Kraft Heinz Q1 2026 Prepared Remarks Earnings Report

Kraft Heinz EPS Results

• Actual EPS: $0.58
• Consensus EPS: $0.50
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: $0.62

Kraft Heinz Revenue Results

• Actual Revenue: $6.05 billion
• Expected Revenue: $5.89 billion
• Beat/Miss: Beat by +$161.66 million
• YoY Revenue Growth: +0.80%

Kraft Heinz Announcement Details

• Quarter: Q1 2026 Prepared Remarks
• Date: 5/6/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 6, 2026
• Conference Call Time: 7:00AM ET

The Kraft Heinz (NASDAQ:KHC) (NASDAQ: KHC) is a global food and beverage company formed in 2015 through the merger of Kraft Foods Group and H.J. Heinz Company. The combination created one of the largest packaged-food companies in the world, built around well-known consumer brands. The merger was supported by major investors and established a multi-national platform for branded food products.

Kraft Heinz develops, manufactures, markets and distributes a broad portfolio of branded packaged foods and condiments. Its product assortment includes iconic household names in categories such as condiments and sauces, cheese and dairy, meals and sides, meats, coffee and other shelf-stable and refrigerated items. The company sells products through retail, foodservice and other channels, and operates across North America, Europe, Latin America and parts of the Asia-Pacific region, serving consumers in many international markets.

Kraft Heinz is headquartered in Chicago with historic operational roots in Pittsburgh and maintains global manufacturing, research and development, and sales operations to support its portfolio. The company emphasizes brand management, scale manufacturing and global distribution as core elements of its business model. Miguel Patricio has served as chief executive officer since 2019, leading efforts to refresh the company’s brand portfolio and improve growth execution while leveraging the company’s extensive marketing and supply-chain capabilities.

Kraft Heinz Q1 2026 Prepared Remarks Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q1 outperformed expectations with organic net sales down 0.4% (better than a low-single-digit decline), helped by an estimated ~150 bps winter-storm boost and clear share momentum — taste-elevation brands showed particularly strong gains (over 80% gaining/holding share, 87% in March).
• Neutral Sentiment: Management announced a disciplined $600 million investment plan across product, pricing, marketing, sales and R&D, and is increasing marketing to at least 5.5% of net sales and R&D spend toward ~0.9% of sales to drive longer-term growth.
• Positive Sentiment: Cash generation is a strength — the company produced $800 million in free cash flow in Q1 (up 59%) with 111% conversion, reinforcing the ability to sustain the dividend, pay down debt and fund reinvestment.
• Negative Sentiment: Profitability remains under pressure — Q1 adjusted operating income declined ~12% and adjusted EPS fell 6.5%, and full-year guidance reiterates adjusted operating income down 18%–14% and EPS of $1.98–$2.10, reflecting higher investments, inflation, SNAP headwinds and Indonesia impacts.
• Positive Sentiment: Structural actions and international momentum — new North America leadership, simplified operating model and incentive changes aim to accelerate share gains, while Heinz grew ~11% in emerging markets and distribution points rose over 25%, with H2 emerging markets expected to accelerate to double-digit growth.

Presentation

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

Hello, this is Anne-Marie Megela, Head of Global Investor Relations at The Kraft Heinz Company. I'd like to welcome you to our first quarter 2026 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 risk and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release which accompany these remarks, as well as our most recent 10-K, 10-Q, and 8-K filings for more information regarding these risks and uncertainties. Additionally, we will refer to non-GAAP financial measures which exclude certain items from our financial results reported in accordance with GAAP.

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

Please refer to today's earnings release and the non-GAAP information that accompany these remarks, which are available on our website at ir.kraftheinzcompany.com under News & Events for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Today, our Chief Executive Officer, Steve Cahillane, will provide an update on our business performance and overall strategy. Andre Maciel, our Chief Global Financial Officer, will provide a financial review of the first quarter results and will conclude by discussing our 2026 outlook. We've also scheduled a separate live Q&A session with analysts. You can access our Q&A session at ir.kraftheinzcompany.com. A replay will also be available following the event through the same website. With that, I will now turn it over to Steve.

[Steve Cahillane, CEO at The Kraft Heinz Company]

Thank you, Anne-Marie, and thank you all for joining us. We've made steady progress in the first quarter, and I'm encouraged by the early signs of momentum that we're building. At the same time, we remain grounded in the necessary work ahead, particularly against the backdrop where consumer sentiment remains low due to current macroeconomic and geopolitical conditions. What gives me confidence is the alignment and commitment I see across the organization as we execute against our 2026 plans, which will position us to ultimately return to sustainable and profitable growth. Beginning with the first quarter, I'm pleased to share that we delivered results ahead of our expectations. Organic net sales declined 0.4%, outperforming our initial outlook for a low single-digit decline.

[Steve Cahillane, CEO at The Kraft Heinz Company]

This better-than-expected top line was driven by an estimated 150 basis points consumption benefit from winter storms in January and February, and to a lesser extent, outperformance in market share recovery. While the storm impact reflects a one-time benefit in the quarter that we don't expect to repeat, we're encouraged by the underlying share momentum. Adjusted gross profit margin of 34.1% was down 30 basis points versus the prior year, primarily driven by inflation, partially offset by productivity gains. Our top line and adjusted gross profit margin performance, in addition to our planned increase in SG&A, primarily in marketing, contributed to a constant currency adjusted operating income decline of 12.5%. Adjusted EPS was $0.58 for the quarter, a decline of 6.5% compared to the prior year.

[Steve Cahillane, CEO at The Kraft Heinz Company]

This was driven by our adjusted operating income performance, partially offset by a lower effective tax rate. We continued to generate strong free cash flow, up 59% versus the prior year, driven largely by improvements in working capital. This, along with the strength of our balance sheet, positions us to confidently sustain our dividend and manage debt levels. As you may recall, we started increasing investments in the second half of 2025. I am pleased to share that we're seeing those investments start to pay off and drive early market share traction this year. In 2025, 21% of our total Kraft Heinz business was gaining or holding share. In the first quarter, that number improved to 35% with an even more pronounced improvement in March at approximately 58%.

[Steve Cahillane, CEO at The Kraft Heinz Company]

As we look at this through the lens of our market share goals across Win Big, 28% of our business was gaining or holding share in 2025, with an improvement to 51% in the first quarter and 59% in March. Driving majority of the improvement across Win Big is our performance in U.S. taste elevation, where we have a portfolio spanning categories in which we hold strong market share positions and have a clear right to win. Here, the percentage of sales gaining or holding share in the first quarter was over 80% and reached 87% in March. We have made product and packaging improvements to drive superiority across taste elevation categories, including ketchup and cream cheese. We increased marketing and optimized allocation across media types, while at the same time launching new product-focused creative.

[Steve Cahillane, CEO at The Kraft Heinz Company]

We invested last year to bolster our U.S. taste elevation team with approximately 50% more headcounts supporting core brands like Heinz and Philadelphia. This is proof that when we make focused, consumer-driven investments, we can improve performance. As we have recently announced, our plan for this year calls for meaningfully more investment. In our U.S. retail business, we are moving in the right direction from 29% of our portfolio gaining or holding share in the first quarter to 54% in March. In addition to taste elevation, we are driving market share improvements across both hydration and desserts. That said, we still have much work to do, particularly in categories like meats and meals, where we are taking targeted actions, including price investment across Oscar Mayer and stepping up innovation and marketing across Mac and Cheese.

[Steve Cahillane, CEO at The Kraft Heinz Company]

We believe the investments we're making this year will translate into stronger performance in U.S. retail. Let me take you through our specific plans for the rest of 2026 and how we will continue to build on this early momentum. As I said, our goal was to drive volume-led, sustainable, and profitable top-line growth while continuing to generate attractive free cash flow. We plan to do this by turning around our U.S. business and by accelerating the momentum in our international markets across both retail and away from home channels. Starting with the U.S., we are building upon investments we started to make last year. We announced a $600 million investment across product superiority, select pricing, marketing, sales, and R&D, of which the majority will be focused on turning around our U.S. business. We know that our brands respond well when we invest behind them.

[Steve Cahillane, CEO at The Kraft Heinz Company]

Building on 2025 learnings, we are improving how we allocate spend and are sharpening our execution. We are deploying these incremental dollars in a highly disciplined manner. Our strong balance sheet and robust free cash flow capabilities position us well to fund the investments. In addition to the investments, we are improving and simplifying our U.S. operating model, including new leadership, refined incentives, and a renewed focus on rewiring core processes. I will share more details on this shortly. Internationally, growth will be led by our Heinz brand, along with distribution expansion in emerging markets. In the second half of 2026, we expect emerging markets to accelerate to a double-digit growth pace. Let's dive a bit deeper into the $600 million investment.

[Steve Cahillane, CEO at The Kraft Heinz Company]

Our focus is on delivering value to consumers, not only through superior products and meaningful differentiation, but also by providing affordable options while at the same time protecting distribution. We are making disciplined investments to improve the ROI of our promotional spend, expand access to opening price points, and in select cases, implement base price adjustments. For example, we added frequencies to our Capri Sun 10-pack in the first quarter, which is performing very well. We just introduced new promotions on our 5-pack Kraft Mac & Cheese. We're also introducing smaller pack sizes at more accessible entry price points, such as in pasta sauce, and will drive value through optimal price curves across select condiments, including Heinz Ketchup. To drive consistent execution, we are making investments in people, increasing headcount throughout the organization with a particular focus on our marketing and sales teams.

[Steve Cahillane, CEO at The Kraft Heinz Company]

This includes investments in e-commerce, where we grew approximately 13% year to date through the first two months of the year, with investments expected to accelerate in the second quarter. We know that well-resourced teams will enable us to have better retail partnerships, better in-store and online execution, sharper consumer insights, and better product launches. In the first quarter, we've made progress in pinpointing our hiring priorities and are actively working on bringing the right talent on board to complement our existing teams. On the marketing front, we have been actively working to increase our return on marketing spend. We've reallocated dollars towards higher return brand media, improving efficiency through fewer, more effective media partners, and launching stronger consumer-driven creative. Importantly, we're measuring direct sales impact, and we are seeing clear improvements. Based on our latest data, return on ad spend grew 8 percentage points globally.

[Steve Cahillane, CEO at The Kraft Heinz Company]

As we are improving returns, we're also stepping up our investment, increasing marketing spend to at least 5.5% of net sales. In the first quarter, marketing was up approximately 37% versus the prior year. Importantly, we are doubling down on marketing in areas with good momentum. For example, across big bet innovations, including PowerMac, new partnerships, including our recently announced five-year partnership with the NFL, and supporting Heinz globally. We also know that we need to invest more in R&D to drive both product superiority and value for consumers. Our plan contemplates increasing investment in R&D by approximately 20% versus the prior year, bringing it closer to 0.9% as a percentage of net sales. In the first quarter, our R&D spend was up 16% versus the prior year.

[Steve Cahillane, CEO at The Kraft Heinz Company]

These investments are increasing both capacity and capabilities to support our growth agenda across consumer experience, packaging innovation, and process development, all further enabled by digital advancements. As we invest more in R&D, we are strengthening the foundation of our innovation pipeline. Our innovation and renovation strategy is centered around three consumer-driven platforms, convenience, new occasions, and nutrition. We have already done a lot of work on renovating the core, including product and packaging improvements, whether that be improved cookies and crackers in Lunchables with a new on-pack protein claim or Crystal Light, where we refreshed the packaging to clearly highlight its zero sugar, low-calorie positioning. To complement that work, we are launching bigger innovation. This is highlighted by the recent launch of Kraft Mac and Cheese Power Mac, which is now on shelves at major retailers nationwide.

[Steve Cahillane, CEO at The Kraft Heinz Company]

PowerMac expands our blue box lineup with added nutrition while staying true to the taste, convenience, and affordability that has made Kraft Mac & Cheese a trusted household favorite, offering more nutritional value at a lower price than competition while maintaining attractive margins. We are really hitting on the value equation for our consumers. While it is too early to gauge sell-out performance, distribution has come in very strong, selling into 35,000 stores, and we are ramping up in-store support and media to drive trial and velocities. We also have an exciting pipeline ahead of us, including Capri Sun Hydrate, a functional beverage option that addresses the white space between kid beverage and adult sport drink. We are expanding our Philadelphia lineup with lactose-free cream cheese offerings.

[Steve Cahillane, CEO at The Kraft Heinz Company]

Lactose intolerance affects up to 50 million Americans, and our Philadelphia brand is well-positioned to provide the same signature creaminess and taste without compromise. You can expect to see Capri Sun Hydrate roll out on shelves throughout the second quarter, with lactose-free Philadelphia coming in early third quarter. As we prioritize our investments across the portfolio, we are taking into consideration our market share goals. For those brands where we want to hold share, like Oscar Mayer and Maxwell House, we will spend to defend share. In those brands where we're looking to win market share, like Lunchables and Jell-O, we will invest selectively. For those brands where we have the right to Win Big, like in our taste elevation brands, such as Heinz and Philadelphia, we will distort our investments accordingly.

[Steve Cahillane, CEO at The Kraft Heinz Company]

In addition to investing more across the business, the second major element of our U.S. turnaround is the simplification of our U.S. operating model. First, we brought in Pedro Pizarro to lead our North America business. Having worked closely with Pedro, I've seen firsthand his ability to build strong teams, stay relentlessly focused on consumers and customers, and translate strategy into results. I am confident in his ability to help drive our North America business forward. Second, we have rolled out an incentive structure that better focuses the teams on generating market share gains while empowering teams to be more flexible and adaptive to market conditions. Lastly, we are making refinements to our business unit model. We believe that we have the right base to build upon with an operating model that is BU-led and functionally enabled, but we are not fully living into this model today.

[Steve Cahillane, CEO at The Kraft Heinz Company]

We've launched an initiative to rewire core processes and management routines, such as integrated business planning, innovation, and marketing and sales ways of working. This will help us streamline decision-making and build more consistent commercial capabilities with clearer processes and accountabilities. We expect through our investments and simplified operating model in the United States, we can sharpen our focus on our brands and capabilities while reducing complexity and accelerating decision-making across the organization. As we progress throughout the year, we anticipate this will translate into more consistent and stronger execution in market. Turning to our international markets. Our focus remains on growing the core through our Heinz brand and distribution expansion in our emerging markets. Heinz grew approximately 11% in emerging markets in the first quarter. Around the world, we are expanding Heinz across new occasions and geographies while catering to local preferences and trends.

[Steve Cahillane, CEO at The Kraft Heinz Company]

Even in markets where we're already strong, there's substantial white space. Brazil is a prime example. Here, we are the leader in Ketchup with nearly 50% share. Despite our share position, Heinz is only in about 20% of Brazilian homes. This presents a meaningful opportunity for expansion. This past month, we launched Heinz Tomato Ketchup Zero, which has no added sugar, 50% fewer calories, 25% less sodium, uses a high proportion of tomatoes, and sells for the same price as the original version. This is a great example of how we're leveraging the strength of our Heinz brand to meet consumers where they are. We also expect to continue to grow in emerging markets through increased distribution, leveraging our go-to-market model, with distribution points up more than 25% in the first quarter.

[Steve Cahillane, CEO at The Kraft Heinz Company]

This includes continued expansion into the away-from-home channel, which grew over 8% in the quarter. Taking a closer look at global away from home, organic net sales have continued to improve relative to our performance in 2025. In the first quarter, our away-from-home business declined 0.6%. This was primarily driven by our performance in the U.S., which was partially offset by growth in emerging markets that I just mentioned. As we progress throughout the year, we anticipate an improvement in our share performance despite our expectation for the U.S. food service industry to remain muted. We believe this will be driven by a combination of continued ramp-up of new business wins and further investment behind our Heinz Verified program. Away from home remains a strategic channel for us where we see significant opportunity for growth both across our North American and our international businesses.

[Steve Cahillane, CEO at The Kraft Heinz Company]

This includes growth beyond ketchup, expansion into non-commercial channels, and increased penetration in QSRs. Before I hand it off to Andre, as you can see, we are starting to see some initial momentum. Based on the strategic direction we have set and our first quarter performance, we are confident that we can achieve our expectations for 2026. Andre will now walk you through our first quarter financial performance and 2026 outlook in more detail.

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

Thank you, Steve. In the first quarter, organic net sales for Kraft Heinz declined 0.4%. Price contributed 0.8 percentage points, while volume mix declined 1.2 percentage points. Higher pricing was primarily driven by coffee, with declining volume mix largely reflecting elasticities in coffee and softness in cold cuts. Breaking this performance down by segment, North America organic net sales declined 1.1%. Coming in better than we anticipated due to a 150 basis point one-time impact from increased consumption driven by winter storms, as well as market share momentum. Growth in Canada was more than offset by declines in the U.S., which was driven primarily by cold cuts. As expected, we also experienced a benefit from the Easter shift of approximately a 100 basis points, which we anticipate will be a headwind in the second quarter.

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

At the same time, we are cautiously optimistic that the underlying improvement in share performance will hold and ultimately improve. In our international developed markets, organic net sales declined 0.1%. This decline was primarily driven by pressure in Western Europe due to price negotiations. Heading to the second quarter, most of these discussions are behind us, with market share now recovering across the region. This headwind was mostly offset by growth in the U.K., where we gained 60 basis points of share in the quarter. Growing share across our meals, sauces, and pasta sauce categories led by our Heinz brand. This is a true testament to the stretchability of the Heinz brand beyond ketchup. In emerging markets, organic net sales were up 3.8%.

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

This was driven by high single-digit growth across our LATAM and East regions, partially offset by the previously anticipated 400 basis point impact from the decline in Indonesia. Outside of Indonesia, we are generating volume growth in emerging markets, we expect to start seeing recovery in Indonesia in the second half of the year. Turning to the next slide. Kraft Heinz adjusted operating income declined 11.8%, Our adjusted operating income margin decreased 250 basis points. In North America, adjusted operating income declined 11.6% versus the prior year. This was primarily driven by investments we are making in marketing in addition to inflation, which was partially offset by our productivity initiatives. In international developed markets, adjusted operating income increased 4.9%.

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

This was primarily driven by a favorable impact from currency, strong productivity, and lower commodity costs that were partially offset by incremental investments in marketing. In emerging markets, adjusted operating income declined 4%. Indonesia, which contributed 11 percent point impact to the decline, more than offset growth in the rest of the business. Outside of Indonesia, we delivered growth driven by sales performance, particularly in our Heinz brand and productivity savings helping to offset inflation. Moving to adjusted gross profit margin, which declined 30 basis points versus the prior year in the first quarter. This was driven by inflation, particularly across manufacturing and logistics, which more than offset productivity initiatives and pricing. Looking ahead, the macro environment remains volatile, driven by ongoing geopolitical conflicts. We expect our commodity hedging program to provide some near-term protection, particularly as it pertains to costs related to energy and edible oils.

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

We also have hedges in place for certain resins and metals through mid Q3. As these roll off, we would expect increased exposure to spot prices in the fourth quarter. Helping to mitigate these inflationary headwinds and support gross margin performance, we continue to generate strong gross efficiencies. We delivered approximately $160 million in the first quarter, representing roughly 4% of COGS, a pace that we expect to continue through the rest of the year. In terms of adjusted EPS, we declined approximately 6.5% or $0.04 versus the first quarter of 2025. The decline was driven as expected by lower results of operations and was partially offset by a lower effective tax rate. Looking at free cash flow, we generated $800 million in the first quarter, a 59% increase versus the prior year.

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

Free cash flow conversion of 111% represented a 46 percentage point increase compared to Q1 of last year. The increase in free cash flow was driven primarily by improvements in working capital across both inventory and payables. These improvements reflect our continued focus on excess inventory reduction, digital integration in demand planning, and improved payment terms through collaborative supplier negotiations. Our free cash flow conversion also benefit from marketing accruals booked in the first quarter with the impact to cash expected in subsequent quarters. Looking at capital allocation, our priorities remain very clear: sustaining the dividend and protecting our investment-grade credit profile. With a strong balance sheet and solid free cash flow generation, we have the flexibility to navigate potential volatility while reinvesting the business and continuing to fund the dividend, reduce debt, and manage leverage in a disciplined way.

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

In the second quarter, we are deploying excess cash to reduce debt and continuing to optimize our debt towers by finding opportunities to reduce our cost of debt. We would expect our 2026 net leverage to be no higher than 3.3 times. We have a clear path to bring back this down to our target in about two years. Turning to our full year 2026 outlook. We are reiterating our expectations for the year. We continue to expect organic net sales to be down 3.5% to down 1.5%. This includes an approximate 100 basis point impact from incremental SNAP headwinds. Our outlook contemplates adjusted gross profit margin in the range of down 75 basis points to down 25 basis points year-over-year, reflecting inflation as well as investments in price, product, and packaging.

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

This is expected to more than offset targeted efficiencies. We expect inflation within our full year outlook to be slightly above 4%. As I mentioned, the macro backdrop continues to be uncertain amid geopolitical tensions. We are maintaining a heightened focus on supply continuity, and while we expect our commodity hedges to help mitigate near-term cost volatility, we would expect to see some incremental costs in the second half. Importantly, we have the capacity to absorb these costs within our guidance. We continue to expect constant currency adjusted operating income to be in the range of down 18% to down 14%. This includes approximately 13 percentage points from incremental investments and an approximate 3 percentage point impact from lapping lower variable compensation in 2025. We continue to expect adjusted EPS to be in the range of $1.98-$2.10.

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

Our adjusted EPS expectation now contemplates an effective tax rate of approximately 25%. From a cash perspective, we continue to expect to generate free cash flow conversion of approximately 100%. Looking specifically at the second quarter, we expect organic net sales to be down between 3%-5%. This includes an approximate 100 basis point headwind from the Easter shift and a 100 basis point headwind from lower SNAP funding. In the U.S., we do expect to hold our underlying share improvement seen in the first quarter into the second quarter, and a slight sequential improvement in both global away-from-home and emerging markets. Moving into the second half of the year, we expect further improvement in our top line as we lap the headwind in Indonesia and our investments ramp up.

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

For adjusted operating income, we anticipate a decline in the range of 18%-20% in the second quarter. This is driven by our top-line expectations, a slightly worse adjusted gross profit margin year-over-year relative to the first quarter, and increased levels of investment. With that, let me pass it back to Steve Cahillane for some closing comments.

[Steve Cahillane, CEO at The Kraft Heinz Company]

Thank you, Andre. Our 2026 plan is focused on building momentum in the business to drive profitable growth through share recovery and volume improvement while continuing to generate attractive free cash flow. We believe this is the single most important thing we can do to position ourselves for the future. Investments we made in 2025 are now driving early traction with improving market share trends, particularly in must-win parts of our portfolio like taste elevation. We've seen that our brands respond well when we invest behind them. This year, we will build on those initial investments, applying learnings from 2025 to improve how we allocate spend, sharpen our execution, and drive stronger returns. We believe that with the right level of investments, a simplified operating model, and continued opportunity in our international markets, we will be well-positioned to drive sustainable growth.

[Steve Cahillane, CEO at The Kraft Heinz Company]

While I am encouraged by our start to the year, we are reaffirming our 2026 outlook amid market volatility with increasing inflationary pressures and low consumer sentiment. At the same time, we are retaining flexibility to increase investments in areas that are delivering attractive returns. That concludes our comments for today. Thank you for your time, and thank you for your interest in Kraft Heinz.

Participants

Executives

• Andre Maciel, Global CFO
• Anne-Marie Megela, Head of Global Investor Relations
• Steve Cahillane, CEO