Speaking on an earnings’ calls to investors, Miguel Patricio, who took over as CEO just over a month ago, said that the board has mandated a “new approach” to Kraft Heinz, which needs to become “more efficient than everybody else”.
And he indicated that a redeployment of resources is likely because, despite investing more on marketing over the past two years, the company’s media spend has fallen behind.
“In marketing, we increased investment in the last two years. But in media, we've been declining. We grew investments or we put money behind many other things, agency fees, production, research, product development,” he said.
“But the thing that the consumer really sees, we declined to pay the other expense. This was in our inefficiencies that we can redeploy.”
He added that Kraft Heinz must find a better balance between its spending and marketing as well as between innovations and support for its core brands.
“I believe our investments in media remain low despite fixed costs and overall market spend increasing over the past two years,” Patricio said.
“On the brand and innovation side, we need to become more consumer obsessed so we can better predict their behaviour even before they know it. And we need to better balance spending and marketing, innovations versus core brand support.”
He was commenting as Kraft Heinz reported that net sales in the first half were down 4.8% to $12.4bn compared to the same period last year. In addition, net income, hit by $1.2bn of writedowns, was down to $852m from $1.76bn a year ago.
However, on the plus side, Patricio pointed to the success of some of Kraft Heinz’s core brands, such as Heinz ketchup and Philadelphia spread, which have benefitted from investments in product innovation and marketing.
He said Heinz Ketchup, a 150-year-old brand, now has a record market share of 70% in the US, while Philadelphia has grown share and category year over year since 2014.
Patricio also said the company needs to look for opportunities, or “find white spaces”, in which to invest. In China, for example, Kraft Heinz is the market leader for soy sauce, an industry worth $12bn that is growing 8% per year, yet the company is present in just the two provinces of Guangdong and Fujian. There is a “big opportunity” to grow elsewhere, he said.
Similarly, he observed that Hispanic Americans make up 20% of the US population, yet “we don’t have absolutely anything in our portfolio today to attend this population. We don’t even communicate to the Hispanic community”.
“That gives an opportunity,” he said. “I’m looking at these opportunities everywhere from a brand standpoint, from a channel standpoint, from [an] ethnicity standpoint, from a country standpoint.”
Sourced from Yahoo! Finance, Kraft Heinz; additional content by WARC staff