The Kraft Heinz Company · NASDAQ:KHC
The Kraft Heinz — Q2 2023 Earnings Presentation
32 slides from The Kraft Heinz's earnings presentation, Aug 2, 2023
Slide 1: Q2 2023 Business Update
Q2 2023 BUSINESS UPDATE AUGUST 2, 2023
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS August 2, 2023 This presentation contains a number of forward-looking statements as defined under U.S. federal securities laws, including, but not limited to, statements, estimates, and projections relating to our business and long-term strategy; our ambitions, goals, targ
Slide 3: Business Update
Q2 2023 BUSINESS UPDATE Miguel Patricio Chief Executive Officer and Chair of the Board
Slide 4: Q2 Key Takeaways
Accelerated profitable growth, with topline fueled by our 3 pillars. Mitigated expected headwinds and built momentum into the second half of 2023. Q2 Taking a disciplined approach to protect our profit dollars and Key Takeaways drive variable cost efficiencies. With margin gains, we are investing in
Slide 5: Grew Topline, Profits, and Profitability: Q2 Results
Grew Topline, Profits, and Profitability Q2 Results Organic Net Sales1 Constant Currency Adjusted EBITDA1,2 Adjusted EPS1 12.9% 7.3% 4.0% vs Q2 '22 vs Q2 '22 vs Q2 '22 Q2 2023 Business Update 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconciliations at ir.krafthein
Slide 6: All Three Pillars of Growth Fueling Organic Net Sales
All Three Pillars of Growth Fueling Organic Net Sales1 Foodservice Emerging Markets GROW Platforms in U.S. Retail Global International Zone North America Zone ~+15% +11% +1% Organic Net Sales1 Organic Net Sales1,2 Organic Net Sales1 vs Q2 2022 vs Q2 2022 vs Q2 2022 Q2 2023 Business Update 1| Non-GAA
Slide 7: Foodservice Growing and Gaining Market Share
Foodservice Growing and Gaining Market Share Foodservice Q2 2023 Growth1 vs PY 30% 20% 10% 0% Total KHC Industry KHC Industry KHC 2 2 (U.S. only) North (Dev Mkts. only) International America Q2 2023 Business Update 1| Based on internal sales data, which holds the impact of currency constant and excl
Slide 8: Foodservice Growth Strategy Driving Strong Results
Foodservice Growth Strategy Driving Strong Results Chef-Led Model Attractive Channels Innovation Co-creating menu concepts with Competing in more attractive, Leveraging connected equipment and customers to meet specific needs higher margin spaces testing/scaling to drive innovation Mom & Pop Hospita
Slide 9: All Three Pillars of Growth Fueling Organic Net Sales
All Three Pillars of Growth Fueling Organic Net Sales1 Foodservice Emerging Markets GROW Platforms in U.S. Retail Global International Zone North America Zone Q2 2023 Business Update 9 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconciliations at ir.kraftheinzcompan
Slide 10: Emerging Markets Growing Double Digits
Emerging Markets Growing Double Digits Q2 2023 Organic Net Sales1 vs PY ▪ Expect H2 growth in line 13% International Zone with Q1 ▪ Q2 was impacted by one- time items totaling Emerging Markets2 11% approximately 7pp, driven primarily by delivery timing in Brazil Q2 2023 Business Update 1| Non-GAAP f
Slide 11: Three Consistent Levers Backing our Emerging Markets Growth
Three Consistent Levers Backing our Emerging Markets Growth Go To Market Brand Equity Foodservice Scalable, Repeatable Model Led by the Power of Heinz, Attacking Underpenetrated well beyond Ketchup; Foodservice Channel Supported by Local Jewels Q2 2023 Business Update 11
Slide 12: All Three Pillars of Growth Fueling Organic Net Sales
All Three Pillars of Growth Fueling Organic Net Sales1 Foodservice Emerging Markets GROW Platforms in U.S. Retail Global International Zone North America Zone Q2 2023 Business Update 12 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconciliations at ir.kraftheinzcompa
Slide 13: Consumption Growth in GROW Platforms
Consumption Growth in GROW Platforms Total North America Q2 Organic Net Sales1 ~15% North America2 U.S. Retail GROW ENERGIZE Platforms +1.3% GROW ~65% ~20% +0.8% STABILIZE 2 vs 2022 vs 2022 0.8% Q2 Consumption3 2.6% Q2 2023 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and
Slide 14: Within GROW Platforms, Taste Elevation and Easy Meals Led Growth
Within GROW Platforms, Taste Elevation and Easy Meals Led Growth Taste Elevation Easy Meals 6% U.S. Retail Organic Net Sales1 1% Q2 2023 8% Consumption Growth2 vs Q2 2022 6% Business Update 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconciliations at ir.kraftheinzc
Slide 15: Action Plans in Place to Capture Additional Share
Action Plans in Place to Capture Additional Share Teams are Implementing Action Plans Shared Last Quarter 1 Joint Business Plan Execution 2 Increasing Marketing Investment 3 4 Innovation 4 4Supply Recovery Agreements in place to Increasing Innovation Solve remaining supply to improve Shelf Space Dou
Slide 16: Taste Elevation and Easy Meals Outperforming U.S. Retail
Taste Elevation and Easy Meals Outperforming U.S. Retail Q2 U.S. Market Share1 vs PY Taste Elevation U.S. Retail & Easy Meals (0.1pp) ▪ Share loss remains concentrated in Cold Cuts, Cream Cheese, and Kids Single Serve Beverages (0.5pp) ▪ Taste Elevation and Easy Meals outperforming U.S. Retail Q2 20
Slide 17: Share Trend Improving as Action Plans Implemented
Share Trend Improving as Action Plans Implemented 2023 U.S. Dollar Share1 vs PY 0.2pp 0.1pp 0.0pp (0.1pp) (0.2pp) US Retail (0.3pp) Taste Elevation and Easy Meals (0.4pp) July Month-to-Date2 (0.5pp) (0.6pp) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Pricing SNAP Student Loan Action Reduction Re
Slide 18: Investing in Marketing, R&D and Technology to Drive Future Growth
Investing in Marketing, R&D and Technology to Drive Future Growth Marketing R&D Technology Imagery TBD Q2 2023 Business Update 18
Slide 19: Investing in Marketing
Investing in Marketing, R&D and Technology to Drive Future Growth • 23% increase in Marketing spend in Q2 vs PY • First ever global marketing campaign for Heinz – based on actual consumer stories • KHC awarded most 2023 Cannes Lions of any food company in the world! Q2 2023 Business Update 19
Slide 20: Investment in R&D
Investing in Marketing, R&D and Technology to Drive Future Growth Investment in R&D : 1 +10% Disruptive Innovation National Launches Expansion into New Aisles in Foodservice Agile Innovation Engine Driving Innovation Pipeline Across Retail and Foodservice Q2 2023 Business Update 20 1| Q2 2023 vs Q2
Slide 21: Unleashing Power of Heinz beyond Ketchup
Investing in Marketing, R&D and Technology to Drive Future Growth Unleashing Power of Heinz beyond Ketchup, Tingly Ted’s: Top 25th Percentile Velocities launching Culinary Tomatoes Line in UK1, Launching Around the Globe Q2 2023 Business Update 21 1| Based on IRI data 4 weeks ending July 8, 2023.
Slide 22: Investments in Technology
Investing in Marketing, R&D and Technology to Drive Future Growth Investments in Technology State of the Art Distribution Center Expected 2025 Driving Transformation In: • Innovation • Revenue Management • Leverage Advanced Automation • Sales • Marketing • Drive 2X Volume • Supply Chain • Reduce Env
Slide 23: Financial Performance and Outlook
Q2 2023 FINANCIAL PERFORMANCE AND OUTLOOK Andre Maciel Global CFO
Slide 24: Grew Topline, Profits and Profitability
Grew Topline, Profits and Profitability Kraft Heinz North America International Q2 vs ‘22 Q2 vs ‘22 Q2 vs ‘22 Organic Net Sales 1 +4.0% +1.3% +13.2% Price 11.0pp 9.4pp 16.5pp Vol/Mix (7.0pp) (8.1pp) (3.3pp) Adjusted EBITDA 1 +6.0% +2.7% +16.9% Currency (1.3pp) (0.4pp) (5.6pp) Constant Currency Adjus
Slide 25: Expanding Margins Enabling Growth Investments
Expanding Margins Enabling Growth Investments Adjusted Gross R&D / Marketing Adjusted EPS1 Profit Margin1 Spend Increase Q2 ’23 vs Q2 ‘22 $0.79 $0.70 +23% 33.3% 31.5% +10% Q2 '22 Q2 '23 R&D Marketing Q2 '22 Q2 '23 Approaching FY2021 levels Investing to drive future growth vs Q2 2022 Results of Opera
Slide 26: Strengthening Balance Sheet
Strengthening Balance Sheet Free Cash Flow Conversion1 Net Leverage1 59% 3.3x 3.1x 22% YTD '22 2 YTD '23 Q2 '22 Q2 '23 Inventory improving sequentially from Q1 Approaching targeted leverage of ~3.0x Q2 2023 Business Update 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and
Slide 27: Pricing in Place with Disciplined Approach to Promotions
Pricing in Place with Disciplined Approach to Promotions % U.S. Q2 Consumption U.S. ROI Improvement ▪ Pricing for the year has been Volume Sold on Promotion1 announced ~15pp ~5pp Branded Kraft Heinz ▪ Price gaps expanded relative to private label and branded ▪ Branded selling more on promotion 35% 2
Slide 28: Volume Trends Expected to Improve, with More Balanced Growth in 2024
Volume Trends Expected to Improve, with More Balanced Growth in 2024 ▪ Volume declines expected to moderate as a result of: - Lapping prior year pricing - Action plans in U.S. Retail - Continued share gains in Foodservice - Re-acceleration of Emerging Markets ▪ Expect volume to turn positive in 2024
Slide 29: Generating Higher Efficiencies to Reinvest in the Business
Generating Higher Efficiencies to Reinvest in the Business, as Inflation Moderates Supply Chain Efficiencies Inflation Gross Efficiency Plan on Track Improvement in Cost Goal: $2.5 Billion by 2027 ▪ Inflation moderating Annual Target 500 $500M ▪ Timing impacted by hedges / contracts Q3-Q4E FY H2 250
Slide 30: Outlook Reflects Above Algorithm Organic Net Sales & Adjusted EBITDA Growth
Outlook Reflects Above Algorithm Organic Net Sales1 & Constant Currency Adjusted EBITDA1 Growth 2023 Outlook 2023 Considerations Above Long-term Algorithm Growth +4-6% • Returning to historical elasticity levels Organic Net Sales1 +2-3% • Driven by Foodservice, Emerging Markets, U.S. Retail GROW Pla
Slide 31: Closing Commentary
CLOSING COMMENTARY Miguel Patricio Chief Executive Officer and Chair of the Board
Slide 32: Q2 Key Takeaways
Accelerated profitable growth, with topline fueled by our 3 pillars. Mitigated expected headwinds and built momentum into the second half of 2023. Q2 Taking a disciplined approach to protect our profit dollars and Key Takeaways drive variable cost efficiencies. With margin gains, we are investing in
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