with net positive ROI by 6.6 percentage points. As Steve mentioned, we are allocating an incremental $100 million investment on top of the $600 million that was already in our plan. These incremental dollars are primarily going to marketing. We are seeing good returns on our marketing spend, which give us the confidence to step up our investments here.

Speaker #1: The results we cover today are in our previous structure, and we'll begin reporting under the new operating structure in the third quarter. Now going deeper into how we are tracking against some of our investments.

Speaker #1: We have generated improvements in our return on promotions. Year to date, we have increased ROI by 3.4 percentage points versus prior year and have increased the percent of promotional spend with net positive ROI by 6.6 percentage points.

Andre Maciel: Year to date, we have increased ROI by 3.4 percentage points versus prior year and have increased the percent of promotional spend with net positive ROI by 6.6 percentage points. As Steve mentioned, we are allocating an incremental $100 million investment on top of the $600 million that was already in our plan. These incremental dollars are primarily going to marketing. We are seeing good returns on our marketing spend, which give us the confidence to step up our investments here.

Speaker #1: As Steve mentioned, we are allocating an incremental 100 million dollar investment on top of the 600 million dollar that was already in our plan.

Speaker #1: This incremental dollars are primarily going to marketing. We are seeing good returns on our marketing spend, which give us the confidence to step up our investments here.

Speaker #1: Based on our latest data, we turn on ad spend grew 6 percentage points globally. For the full year, we expect marketing to be at least 6% of net sales.

Andre Maciel: Based on our latest data, return on ad spend grew 6 percentage points globally. For the full year, we expect marketing to be at least 6% of net sales. In H1, marketing was up approximately 36% versus the prior year. Our plan also contemplates increasing investment in R&D. In H1, R&D was up 22% versus the prior year, which is relatively in line with our full-year expectation. Moving to adjusted gross profit margin. In Q2, our margin was flat versus the prior year. This was driven by productivity initiatives helping to offset inflation, mostly across manufacturing and logistics, and a positive impact from price. Our inflation outlook for the full year remains slightly above 4%, reflecting current macroeconomic volatility and ongoing geopolitical conflicts. We are well hedged on energy and edible oils, providing coverage throughout most of 2026.

Speaker #1: In the first half of the year, marketing was up approximately 36% versus the prior year. Our plan also contemplates increasing investment in R&D. In the first half of the year, R&D was up 22% versus the prior year, which is relatively in line with our full year expectation.

Speaker #1: Moving to adjusted gross profit margin. In the second quarter, our margin was flat versus the prior year. This was driven by productivity initiatives helping to offset inflation mostly across manufacturing and logistics.

Andre Maciel: Moving to adjusted gross profit margin. In Q2, our margin was flat versus the prior year. This was driven by productivity initiatives helping to offset inflation, mostly across manufacturing and logistics, and a positive impact from price. Our inflation outlook for the full year remains slightly above 4%, reflecting current macroeconomic volatility and ongoing geopolitical conflicts. We are well hedged on energy and edible oils, providing coverage throughout most of 2026.

Speaker #1: And a positive impact from price. Our inflation outlook for the full year remains slightly above 4%. Reflecting current macroeconomic volatility and ongoing geopolitical conflicts.

Speaker #1: We are well hedged on energy and edible oils, providing coverage throughout most of 2026. We also have hedges in place on certain resins and metals through meat Q3, but as those roll off, we expect greater exposure to spot prices in the fourth quarter.

Andre Maciel: We also have hedges in place on certain resins and metals through mid Q3. As those roll off, we expect greater exposure to spot prices in Q4. Helping to mitigate these inflationary pressures, we continue to drive strong gross efficiencies that support our gross margin. We delivered over $330 million year to date, representing at least 4% of COGS, a pace that we expect to continue throughout the rest of the year. In terms of adjusted EPS, we declined approximately 18.8% or $0.13 versus Q2 2025. The decline was driven, as expected, by increased marketing and variable compensation expense. Looking at free cash flow, year to date, we generated approximately $1.7 billion, a 10% increase versus prior year. Free cash flow conversion of 123% represented a 27 percentage point increase compared to last year.

Speaker #1: Helping to mitigate this inflationary pressures, we continue to drive strong gross efficiencies that support our gross margin. With delivered over 330 million dollars year to date, representing at least 4% of COGS.

Speaker #1: A pace that we expect to continue throughout the rest of the year. In terms of adjusted EPS, we decline approximately 18.8% or 13 cents versus the second quarter of 2025.

Speaker #1: The decline was driven as expected by increased marketing and variable compensation expense. Looking at free cash flow, year to date we generated approximately 1.7 billion dollars.

Andre Maciel: The decline was driven, as expected, by increased marketing and variable compensation expense. Looking at free cash flow, year to date, we generated approximately $1.7 billion, a 10% increase versus prior year. Free cash flow conversion of 123% represented a 27 percentage point increase compared to last year.

Speaker #1: A 10% increase versus prior year. Free cash flow conversion of 123% represented a 27 percentage point increase compared to last year. The increase in free cash flow was driven primarily by improvements in working capital across payables.

Andre Maciel: The increase in free cash flow was driven primarily by improvements in working capital across payables. These improvements reflect improved payment terms through collaborative supplier negotiations. Our free cash flow conversion also benefit from marketing accruals, with the impact to cash expected in subsequent quarters. In Q2, we also recognized a non-cash $7.4 billion impairment charge. Turning to capital allocation, our priorities are unchanged and remain very clear: sustaining the dividend and protecting our investment-grade credit profile. With a strong balance sheet and solid free cash flow generation, we have the flexibility to navigate volatility while investing in the business and continuing to fund the dividend, reduce debt, and manage leverage in a disciplined way. In Q2, we used excess cash to pay down $1.9 billion of debt at its June maturity, and we recently repaid another $1 billion due in 2027.

Speaker #1: These improvements reflect improved payment terms through collaborative supplier negotiations. Our free cash flow conversion also benefit from marketing accruals, with the impact to cash expected in subsequent quarters.

Speaker #1: In the second quarter, we also recognize unknown cash 7.4 billion dollar impairment charge. Turning to capital location. Our priorities are unchanged and remain very clear.

Andre Maciel: Turning to capital allocation, our priorities are unchanged and remain very clear: sustaining the dividend and protecting our investment-grade credit profile. With a strong balance sheet and solid free cash flow generation, we have the flexibility to navigate volatility while investing in the business and continuing to fund the dividend, reduce debt, and manage leverage in a disciplined way. In Q2, we used excess cash to pay down $1.9 billion of debt at its June maturity, and we recently repaid another $1 billion due in 2027.

Speaker #1: Sustaining the dividend and protecting our investment-grade credit profile. With a strong balance sheet and solid free cash flow generation, we have the flexibility to navigate volatility while investing in the business and continuing to fund the dividend, reduce debt, and manage leverage in a disciplined way.

Speaker #1: In the second quarter, we used excess cash to pay down 1.9 billion dollars of debt at its due maturity and we recently repaid another 1 billion dollars due in 2027.

Speaker #1: We also issued new euro debt to fund a US tender offer for longer duration, higher coupon notes. The issuance was very successful as it reduced our interest costs and provided net deleveraging.

Andre Maciel: We also issued new euro debt to fund a less tender offer for longer duration, higher coupon notes. The issuance was very successful as it reduced our interest costs and provided net deleveraging. We expect our 2026 net leverage to be no higher than 3.3x, with a clear path to bring this back down to our target in about two years. Looking at our full year 2026 outlook, we are raising our expectations for organic net sales, which we now expect to be down 2% to down 0.5%, versus our previous expectation of down 3.5% to down 1.5%. This outlook includes an approximate 100 basis point headwind from declines in SNAP benefits, which remains unchanged. Our outlook now contemplates adjusted gross profit margin in the range of down 50 to down 10 basis points year-over-year.

Speaker #1: We expect our 2026 net leverage to be no higher than 3.3 times with a clear path to bring this back down to our target in about two years.

Speaker #1: Now looking at our full year 2026 outlook. We are raising our expectations for organic net sales, which we now expect to be down to to down 0.5% versus our previous expectation of down 3.5 to down 1.5%.

Andre Maciel: Looking at our full year 2026 outlook, we are raising our expectations for organic net sales, which we now expect to be down 2% to down 0.5%, versus our previous expectation of down 3.5% to down 1.5%. This outlook includes an approximate 100 basis point headwind from declines in SNAP benefits, which remains unchanged. Our outlook now contemplates adjusted gross profit margin in the range of down 50 to down 10 basis points year-over-year.

Speaker #1: This outlook includes an approximate 100 basis point headwind from declines in SNAP benefits which remains unchanged. Our outlook now contemplates adjusted gross profit margin in the range of down 50 to down 10 basis points year over year.

Speaker #1: Previous guidance contemplated adjusted gross profit margin down 75 to down 25 basis points year over year. Our updated expectation reflects targeted efficiencies of about 4%, inflation at slightly above 4%, and investments in price, product, and packaging.

Andre Maciel: Previous guidance contemplated adjusted gross profit margin down 75 to down 25 basis points year-over-year. Our updated expectation reflects targeted efficiencies of about 4%, inflation at slightly above 4%, and investments in price, product, and packaging. Our guidance assumes inflation that peaks as we head into Q4. While the market remains volatile as we see things today, we expect full year 2027 inflation to be between 4% to 5%. In anticipation, we are proactively ramping productivity initiatives to offset as much of the impact as possible. For constant currency adjusted operating income, we are now narrowing our guidance range to a decline of 18% to 16%. As a reminder, our previous expectation was to be down 18% to down 14%. Our new outlook reflects an additional step up in market investments and an increased impact from higher variable compensation, partially offset by stronger top-line expectations.

Speaker #1: Our guidance assumes inflation that peaks as we head into the fourth quarter. While the market remains volatile, as we think today, we expect full year 2027 inflation to be between 45%.

Speaker #1: In anticipation, we are proactively ramping productivity initiatives to offset as much of the impact as possible. For constant currency adjusted operating income, we are now narrowing our guidance range to a decline of 18 to 16%.

Andre Maciel: In anticipation, we are proactively ramping productivity initiatives to offset as much of the impact as possible. For constant currency adjusted operating income, we are now narrowing our guidance range to a decline of 18% to 16%. As a reminder, our previous expectation was to be down 18% to down 14%. Our new outlook reflects an additional step up in market investments and an increased impact from higher variable compensation, partially offset by stronger top-line expectations.

Speaker #1: As a reminder, our previous expectation was to be down 18 to down 14%. Our new outlook reflects an additional step up in market investments and an increased impact from higher variable compensation.

Speaker #1: Partially offset by stronger top line expectations. As Steve said, we know that investing behind our brands is the right decision setting us up for a stronger 2027.

Andre Maciel: As Steve said, we know that investing behind our brands is the right decision, setting us up for a stronger 2027. As a result, we expect adjusted EPS to be in the range of $2.03 to 2.09 versus our previous expectations of $1.98 to 2.10. Our adjusted EPS expectation contemplates an effective tax rate of approximately 24.5%. From a cash perspective, we now expect to generate free cash flow conversion of approximately 110% versus our previous expectation of 100%. Looking specifically at Q3, we expect organic net sales to be in the range of down 2.5% to down 1%. We expect the global away from home to grow low single digits and for emerging markets to improve relative to the Q2 year-over-year performance.

Speaker #1: As a result, we expect adjusted EPS to be in the range of $2.03 to $2.09 versus our previous expectations of $1.98 to $2.10. Our adjusted EPS expectation contemplates an effective tax rate of approximately 24.5%.

Speaker #1: From a cash perspective, we now expect to generate free cash flow conversion of approximately 110% versus our previous expectation of 100%. Looking specifically at the third quarter, we expect organic net sales to be in the range of down 2.5 to down 1%.

Andre Maciel: From a cash perspective, we now expect to generate free cash flow conversion of approximately 110% versus our previous expectation of 100%. Looking specifically at Q3, we expect organic net sales to be in the range of down 2.5% to down 1%. We expect the global away from home to grow low single digits and for emerging markets to improve relative to the Q2 year-over-year performance.

Speaker #1: We expect the global way from home to grow low single digits and for emerging markets to improve relative to the second quarter year over year performance.

Speaker #1: In US retail, while we anticipate continued improvement in share trends, we do expect the inventory pull forward we saw in Q2, will be an 80 basis point headwind to our consolidated results in the third quarter.

Andre Maciel: In US retail, while we anticipate continued improvement in share trends, we do expect that the inventory pull forward we saw in Q2 will be an 80 basis point headwind to our consolidated results in Q3. We also expect a headwind from promotional timing reflecting our planned step-up in investments. For adjusted operating income, we anticipate a decline in the range of -25% to -23%, primarily driven by a further step-up in investments. This contemplates an adjusted gross profit margin that is expected to be down year-over-year as we increase investments in price. With that, let me pass it back to Steve for some closing comments.

Speaker #1: We also expect a headwind from promotional timing reflecting our planned step up in investments. For adjusted operating income, we anticipate a decline in the range of down 25% to down 23%.

Speaker #1: Primarily driven by a further step up in investments. This contemplates an adjusted gross profit margin that is expected to be down year over year as we increase investments in price.

Speaker #1: With that, let me pass it back to Steve for some closing comments.

Speaker #2: Thank you, Andre. We delivered a first half that was ahead of our original expectations. Driven by early investments, we have built momentum behind consumption and share trends, and we are seeing improvements across key growth areas, including our taste elevation categories, global away from home, and across emerging markets.

Steve Cahillane: Thank you, Andre. We delivered an H1 that was ahead of our original expectations. Driven by early investments, we have built momentum behind consumption and share trends. We are seeing improvements across key growth areas, including our Taste Elevation categories, global away from home, and across emerging markets. As we have previously said, should we over-deliver our expectations this year, we reserve the right to invest more, and that is exactly what we are doing. With investments ramping up in this H2, there is a lot more to come. We are managing our portfolio of brands and geographies very effectively, and we remain focused on disciplined execution and delivering against our updated outlook. Thank you for your time, and thank you for your interest in Kraft Heinz.

Speaker #2: As we have previously said, should we overdeliver, our expectations this year we reserve the right to invest more, and that is exactly what we are doing.

Steve Cahillane: As we have previously said, should we over-deliver our expectations this year, we reserve the right to invest more, and that is exactly what we are doing. With investments ramping up in this H2, there is a lot more to come. We are managing our portfolio of brands and geographies very effectively, and we remain focused on disciplined execution and delivering against our updated outlook. Thank you for your time, and thank you for your interest in Kraft Heinz.

Speaker #2: With investments ramping up in this second half, there is a lot more to come. We are managing our portfolio of brands and geographies very effectively.

Speaker #2: And we remain focused on disciplined execution and delivering against our updated outlook. Thank you for your time and thank you for your interest in Kraft Heinz.

Q2 2026 Kraft Heinz Co Earnings Call - Pre-Recorded

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