Kraft Heinz Q1 2025 Prepared Remarks Earnings Report

Kraft Heinz EPS Results

• Actual EPS: $0.62
• Consensus EPS: $0.60
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.69

Kraft Heinz Revenue Results

• Actual Revenue: $6.00 billion
• Expected Revenue: $6.02 billion
• Beat/Miss: Missed by -$25.59 million
• YoY Revenue Growth: -6.40%

Kraft Heinz Announcement Details

• Quarter: Q1 2025 Prepared Remarks
• Date: 4/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 7:00AM ET

The Kraft Heinz (NASDAQ:KHC) is a global food and beverage manufacturer known for a broad portfolio of iconic brands including Heinz, Kraft, Oscar Mayer, Philadelphia, and Planters. The company’s operations span categories such as condiments and sauces, cheese and dairy, frozen and refrigerated meals, meat and seafood products, coffee and other beverages, snacking and grocery items. Through integrated production facilities, distribution centers and partnerships with retailers and foodservice operators, Kraft Heinz delivers products to consumers in both established and emerging markets.

Formed in July 2015 through the merger of Kraft Foods Group and H.J. Heinz Company, Kraft Heinz combines over a century of heritage behind some of the most recognized names in the food industry. Heinz traces its origins to 1869 when Henry J. Heinz began selling horseradish in Pittsburgh, while Kraft Foods dates back to 1903 and grew rapidly through innovation in cheese and refrigerated products. The merger was backed by long-term investors Berkshire Hathaway and 3G Capital, creating one of the world’s largest food and beverage companies.

Kraft Heinz maintains dual headquarters in Chicago, Illinois, and Pittsburgh, Pennsylvania, and sells products in more than 190 countries and territories. The company organizes its operations across North America, Europe, the Middle East and Africa, Latin America and Asia Pacific regions, tailoring product offerings to meet local tastes and regulatory requirements. Major production and research facilities support ongoing innovation in packaging, flavor development and nutritional improvements.

Under the leadership of Chief Executive Officer Miguel Patricio, Kraft Heinz emphasizes cost efficiency, brand renovation and portfolio growth. The company continues to invest in marketing, digital commerce and sustainability initiatives, aiming to reduce its environmental footprint and strengthen community engagement across its global supply chain.

Kraft Heinz Q1 2025 Prepared Remarks Earnings Call Transcript

Key Takeaways

• In Q1, organic net sales declined 4.7% year-over-year and constant-currency adjusted operating income fell 4.4%, with EPS at $0.62 reflecting a higher effective tax rate.
• The company generated $482 million in free cash flow (65% conversion, up nine points) and returned nearly $900 million to shareholders while maintaining a ~3x net leverage ratio.
• Kraft Heinz has unlocked $1.5 billion in gross efficiencies toward its $2.5 billion by-2027 goal, driving equipment effectiveness to 70%.
• 2025 full-year guidance was lowered: organic net sales now expected down 1.5–3.5% and constant-currency adjusted operating income down 5–10%, reflecting inflation, tariffs, and consumer headwinds.
• Emerging markets delivered 3.9% sales growth and 20.3% adjusted operating income growth, and the company is scaling its brand growth system to cover 40% of sales and invest in platforms like Lunchables and Capri Sun for top-line recovery.

Presentation

[Anne-Marie Megela, VP & Global Head of Investor Relations at The Kraft Heinz Company]

Investor Relations at The Kraft Heinz Company. I'd like to welcome you to our first quarter twenty twenty five business update. During the following remarks, we will make forward looking statements regarding our expectations for the future, including related to our business plans and expectations, strategy, efforts and investments and related timing and expected impacts. These statements are based on how we see things today, and actual results may differ materially due to risks and uncertainties. Please see the cautionary statement and risk factors contained in today's earnings release, which accompanies these remarks, as well as our most recent 10 ks, 10 Q and eight ks filings for more information regarding these risks and uncertainties.

[Anne-Marie Megela, VP & Global Head of Investor Relations at The Kraft Heinz Company]

Additionally, we will refer to non GAAP financial measures, which exclude certain items from our financial results reported in accordance with GAAP. Please refer to today's earnings release and the non GAAP information that accompany these remarks, which are available on our website at ir.kraffheinscompany.com under News and Events for a discussion of our non GAAP financial measures and reconciliations to the comparable GAAP financial measures. Today, our Chief Executive Officer, Carlos Abrams Rivera, will provide an update on our overall business performance And Andre Maciel, our Global Chief Financial Officer, will provide a financial review of the first quarter results and will discuss our 2025 outlook. We've also scheduled a separate live question and answer session with analysts. You can access our question and answer session at ir.krafsheimscompany.com.

[Anne-Marie Megela, VP & Global Head of Investor Relations at The Kraft Heinz Company]

A replay will also be available following the event through the same website. With that, I will turn it over to Carlos.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Thank you, Anne Marie, and thank you all for joining us. At Kraft Heinz, we know we play a vital role in family's lives and are proud to be a trusted partner in kitchens everywhere. We do know that in moments of uncertainty, our product provides comfort and connection from the kitchen table to the soccer fields to the family owned Main Street restaurants. We source high quality ingredients from local communities like California tomatoes, Ohio cucumbers, and Idaho potatoes. And our commitment to quality and community is reflected in the craftsmanship and the care that goes into every Kraft Heinz product.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

In these unpredictable times, Kraft Heinz remains committed to controlling the controllables and making necessary investments to deliver quality, taste, and value to our consumers through our beloved brands. We are leveraging our unique insights gained from our brand growth system and are executing quickly through our agile ways of working. We believe everyone deserves access to delicious and nutritious food, which is why we are dedicated to making our products superior, affordable, and accessible to all. This is especially important now as consumer sentiment has reached its second lowest point in the last seventy years. Despite growing market pressures in the first quarter, we delivered results in line with our expectations.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We also delivered strong cash flow performance with an increasing free cash flow conversion of nine percentage points year over year. At the same time, we maintained our targeted leverage ratio of approximately three times, ensuring a healthy balance sheet as we return nearly $900,000,000 to our stockholders. We are encouraged by these results and we'll build on the progress we have made to drive consistent long term growth and profitability. At the same time, we're also closely monitoring implication for market tensions such as tariff inflation and the consequence to consumer behavior. And we have reflected these factors in our updated guidance.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

While we do still expect to see progress on recovery throughout the year, we have lowered our expected organic net sales range and widened our constant currency adjusted operating income guidance range. Our revised outlook contemplates incremental costs from inflation, including the impact of tariffs and new regulations as well as the impact on elasticities. Andre will provide more color in his remarks. Looking at the quarter more closely, organic net sales declined 4.7% versus the prior year and were in line with our expectation of down mid single digits. This performance was driven by continued growth in emerging markets and international away from home, more than offset by a decline in The US retail and to a lesser extent, softness in The US away from home industry.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We generated nearly $150,000,000 in growth efficiencies in the quarter, offsetting some of the pressure primarily from commodity inflation. This resulted in a 10 basis point margin contraction in year over year adjusted gross profit margin. Constant currency adjusted operating income decreased by 4.4% as a result of the top line and margin dynamics. EPS came in at $0.62 including a $05 impact from a higher tax rate. As we continue to control the controllables in this environment, our ability to deliver strong cash flow is a consistent bright spot.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We generated $482,000,000 in free cash flow for the quarter, slightly above last year's performance. Our 2025 priorities are aligned with our long term strategy to drive growth and value creation. We will do this by continuing to unlock efficiencies and reinvest in the business. This will power brand and products a priority and ultimately accelerate profitable growth. And while we have further to go on our journey, we have made meaningful progress.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

For example, we are making considerable strides in productivity. In 2023, we set a goal to unlock $2,500,000,000 in gross efficiency by 2027, and we have already unlocked 1,500,000,000.0. As a reminder, we are not just looking to cut cost, but rather a commitment to continuous improvement, building this mindset into our culture so it becomes a natural part of our DNA. And this commitment has paid off with a meaningful improvement in overall equipment effectiveness, reaching an all time high of 70% this quarter and up five percentage point from 2023. We recognize that consumers are increasingly seeking value, and we are committed to delivering products that meet their needs at prices they can afford.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

In addition to marketing and innovation, we are stepping up our investments in value driving initiatives, which is reflected in part in our declining price gap relative to private label in the first quarter. At the same time, we are creating a strong foundation to grow our brands. To drive brand superiority, we are harnessing the power of a brand growth system. And this framework is helping us pinpoint areas for growth acceleration as well as inform smart investments and prioritize future initiatives. We have expanded the system reach aiming to cover 40% of our sales by year end, up from our pilot in 2024, which cover approximately 10%.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

And finally, we are seeing progress in driving omnichannel execution across US retail. In this quarter, we increased share of shelf approximately 25% of our portfolio. Now moving into our results by strategic pillar. In our North America retail accelerated platforms, organic net sales declined 8.1. This was primarily driven by a decline in Lunchables, lapping competitors out of stocks in Philadelphia and Moriah in the previous year and the Easter shift, which drove 110 basis points of the decline.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

This partially offset by a strong performance in Canada, where accelerated platforms grew 5% versus the prior year. We expect a material improvement in the second quarter due in part to the timing of Easter. We're also stepping up pricing business, optimizing media spend, and launching innovation for the remaining of the year, which is expected to improve performance. I will provide more details on that later. Global away from home organic sales declined point 8%, but we continue to see growth in international away from home and have for 16 quarters in a row now.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

At the same time, The U. S. Away from home industry faced pressures due to slowing traffic, which led to a decline in our total U. S. Away from home business.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Turning to emerging markets, we grew 3.9% versus the prior year, primarily driven by recovery in Brazil as we expected. We anticipate continued improvement throughout 2025 in each quarter and we plan to exit the year at an own algorithm pace. Now let's go deeper into our North America retail business. Following the success of our Philadelphia and the Hines UK pilots, we are scaling up our brand growth system to reach 40 percentage sales coverage by year end, up from only 10% in 2024. At CAGNY, you may recall that we were expecting 30% coverage by year end.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Our revised expectations are grounded in our experience to date and the success we're seeing combining the brand growth system with our agile ways of working. Our brand growth system is a critical component of our creative ecosystem, providing a systematic and repeatable framework that complements our disruptive marketing and innovation efforts to drive brand superiority. We have prioritized resources to drive improvement across four brands that are experiencing more significant top line pressures, Lunchables, Capri Sun, Kraft Mac and Cheese, and Kraft Mayonnaise. So let me walk you through each brand, sharing the specific actions we're taking and the encouraging traction we are already seeing as we invest to drive superiority. You will then see how we are confident in the expected improvements contemplated in our 2025 guidance.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Starting with Lunchables, we remain committed to our number one market share. We are bringing bold innovation, delicious renovation, and executed an integrated omnichannel approach as part of our largest Lunchables fall season campaign ever. We recently launched our spicy nachos, which has already delivered over 30% incremental growth to the category. And be sure to stay tuned for a game changing new launch still here in q two. We are geared up for a successful fall season like never before, starting with an elevated Lunchables experience.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Our iconic brand now features a superior tasting cookie, and both with the Lunchables logo sure to excite everyone. Better crackers options are also on the menu, offering a delightful upgrade in our products. Plus, Lunchables is highlighting the fact that it is a great source of protein, giving parents confidence that they are providing nutritious and filling meals and snacks. And to amplify this message, we have built a targeted marketing campaign to drive trial and sampling. This effort ensures that the value and quality of Lunchables resonates with people who matter most, consumers who love our brand.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Our strategic focus on omnichannel executions across Lunchables is already paying dividends with key customer partnerships yielding a meaningful increase in distribution. And to support a winning fall season for our consumers, we are doubling down on our marketing commitment and investing twice the national media spend, ensuring that this iconic brand is top of mind. Let's now look at Capri Sun. It is truly amazing the progress we are seeing in this turnaround story. First, we are driving product superiority with a newly renovated Capri Sun, generating an eight percentage point improvement year over year sales in q one for what we ended in 2024.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We are also expanding accessibility in new channels and driving new occasions with our single serve bottles. The early success is very encouraging, with initial sales coming in five times greater than we expected. Plus, we have entered the front of the store for the first time at checkout with our on the go Caprisone bottles generating velocities at four times the rate of a key competitor. And let's not forget all the new brand love we are bringing by showing up in culture relevant moments. We launched Caprico Moon Punch, featuring our first ever glow in the dark pouch with eight collectible designs inspired by the different moon phases.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

This limited time offer was a huge success with sales exceeding two times the rate of our core products, leading to increased distribution with several top customers. Not only is it clear that kids and parents alike were over the moon for Caprizo and Moon Punch, but that we are successfully executing on these relevant moments. And importantly, we have several more limited time offers on the way and are heavily investing in brand media over the summer hydration season. At Kraft Heinz, we are committed to revamping our iconic mac and cheese brand to meet the evolving needs and taste of our consumers. Our approach to driving top line growth is threefolds.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

First, we are focused on driving incremental to the category. Our Mario shapes are driving total shape sales to the highest level we have seen in the last five years. We're also expanding our flavor portfolio, targeting younger consumers who are craving bold and dangerous flavor within the comfort of familiar trusted brands. Flavored mac and cheese has seen remarkable growth, outpacing the total category by seven times over the last five years. Second, we are optimizing our packaging graphics to ensure consumers know that our Kraft Mac and Cheese has been proudly made with no artificial flavors, no preservatives, and no dyes since 2016.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We're also showcasing our cheesiness and taste because, let's be honest, who does not love more cheese? We know these attributes are important to our consumers. And to further showcase our superiority, we have a new product focused creative rolling out in the market in the coming months with a large media investment behind it. And third, building on our commitment to deliver value, we are excited to introduce new value offerings that cater to evolving consumer needs and preferences. We recently launched an 11 ounce box, which provide 50% more at a price point that is 20% less per ounce.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

This larger size is unbeatable value, feeding a family of five for less than $2. To serve across multiple meal locations, we are rolling out larger mac and cheese cups to capture the accelerating trend of mini meals. Our big cups are twice the size of the original and are perfectly suited to satisfy the larger than a snack hunger. Now let's look at craft mayonnaise. To build on its great taste, our initial focus is on investing in packaging and price.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We're also executing a regional media strategy, a key moment, and leveraging the success we have had in mayonnaise in other parts of the world. We are refreshing our packaging with new graphics, highlighting key attributes that are important to our consumers. We are also encouraging trial and driving confidence in a superior quality through a money back guarantee. Through our brand growth system, we learned that for mayonnaise, regionality matters. So to optimize the media spend, we are now using a targeted media approach focusing on three regions where 75% of our business is concentrated.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We are connecting with our target audience during key seasons like Easter and summer drilling. And inspired by our global success, which includes reaching a 50% market share in Chile from 30% in 2020, we've had what it takes to win. In fact, we are taking the Heinz menu line that has been extremely successful globally and launching it now in Canada. I am very excited about the plans we have in store for these important brands. They are rooted in robust insight from a brand growth system and are being brought to life by our proven agile ways of working.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

This powerful combination of what we are doing and how we are doing it is what gives me confidence in our ability to successfully execute our expected top line recovery in The US retail this year. At the same time, we are making great strides across our other accelerated categories, including pasta sauce with a 5% increase in Q1 organic net sales and our delicious Krave frozen meals in Canada increased 7% through innovation launches and more effective promotions. And our focus on driving awareness and conversion contributed to 10% growth in Primal Kitchen. And finally, building on the growing Mexican cuisine trend, we grew Mexican food and sausage by 15%, the second year of double digit growth in this category. Our next strategic pillar is global away from home.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

In The US, the away from home market is experiencing a downturn as consumers tighten their belt and navigate economic uncertainty. However, despite this challenging environment, we are seeing progress across each aspect of our strategy. We are expanding our footprint in higher margin channels, growing beyond ketchup, and excelling in a go to market approach. In The US, we achieved 4% of sales growth in higher margin, noncommercial channels, including notable wins in the entertainment and travel sectors. Our recent partnership with the Chicago Cubs, which made Heinz the official condiment of Wrigley Field, has yielded incremental distribution of our ketchup, mustard, relish, and other products.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We also signed a new global contract earlier this year with Hilton Hotels. It designates Kraft Heinz as their preferred sauce and condiment vendor. Furthermore, we are making strides in diversifying our portfolio beyond ketchup. Our Philadelphia cream cheese brand, for instance, has seen substantial growth in The US away from home channel, up double digits in the quarter, driven in part by partnership with Crumble and Dunkin' Donuts. Finally, we are leveraging our proven go to market model to expand our distribution network in the emerging markets away from home segment.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

In the first quarter, we successfully added 16,000 new distribution points. And while we're pleased with initial improvements in the first quarter relative to the fourth quarter of last year, the U. S. Away from home industry continues to face challenging times with traffic declining across the sector. As a result, our go forward expectation of industry growth is appropriately adjusted.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Andrew will discuss the implication on outlook in this guidance discussion. Looking at emerging markets, as we expected, we grew organic net sales and accelerated pace year over year in the first quarter of twenty twenty five as compared to the fourth quarter of twenty twenty four. Our growth drivers in emerging markets are twofold. Leveraging the strong brand equity of our Heinz brand and expanding distribution through our go to market model. We grew Heinz organic net sales in emerging market approximately 11%.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Heinz is our largest brand globally. And today, it represents over $1,000,000,000 in sales in emerging markets, but account for only 40% of total sales in the zone, reflecting meaningful run for growth. We also continue to expand distribution through our go to market model, adding approximately 21,000 distribution points compared to the first quarter of twenty twenty four. Shifting now to two key enablers of growth, innovation and marketing. Let's begin with innovation.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We are creating products that truly delight consumers, whether it's through our bold new flavors and cuisines, making our brands more accessible and relevant to a wider audience, or delivering benefits that make a real difference in people's lives. We have spent the last few years building a solid pipeline with over 75% of innovation sales in 2025 expected to come from proven innovation already launched. For example, as part of our Mexican food strategy, we have expanded our Taco Bell partnership, providing our consumers with restaurant quality experiences at home. Building on the momentum from 2024, we grew dollar sales 12% in the first quarter of twenty twenty five, and we are now launching this great testing experience in Canada. We are also expanding into new channels, location, and host foods.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

After one hundred and fifty years, leveraging our extensive agricultural heritage and tomato expertise, we launched the first Heinz pasta sauce in The UK A Couple Years ago. Now we continue to introduce new formats, disrupting and driving excitement in the pasta sauce category and are expanding into new countries and is working, generating dollar sales growth of 26% in the first quarter. And in Indonesia, we introduced our ABC multipurpose peanut sauce, making our entrance into a $200,000,000 peanut sauce market. This ready to use sauce takes meals to the next level. With the rich, nutty flavor of peanuts, it elevates dishes in an instant and is super convenient.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Just open, pour, and enjoy. Introducing Mio and Wine, our latest innovation in the health and wellness space. This on the go hydration solution helps consumer discover the zen and is made with zero sugar, zero artificial diet, and zero calories. Plus, it is a good source of magnesium and b vitamins. This is a great example how we are tapping to the increasing demand for wellness focused catholic products.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

The $6,000,000,000 global magnesium market projected to grow at 5% annually presents a significant opportunity for us to capitalize on this exciting trend. Turning to our marketing engine. This year, we're all about levering up our game and driving return on investment. Obsessed with making every marketing dollar count as we power our brands. Fueled by insights from the brand growth system, we are ensuring that creative excellence is a likely outcome, not a lucky one.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We are marketing at the speed of culture and igniting relevance of great ideas by aligning them to key moments in culture, helping to bring this to life with our internal agency, the kitchen. Here, the best internal talent is collaborating with external partners to create marketing that matters. In q one, we secured over 11,000,000,000 earned impression for our North American brand, which is the highest in Kraft Heinz history. And we're not just reacting to trends. We're activating with agility to capitalize on real time consumer insights.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

For example, when egg prices soar, our teams swoop in with a genius solution, A Jeff Puck dip and decorate marshmallow kit for only $1.99. It was a total hit, and retailers are already asking for a repeat performance in 2026. Who knows? Maybe we just started a new eastern tradition. Just a week before March Madness, a news story dropped that BYU star player, Richie Saunders, was the great grandson of the tater tot inventor of Angoraida Founder.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

We knew we had to act fast, but as a non NCAA partner, breaking through the noise was a challenge. Undeterred, we signed Richie to an NIL deal, capture a photoshoot, and launched the top clock national giveaway in under a week. The campaign went viral, driving 3,000,000,000 earned media impressions and a 9% regional sale lift. We have more engagement than all March Madness sponsor combined with less than five basis points of the spend. As you can see, we are elevating our marketing and making a lasting impact.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

By combining data driven insights with creative excellence, we are building brand relevance and sparking new consumer connections, all at the speed of culture. With that, let me hand it over to Andre to provide more details on our first quarter financial results and to discuss our 2025 outlook.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Thank you, Carlos. In the first quarter, organic net sales declined 4.7% for total Kraft Heinz, with price up 0.9 percentage points and volume mix down 5.6 percentage points. In North America, organic net sales declined 6.5%, with growth in our Canada business offset by lower sales in both U. S. Retail and Away From Home.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

This includes an impact of 120 basis points driven by the timing of Easter. In our International Developed Markets, organic net sales declined 1.7%. This was primarily driven by industry slowdown in The UK from weakening consumer sentiment. Keep in mind that this is an improvement from the fourth quarter year over year decline of 4%. In Emerging Markets, organic net sales were up 3.9%, an improvement from 2.2% year over year growth in the fourth quarter of twenty twenty four.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Results were driven by pricing in line with inflation, with volumes impacted by the timing of Ramadan. We are pleased with the progress in Emerging Markets, and we expect to see this continue, reaching double digit growth by the fourth quarter of twenty twenty five. Turning to the next slide. Total Kraft Heinz adjusted operating income declined 5.2%, while our adjusted operating income margin increased 30 basis points, a result of strong performance in Emerging Markets. North America, adjusted operating income declined 9.4% versus the prior year.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Productivity gains and lower incentive compensation were more than offset by declines in sales and commodity inflation, particularly in coffee, eggs and meat. In International Developed Markets, adjusted operating income decreased 7%, mainly due to the lag between pricing and inflation as well as softer sales. In Emerging Markets, adjusted operating income increased 20.3% and adjusted operating income margin expanded by 300 basis points. This growth and margin expansion was driven by revenue management initiatives in Brazil and operational efficiencies across the zone. As a result of these initiatives, we expect to be able to maintain this profitability levels throughout the year.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

As we navigate the current consumer landscape and macroeconomic conditions, our focus remain on delivering value to our consumers. By unlocking efficiencies and optimizing our marketing spend, we are able to invest in price and support our brands. Building on our previous commitment, we are increasing our investments in price in 2025, starting with reestablishing optimal price gaps in key categories. Additionally, we are leveraging trade spend to support our product renovations and boost trial and drive awareness of superior product attributes. We are also leveraging our Heinz Verifier loyalty program to accelerate distribution gains in away from home.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

And finally, we are investing in the strategic areas, including our brands across Canada and Philadelphia and Aurida to keep the momentum and drive further growth. In addition to increasing our investments in price, we are working diligently to improve marketing efficiency and drive better returns. We expect marketing as a percentage of sales to be up versus the prior year, with the media spend increase by at least 15%. We are also targeting a double digit increase in returns on that spend by optimizing our media mix and brand allocation. Ultimately, our goal is to drive improvement in top line trends, and we believe these efforts will help us to achieve that.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

I'm extremely proud of the team's ability to unlock end to end efficiencies, which enables us to make the investments I just discussed. In Q1, we generated 3.7 of gross efficiencies as a percentage of cost of goods sold. This exceeds the 3.5% goal we had for the year, And we are well on our way to achieving our goal of $2,500,000,000 in efficiencies by 2027. With $1,500,000,000 unlocked to date, we have significant runway ahead. These efficiencies helped mitigate commodity pressure and limited the decrease in year over year adjusted gross profit margin to 10 basis points in the first quarter.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Turning to cash flow. We generated free cash flow conversion of 65%, a nine percentage point increase versus the prior year. This was primarily driven by lower cash outflows from variable compensation, partially offset by inventory phasing. In terms of adjusted EPS, we declined 10.1% or $07 versus the first quarter of twenty twenty four. This was driven by favorable impact from share repurchases and other expense income, more than offset by negative impact from a higher effective tax rate and results of operations.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Last quarter, we spoke about the expected 500 basis points step up in our P and L tax rate starting in the first quarter. As a reminder, this step up is related to the transfer of certain business operations that was completed in the fourth quarter of twenty twenty four. The transfer was part of our planning for the changes in the international tax environment. It also allowed us to achieve greater operational synergies. A healthy balance sheet and strong cash flow generation provide a foundation for financial stability and flexibility.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

We have been able to provide consistent cash generation as well as significantly reduce our net leverage ratio, positioning ourselves to better navigate this uncertain environment. As part of our ongoing effort to optimize our capital structure, we issued bonds to rebalance our debt towers. The net effect on our p and l is minimal, and we are able to reinvest the funds raised. We continue to be excellent stewards of capital. By taking a disciplined approach to financial management, we have created optionality for capital allocation.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Our priorities remain the same, to continue to invest in organic growth, actively manage our portfolio and return incremental capital to our shareholders. We have maintained a strong balance sheet, returned nearly $900,000,000 in capital to stockholders year to date, and maintain our net leverage target of approximately 3x. Of the $900,000,000 returned to stockholders, five hundred million was through our competitive dividend, with a yield that exceeds 5% and EUR 400,000,000 through our share repurchase program. This demonstrates our confidence in the improved trajectory of the company. Currently, we have about $1,500,000,000 remaining against our $3,000,000,000 authorization.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

As a reminder, our share repurchase program is non programmatic, a function of excess cash and takes into consideration the macroeconomic environment. Now turning to our full year 2025 outlook. We are lowering our organic net sales expectations and are widening our guidance range for constant currency adjusted operating income as a result of the growing macroeconomic challenges, including potential tariffs and the regulatory environment. We are now expecting organic net sales in the range of down 1.5% to down 3.5% compared to our previous outlook of flat to down 2.5%. This guidance contemplates growth in Emerging Markets, which is expected to reach a double digit pace by year end, and it also reflects a relatively flat top line performance in global Away From Home relative to last year, and an elongated recovery in U.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

S. Retail challenged categories. Relative to our previous expectations, the change in organic net sales is primarily driven by worsening consumer sentiment and changes in volume elasticity, particularly in The United States. For full year constant currency adjusted operating income, we are now anticipating a decline of 5% to 10% compared to our previous expectation to decline 1% to 4%. Our lower expectations contemplate increased costs of doing business, including elevated inflation and tariffs.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

The wider range reflects a larger degree of uncertainty given the underlying volatility and unpredictability of macroeconomic dynamics, as well as a changing policy landscape. It also provides us with the necessary flexibility to dial in on investments as deemed appropriate. Our constant currency adjusted operating income expectations include the impact of lapping lower variable compensation 2024, which is an approximate 150 basis point headwind. It also contemplates an adjusted gross profit margin that is down 25 to 75 basis points year over year, driven by our gross efficiencies, tariff mitigation efforts and additional pricing that are expected to be more than offset by inflation and incremental investments in price and product. We expect adjusted EPS to be in the range of $2.51 to $2.67 as compared to our previous expectation of $2.63 to $2.74 The change in guidance reflects the revised organic net sales and constant currency adjusted operating income estimates, partially offset by the impact of year to date share repurchases.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Our adjusted EPS expectation also contemplates an effective tax rate of approximately 26%, which is a $0.23 headwind on adjusted EPS year over year. From a free cash flow perspective, we expect 2025 to be flat versus prior year, with free cash flow conversion of approximately 95%. This is driven by working capital efficiencies and lower cash outflows for variable compensation, partially offset by the net cash impact of a higher tax rate. Our outlook does not reflect any impact from future potential share repurchases. And as a reminder, we have $1,500,000,000 remaining on our $3,000,000,000 share repurchase plan.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

Looking at the second quarter, we expect year over year organic net sales to come in better relative to the first quarter of twenty twenty five. This is driven primarily by an approximate 100 basis points benefit due to Easter shift, but also from improvements in cream cheese and Oreoada as we lap headwinds in the first quarter that were driven by competitor out of stocks in the prior year, and also continued sequential improvement in emerging markets. We expect adjusted gross profit margin to be down approximately 200 basis points in the second quarter. The pressure is primarily driven by continued inflation in coffee and the timing of commodity hedges. As a result of the pressure on adjusted gross profit margin, we expect adjusted operating income to be down double digits versus the prior year.

[Andre Maciel, Executive VP & Global CFO at The Kraft Heinz Company]

With that, I will pass it back to Carlos for some closing comments.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Well, you, Andre. Let me wrap up by saying we're acutely aware of the building pressures across food from incremental inflation to tariff implications and the concern our consumers have regarding a potential recession. We're actively working on solutions. I sincerely believe that our proven ability to unlock efficiencies and generate cash along with our value adding innovation and renovation, plus the strategic investments we're making across marketing and our brands provide us with a robust toolkit to navigate and adapt to the ever changing environment. And by doing so, we will continue to serve our consumers delicious food from trusted brands at a price that they can afford, all while returning value to our stockholders.

[Carlos Abrams-Rivera, CEO at The Kraft Heinz Company]

Thank you for joining us and for your interest in Kraft Heinz.

Participants

Executives

• Anne-Marie Megela, VP & Global Head of Investor Relations
• Carlos Abrams-Rivera, CEO
• Andre Maciel, Executive VP & Global CFO