Myles Udland, Julie Hyman and Brian Sozzi of Yahoo Finance talk to Miguel Patricio, CEO of Kraft Heinz, about the company’s history in the packaged food segment, a potential price increase on some products and more.
Video transcription
BRIAN SOZZI: The turnaround at Kraft Heinz continues to the right. Kraft Heinz recently sold its Planters nut business to Hormel for $ 3.35 billion and executives made a reasonably upbeat presentation at the CAGNY Food and Beverage Conference on Tuesday. Miguel Patricio CEO Kuel Heinz is joining us now. Miguel, good to talk to you here again.
You know, I was talking to someone yesterday who caught you and your team presenting at CAGNY, and he told me Kraft Heinz is the most interesting story in packaged food. Is this a fair assessment?
MIGUEL PATRICIO: Well, I hope so. We are transforming the business and enjoying every step of it. We had to change and change the company in any way, but now because of the headwinds we have due to the pandemic, it is happening much faster, and I can say that we are in a very different moment. We are a very different company than just one year ago. We are stronger, more confident and we know what we need to build.
BRIAN SOZZI: The last time you and I last spoke was investor day last year, and this is the day you put off your natural cheese industry. Last week you sold the Planters nut industry for a really big amount. Are you done evaluating your portfolio? Do you have any other brands that could eventually be sold due to the transformation plan?
MIGUEL PATRICIO: Look, we need to look at our portfolio in a very agile way. I think food is one of those industries that is changing faster. If you think the way you ate ten years ago and the way you eat today is very different, and we did not adjust the portfolio fast enough. You can therefore expect to be much more mobile in terms of portfolio management, and this will always mean acquiring and selling a product. So I am not working on any sales, but it may happen in the future in the same way that our other businesses can acquire.
JULIE HYMAN: Hi. It’s July here. I want to ask you at the moment about pricing power, because we’ve heard some companies talk about this, including your own. How much do you expect to be able to increase prices in this environment, and how much does this reflect the rising input costs for you versus just the consumers’ willingness to accept the price increases?
MIGUEL PATRICIO: Very good and important question. Well, we are affected by inflation like everyone else, ultimately a little less because we are less dependent on grains, but I think what is important is that we announced that we would reduce, we would have a gross saving of $ 2 billion in five years, and we invested $ 400 million last year, and we plan to deliver more than $ 400 million in gross savings. And it will be – making rising costs and inflation less worrying.
That said, we’re always going to look at revenue management opportunities, which means price or not price, you know, to manage our portfolio.
MYLES ABROAD: You know, Miguel, it’s Myles here. You had a very interesting slide in your presentation yesterday about the marketing approach you have chosen, which you know, mentioning the number of YouTube views and preferences and involvement in social. How fast was the change for a brand like you to look at different social channels as a place to increase spending, and how do you think about pulling the levers a little more, perhaps versus the traditional paths that a Kraft Heinz would have followed? in, you know, the last cycle? How do you think about those who are moving forward?
MIGUEL PATRICIO: I think we’re just starting a big transformation in the field of marketing and media. Most of it is yet to come, but in 2020 we had some experiences that we are very excited about. We started in May in the midst of the pandemic, our own social agency, you know, that brings home social speaking, social listening and content development, and we did the experiment in Canada.
And very quickly we have already expanded it to China, Australia, the UK, and the next one is now going to be the US. And it’s really transforming a business because it’s polluting the whole marketing area with the social, you know, mindset, and we’re already benefiting a lot from it. We are already in these countries where we started it with a very different mindset, but also results.
Last week, we made a post on Twitter in the UK, you know, and we invited consumers to taste a Weetabix product with baked beans. It generated, well, Twitter became that day, we were the number one topic of conversation in the country. We had 4 billion impressions in the UK, and that only happened because we were very close to social networks. We had it at home, and we have a new way of working. We’re going to see a big transformation at Kraft Heinz in marketing going forward and in the digital arena as a whole.
BRIAN SOZZI: Miguel. I have 30 seconds left. Much concern on Wall Street about demand is slowing in the second half of this year as more people are vaccinated. Do you see it in your business?
MIGUEL PATRICIO: Well, when we are vaccinated, the demand will definitely drop. It will not be at the levels it is today. You know, for some reason people will go out more than today. However, we expect that consumption will not rise to pre-pandemic levels at all for some reason. I’m going to mention you at the first one about branding.
We have gained a lot of penetration during this time, and many new consumers have come to the base of our brands and we are working hard to maintain it once this pandemic is over. The second one, you know, just think of how we’re going to work going forward, all of us, all of us companies. We will never – we will be more mobile. We will work from home forever. There is technology for that, and just think, you know, example of a number.
If companies now start working from home on average just one day a week, it will be 20% above the pandemic. This is going to happen. We are not going to work the same way we worked before the pandemic, but only two reasons to believe that, yes, consumption will fall. It will not go to the levels it was pre-pandemic.
BRIAN SOZZI: Fair enough. Let’s leave it there. Kraft Heinz CEO Miguel Patricio. Good to see you. Stay safe, and we’ll talk to you soon.
MIGUEL PATRICIO: Thank you very much, have fun.