Kraft Heinz investment strategy: overview
- Kraft Heinz is reallocating $600m into growth after demerger paused
- Two thirds of funds target marketing packaging and commercial capabilities
- Remaining investment focuses on pricing to improve affordability for consumers
- Company prioritises key brands like Heinz and Philadelphia to drive returns
- Strategy aims to boost household penetration through brand equity and innovation
Kraft Heinz’s planned demerger remains paused. It was less than a year ago that the US giant announced the split, yet it’s already been in limbo since February.
Now, the company is planning on incrementally investing $600m back into itself.
Kraft Heinz will invest this into top-line growth instead of spending $300m on the separation, says CEO Steve Cahillane in a fireside chat with Deutsche Bank.
How will this investment be used?
Pricing will be a major focus for investment
Kraft Heinz will use the $600m on two things, explains Andre Maciel, CFO and executive VP for the company. Two-thirds of it will be spent on “the commercial levers of sustainable top-line growth”, such as product packaging superiority, marketing and commercial headcount.
The remaining third will be spent on price. This is an important focus in the current climate, as consumers struggle with affordability.
Cahillane acknowledges that the events of the past five years have been “unprecedented” in terms of affordability and suggests that it’s been a generation since things were as bad as they are now. In light of this, he says, the company aims to provide the consumer with a more attractive value proposition.
In terms of pricing, Kraft Heinz has looked at its gaps relative to its competition and relative to private label offerings.
A refocus on brands
Kraft Heinz’s brands have been underinvested in for the past decade, believes Cahillane. Now it has an opportunity to do something different.
The company aims to refocus on brands — both major brands and brands that have seen underinvestment.
Major brands such as Heinz and Philadelphia will be central to the investment, says CEO Cahillane. The company will “push forward” on such “iconic brands”. These brands have the highest returns, so it makes sense to plough resources into them.
While such brands are widely known by consumers, he explains, this doesn’t always mean that they’re present in households.
“When you look at our portfolio, one of the things that you see in our brand awareness is very high across the board,” he says. “People know our brands. But how that translates into household penetration is not always as strong as it needs to be.”
There are two ways to address this problem, he says; through investing in brand equity, the value of the brand through the eyes of the consumer, and through innovation.
He gives an example of when innovation has helped boost a brand. Consumers of Capri-Sun used to stop buying it at around the age of 12. However, the company introduced Capri-Sun in plastic bottles, which consumers see as less ‘childlike’ than the pouch, attracting more teenagers to buy it.
There are a lot of brands that need innovation like this, he says. The $600m investment will help the company do this.
“We’ve got iconic brands that have been underinvested, and as we get the investment levels right, as we get the execution right, as we get the organisation really rallied around the top-line agenda, I think it’s going to be exciting what we can accomplish.”
Kraft Heinz’s priorities
Cahillane has only been in the role of CEO since December. How does he want to be remembered?
The chief priority for him is organic top-line growth, as seen in this investment.
For now, the demerger does not appear to be Cahillane’s or Kraft Heinz’s chief priority.
