The Kraft Heinz Company · NASDAQ:KHC
The Kraft Heinz — Q1 2023 Earnings Presentation
45 slides from The Kraft Heinz's earnings presentation, May 3, 2023
Slide 1: Q1 2023 Business Update
Q1 2023 BUSINESS UPDATE MAY 3, 2023
Slide 2: Forward-Looking Statements
2 FORWARD-LOOKING STATEMENTS May 3, 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, targe
Slide 3: Q1 2023 Business Update
Q1 2023 BUSINESS UPDATE Miguel Patricio Chief Executive Officer and Chair of the Board
Slide 4: Delivered Strong Results; Growth Pillars
Foodservice GROW Platforms in U.S. Retail Agile@Scale Emerging Markets Delivered Driving Advancing Strong Results Growth Across Business All Pillars Transformation
Slide 5: Generating Strong Results across the Entire P&L
Generating Strong Results across the Entire P&L Delivered Strong Results Q1 Results Organic Net Sales1 Constant Currency Adjusted EBITDA1,2 Adjusted EPS1 Strong Growth across North America Organic Net Sales1 Growth and Adjusted Primarily Driven by strong Adjusted and International Zones Gross Profit
Slide 6: Margin Expanded Sequentially and Year over Year
Margin Expanded Sequentially and Year over Year Delivered Strong Results Adjusted Gross Profit Margin1 Expansion from Pricing Flow-through and Unlocked Efficiencies, with Moderating Cost Inflation 32.8% 32.2% 31.6% Q1 '22 Q4 '22 Q1 '23 Q1 2023 Business Update 6 1| Non-GAAP financial measure. See the
Slide 7: Growth Pillars: Driving Growth Across All Pillars
Foodservice GROW Platforms in U.S. Retail Agile@Scale Emerging Markets Delivered Driving Advancing Strong Results Growth Across Business All Pillars Transformation
Slide 8: All Three Pillars of Growth Fueling Organic Net Sales
All Three Pillars of Growth Fueling Organic Net Sales1 Driving Growth Across All Pillars Foodservice Emerging Markets GROW Platforms in Global International Zone U.S. Retail North America Zone ~30% 23% 8% Organic Net Sales1 Organic Net Sales1,2 Organic Net Sales1 vs Q1 2022 vs Q1 2022 vs Q1 2022 Q1
Slide 9: Foodservice Growing and Gaining Market Share
Growing and Gaining Market Share, Contributing to Organic Net Sales1 Growth Driving Growth Across All Pillars Foodservice Q1 2023 Growth2 vs PY 40% 30% 20% 10% 0% Total KHC Industry KHC Industry KHC (U.S. only) North (Dev Mkts. only) International America Q1 2023 1| Non-GAAP financial measure. See t
Slide 10: International Foodservice: Growth Strategy Driving Strong Results
International Foodservice: Growth Strategy Driving Strong Results Driving Growth Across All Pillars Chef-Led Model Local Solutions Driving QSR Growth Scaled to Multiple Markets ~45% ~30% Additional Markets QSR Growth Q1 ’23 vs PY1 Q1 ’23 vs Q4 ‘22 Q1 2023 Business Update 10 1| Based on internal sale
Slide 11: North America Foodservice: Growth Strategy Driving Strong Results
North America Foodservice: Growth Strategy Driving Strong Results Driving Growth Across All Pillars Volume Growth Unlock Distribution with Core Brands through Joint Business Plans Introduce Expand Penetration of Additional Formats Adjacent Categories Innovation +20% +4% Core SKU Cases Shipped Total
Slide 12: North America Foodservice: Entering New Channels
North America Foodservice: Growth Strategy Driving Strong Results Driving Growth Across All Pillars Entering New Channels that are Untapped Market Size: ~$30B Market Size: ~$25B B2B eCommerce Platform Q1 2023 Business Update 12 1| Based on 2022 Technomic data.
Slide 13: All Three Pillars of Growth Fueling Organic Net Sales
All Three Pillars of Growth Fueling Organic Net Sales1 Driving Growth Across All Pillars Foodservice Emerging Markets GROW Platforms in Global International Zone U.S. Retail North America Zone Q1 2023 Business Update 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconc
Slide 14: Sustainable and Repeatable Go-to-Market Model
Growing Through Sustainable and Repeatable Go-to-Market Model Driving Growth Across All Pillars Q1 2023 Organic Net Sales1 vs PY Go-to-Market Model 90% of Emerging Markets Business by Year-End 18% International Zone Emerging Markets2 23% Emerging Markets Developed Markets Emerging Markets Volume Gro
Slide 15: Driving Sustainable Growth in Emerging Markets
Driving Sustainable Growth in Emerging Markets Driving Growth Across All Pillars Innovation Marketing Sustainable, Does Ketchup Belong on Pizza??? Profitable Growth YES!!! Net Sales THE PIZZA CRUST THAT ALREADY COMES WITH HEINZ KETCHUP Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 2023 Adjusted EBITDA Margin1,2 16
Slide 16: All Three Pillars of Growth Fueling Organic Net Sales
All Three Pillars of Growth Fueling Organic Net Sales1 Driving Growth Across All Pillars Foodservice Emerging Markets GROW Platforms in Global International Zone U.S. Retail North America Zone Q1 2023 Business Update 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconc
Slide 17: Strongest Growth in GROW Platforms
Strongest Growth in GROW Platforms, Consistent with Strategy Driving Growth Across All Pillars Total North America Q1 Organic Net Sales1 ~15% North America2 U.S. Retail GROW ENERGIZE Platforms GROW +8.1% ~65% ~20% STABILIZE 3 +6.7% vs 2022 vs 2022 Q1 2023 Business Update 1| Non-GAAP financial measur
Slide 18: Taste Elevation and Easy Meals Led Growth
Within GROW Platforms, Taste Elevation and Easy Meals Led Growth Driving Growth Across All Pillars Taste Elevation Easy Meals 15% U.S. Retail Organic Net Sales1 13% Q1 2023 vs Q1 2022 vs Q1 2022 Business Update 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconciliati
Slide 19: Service Levels Improving Sequentially
Service Levels Improving Sequentially Driving Growth Across All Pillars Service Improving U.S. Case Fill Rate 100% 90% 80% 70% Sept '22 Dec '22 Mar '23 Q1 2023 Business Update 19
Slide 20: Gaining Share in Priority Platforms
Gaining Share in Priority Platforms Driving Growth Across All Pillars Q1 U.S. Market Share1 vs PY KHC gained share in priority platforms: Taste Elevation and Easy Meals ▪ Favorable share momentum in priority platforms: Taste Elevation and Easy Meals Taste Elevation U.S. Retail & Easy Meals ▪ Share l
Slide 21: Action Plan in Place to Capture Additional Share
Action Plan in Place to Capture Additional Share Driving Growth Across All Pillars Our Teams Have Kickstarted A Series Of Action Plans To Capture Additional Share 1 Joint Business Plan Execution 2 Increasing Marketing Investment 3 4 Innovation 4 4Supply Recovery Agreements in place to Increasing Inn
Slide 22: Driving Share through Joint Business Plans
Driving Share through Joint Business Plans Driving Growth Across All Pillars 1 Joint Business Plan Execution Earn Quality Merchandising Expand Distribution of Formats that Gain Fair Share of Shelf Space in Premium Occasions Create Expandable Consumption Q1 2023 Business Update 22
Slide 23: Driving Share through Increased Marketing Investment
Driving Share through Increased Marketing Investment Driving Growth Across All Pillars 2 Increasing Marketing Investment +Double Digit % Deploying Incremental M&C Liquids Media for H2 Q1 2023 Business Update 23
Slide 24: Driving Share through Innovation Ramp-up
Driving Share through Innovation Ramp-up Driving Growth Across All Pillars 33 Innovation 2023 Incremental Organic Net Sales1 Disruption Extension H1 '23E H2 '23E Extension Disruption Q1 2023 Business Update 1| Non-GAAP financial measure. See the accompanying Non-GAAP Information and Reconciliations
Slide 25: Driving Share through Supply Recovery
Driving Share through Supply Recovery Driving Growth Across All Pillars 4 3 Supply Recovery Cold Cuts Frozen Potatoes Labor challenges solved, rebuilding inventory Making capital improvements at Ontario factory, will ramp up production in H2 Q1 2023 Business Update 25
Slide 26: Action Plan in Place to Capture Additional Share
Action Plan in Place to Capture Additional Share Driving Growth Across All Pillars Our Teams Have Kickstarted A Series Of Action Plans To Capture Additional Share 1 Joint Business Plan Execution 2 Increasing Marketing Investment 3 4 Innovation 4 4Supply Recovery Agreements in place to Increasing Inn
Slide 27: Advancing Business Transformation
Foodservice GROW Platforms in U.S. Retail Agile@Scale Emerging Markets Delivered Driving Advancing Strong Results Growth Across Business All Pillars Transformation
Slide 28: Driving Growth Across Pillars through Enablers
Driving Growth Across Pillars through Enablers Advancing Business Transformation Growth Pillars Enablers for Growth Sources of Funding Innovation Revenue Foodservice Engine Management Emerging Disruptive Supply Chain Markets Marketing Efficiencies Sales Excellence Working Capital U.S. Retail & Go-to
Slide 29: Developing Better Products, Faster and Entering New Categories
Developing Better Products, Faster and Entering New Categories Advancing Business Transformation Just Spices in US: Direct to Consumer Launch 1 Innovation Through Partnerships Democratizing Plant-Based Food Q1 2023 Business Update 1| Fast Company’s 2023 list of Most Innovative Companies in Consumer
Slide 30: Disruptive Marketing Driving Substantial Earned Media Growth
Disruptive Marketing Driving Substantial Earned Media Growth Advancing Business Transformation 7.5B Earned Media Impressions 8.0 2 Lunchables approved for National School Lunch Program to be served at cafeterias next +150% 6.0 year 4.0 2.0 0.0 Q1 '22 Q1 '23 Billions of Impressions #FindtheKetchupBoa
Slide 31: Artificial Intelligence Leading Transformation across Sales and Supply Chain
Artificial Intelligence Leading Transformation across Sales and Supply Chain Advancing Business Transformation A.I. Enabled Sales Insights A.I. Enabled End-to-End Supply Chain Visibility Harmonizes Category, Shopper and Supply Chain Data Automated Service Risk Identification Uncovers “Live” Insights
Slide 32: Q1 Key Takeaways
Delivered Strong Financial Results across all 3 Pillars of Growth Future Growth will be driven equally by Foodservice, Emerging Q1 Markets and U.S. Retail GROW Key Takeaways Reinvesting in the Business across Marketing, R&D and Technology Q1 2023 Business Update
Slide 33: Financial Performance and Outlook
Q1 2023 FINANCIAL PERFORMANCE AND OUTLOOK Andre Maciel Global CFO
Slide 34: Solid Results Across North America and International
34 Solid Results Across North America and International Financial Performance: Segment Results Kraft Heinz North America International Q1 vs ‘22 Q1 vs ‘22 Q1 vs ‘22 Organic Net Sales 1 9.4% 6.7%2 18.1% Price 14.7pp 13.2pp 19.3pp Vol/Mix (5.3pp) (6.5pp) (1.2pp) Adjusted EBITDA 1 10.3% 13.7% 5.3% Curr
Slide 35: Growth driven by Price and Efficiencies Offsetting Inflation
Growth driven by Price and Efficiencies Offsetting Inflation; Reinvesting in Business Financial Performance: Adjusted EBITDA1 Adjusted EBITDA1 Q1 2023 vs Q1 2022 (in millions) $1,480 $1,342 +10.3% 1 1 1 Q1 2023 Business Update 35 1| Non-GAAP financial measure. See the accompanying Non-GAAP Informati
Slide 36: Pricing and Efficiencies Protecting Margins; Inventory Impacting Free Cash Flow
Pricing and Efficiencies Protecting Margins; Inventory Levels Impacting Free Cash Flow Financial Performance: Key Metrics Adjusted Gross Profit Margin1 Adjusted EPS1 Free Cash Flow Conversion1 $0.68 32.8% $0.60 31.6% 36% 26% Q1 '22 Q1 '23 Q1 '22 Q1 '23 Q1 '22 Q1 '23 vs Q1 2022 Results of Operations:
Slide 37: Generating Efficiencies to Expand Margins and Reinvest
Generating Efficiencies to Expand Margins and Reinvest in the Business Growth Pillars Enablers for Growth Sources of Funding Innovation Revenue Foodservice Engine Management Emerging Disruptive Supply Chain Markets Marketing Efficiencies Sales Excellence Working Capital U.S. Retail & Go-to-Market Ef
Slide 38: Promotional ROI Significantly Improving while Base Volumes Remain Strong
Promotional ROI Significantly Improving while Base Volumes Remain Strong Financial Performance: Revenue Management Fewer Promotions. Base Volumes Increasing Better ROIs. Year over Year % U.S. Consumption Volume Sold ROI Improvement Kraft Heinz U.S. Consumption Volume2 on Promotion1 Q1 ’23 vs Q1 ‘193
Slide 39: Generating Higher Gross Savings as Inflation Begins to Moderate
Generating Higher Gross Savings as Inflation Begins to Moderate Financial Performance: Supply Chain Efficiencies Supply Chain Efficiencies Inflation Gross Efficiency Plan on Track Improvement in Cost Goal: ▪ Input costs beginning to come down $2.5 Billion by 2027 ▪ Expect Inflation to be modestly lo
Slide 40: Working Capital Improvement Plan in Place
Working Capital Improvement Plan in Place Financial Performance: Working Capital Efficiencies ▪ Increased inventory as we prioritized Proprietary Digital Demand Planning Solution accelerating service level recovery ▪ Expect to see a reduction in inventory Demand Forecast Accuracy +10pp throughout th
Slide 41: Outlook Reflects Organic Net Sales & Constant Currency Adjusted EBITDA Growth
Outlook Reflects Organic Net Sales1 & Constant Currency Adjusted EBITDA1 Growth 2023 Outlook 2023 Considerations Above Long-term Algorithm Growth +4-6% +4-6% • Returning to historical elasticity levels (no change from prior call) Organic Net Sales1 • 98% of 2023 pricing is accepted, of which 95% is
Slide 42: Strong Results in Q1, Well Positioned for Full Year
Strong Results in Q1, Well Positioned for Full Year Organic Net Sales1, Adjusted EBITDA1, and Adjusted EPS1 grew above Long-Term Algorithm Financial Adjusted Gross Profit Margin1 expanded sequentially and versus Highlights PY, funding Investment in Marketing, R&D, and Technology Guidance Raised for
Slide 43: Closing Commentary
CLOSING COMMENTARY Miguel Patricio Chief Executive Officer and Chair of the Board
Slide 44: Appendix
APPENDIX Q1 2023 Business Update
Slide 45: Private Label Reconciliation: Scanner Data
Private Label Reconciliation: Scanner Data1 Kraft Heinz PL exposure, including Nat Cheese (syndicated view) 17.8% Remove natural cheese (1.6pp) Kraft Heinz PL exposure, excluding Nat Cheese (syndicated view) 16.1% Negligible business2 (<$1M FY dollars) (2.0pp) KHC custom hierarchy (example: remove c
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