Kraft Heinz Q1 Earnings Call Highlights

Key Points

• First-quarter organic net sales fell 0.4%, beating internal expectations largely due to an estimated 150 basis‑point winter‑storm consumption lift, but profitability softened with adjusted gross margin down 30 bps and adjusted EPS of $0.58 (‑6.5%).
• Management outlined a $600 million investment plan and is raising marketing to at least 5.5% of sales and R&D toward ~0.9%, actions it says helped the share of the portfolio gaining/holding share rise from 21% in 2025 to about 58% in March.
• Kraft Heinz generated $800 million of free cash flow (up 59%) with 111% conversion, reiterated 2026 guidance (organic net sales down 3.5%–1.5%, adjusted EPS $1.98–$2.10) and expects net leverage to be no higher than 3.3x with a path back to target in ~two years.

Kraft Heinz NASDAQ: KHC executives emphasized early signs of improvement in market share and execution during the company’s first-quarter 2026 earnings call, while maintaining a cautious stance on the remainder of the year due to timing items, category softness, and inflation volatility.

Portfolio priorities shifted within “Hold, Win, Win Big” framework

CEO Steve Cahillane said the company has made adjustments to its internal platform classifications since earlier presentations, describing the changes as part of an ongoing effort “to continue to get smarter.” Among the moves, Cahillane said Kraft Heinz shifted frozen from “Win Big” to “Hold,” citing what the category is showing and a more realistic assessment of opportunities.

At the same time, the company moved hydration from “Win” to “Win Big.” Cahillane pointed to “strong category growth” and highlighted Capri Sun, including an effort to extend the brand with a new hydration platform. Kraft Heinz also moved cheese from “Hold” to “Win,” with Cahillane citing margins, brand strength, and opportunity.

Cahillane framed the changes as evidence of continued portfolio scrutiny and investment focus, but he did not directly connect them to potential asset sales in his response.

Management cites share improvement, but acknowledges Q1 timing benefits

Asked to distinguish underlying progress from temporary boosts, Cahillane acknowledged first-quarter benefits from the Easter shift and winter storms that drove pantry loading. However, he said Kraft Heinz has seen “real improvement” in its share trajectory.

Cahillane cited internal metrics showing the total business “held or gained share” in 21% of the portfolio last year, rising to 35% in the first quarter and 58% in March. He also pointed to sharper improvement in “Taste Elevation,” where he said results improved from 24% holding or gaining share last year to 81% in the first quarter, exiting March at 87%.

He attributed the improvement to investments, product upgrades, and distribution execution, adding that pausing the company’s previously discussed split “freed up lots of resources” and sharpened focus on growth and execution. Cahillane said most of the company’s planned $600 million of investment remains “dry powder” and is being deployed through the rest of the year.

Separately, CFO Andre Maciel added market-share context, saying the company began last year “losing 90 basis points of market share, mix adjusted,” improved to losing 50–60 basis points by year-end, and is now down about 30 basis points year-to-date. Maciel said improvements are being led by Taste Elevation, as well as hydration and desserts, where higher marketing and renovation efforts are showing “some signs of payoff.”

Guidance held; Q2 expected to reflect Easter shift and SNAP headwind

Maciel said the company expects second-quarter top-line performance in a range of negative 3% to negative 5%, describing it as a consequence of the Easter shift. He also reiterated expectations that changes related to SNAP will be a 100-basis-point headwind for the year, beginning in the second quarter.

Maciel said Kraft Heinz expects market share to continue improving as seen in the first quarter, but category softness is expected to remain a headwind in the second quarter. He said this should be partially offset by continued improvement in the away-from-home business globally and in emerging markets.

When asked about expectations for a back-half top-line acceleration implied by the annual outlook, Cahillane pushed back on that characterization, saying the company is “not really calling for an acceleration” and is being “prudent” by not embedding first-quarter overdelivery into guidance.

Maciel outlined several building blocks management is watching for the second half:

• Indonesia: Maciel said Indonesia was a 70-basis-point headwind to first-quarter top-line growth and that the company expects that impact to “go away in the second half” as it laps adjustments made in the business.
• U.S. market share: Maciel said stepped-up investment should support improvement versus current levels.
• Europe: Maciel said the company feels good about its plans, including stepped-up investments behind Heinz in Europe as part of the $600 million program.
• Away-from-home: Maciel cited “signs of market share improvement in the U.S.” that are “quite encouraging,” especially in sauces.

Inflation and pricing: “Very rational” environment; productivity emphasized

Cahillane described the pricing environment as “very rational” following an “unprecedented” inflationary cycle, adding that consumers remain under pressure. He said the company has looked for opportunities to adjust pricing “where we think it’s gone a little too far,” while emphasizing affordability and value.

Both executives stressed productivity as the primary lever to manage higher costs. Cahillane said a business like Kraft Heinz would ideally pass through about half of input-cost inflation via pricing and offset the remainder through productivity, but he indicated the company is pushing to do better given consumer strain.

Maciel added that the company’s guidance initially contemplated pricing only about 20% of inflation and that the company is relying on productivity. He said first-quarter productivity was “above 4% of COGS” and the company expects to maintain that pace.

On inflation assumptions, Maciel said the company initially guided to approximately 4% inflation for the year, but is now seeing energy and resins inflation “spiking up,” which he tied to conflict-related dynamics. He said Kraft Heinz is “well hedged” on energy for the year and hedged on resins through mid-third quarter, but if conditions persist, the company expects to “start to suffer the impact” in the third quarter.

Marketing investment ramp and cash flow priorities

Maciel said the company expects marketing for the year to be at least 5.5% of revenue and indicated the company could “lean in more” if performance trends better than anticipated. He explained that a 37% year-over-year marketing increase in the first quarter reflects an easier comparison because the company stepped up marketing in the second half of last year; he said the year-over-year impact should “gradually” reduce as comparisons normalize. For the full year, he said the company expects at least a 20% increase in marketing.

Maciel said investment has been prioritized toward “win big categories,” including sauces, cream cheese, mac and cheese, and hydration, while noting there is opportunity to increase marketing across the broader portfolio.

Cahillane highlighted several initiatives the company is investing behind, including Power Mac & Cheese, which he said launched in April with “outstanding” sell-in and 35,000 accounts so far; Capri Sun Hydrate; a Lunchables renovation expected next month; and Philadelphia Lactose Free later in the year. He also said the company plans to invest to address underperforming areas such as meats, adding, “we don’t like leaky buckets.”

On free cash flow, Maciel said cash generation remains strong and credited incentive changes that increased discipline around CapEx and working capital. However, he said stepped-up investment in the second half could pressure cash flow later in the year. He also said the company exited the quarter with strong cash on hand and expects to pay down debt in the second quarter as maturities come due, while “strongly considering” paying back a portion of debt maturing next year. Maciel said the company is also managing its “debt tower” to reduce interest expense.

Maciel also addressed gross margin, noting 40–50 basis points of non-recurring benefit in the quarter. He said this included selling excess byproducts, as well as timing from shifting a planned factory maintenance event to later in the summer. He added that cheese commodity was somewhat better than expected. Despite the quarter’s upside, he said the company is maintaining its expectation for the year of a 25–75 basis-point headwind.

On SNAP impacts, Maciel said the company is already seeing pressure, with SNAP transactions down in February and March “in line, if not even a little more than expected.” He said strength in non-SNAP households helped offset the impact in the first quarter, but the company still anticipates a 100-basis-point headwind as the year progresses. He said some of the $600 million investment has gone toward opening price points to support consumers under pressure.

Discussing away-from-home, Cahillane said the channel is under pressure from macroeconomic conditions in the U.S. and globally, but he called it a strategic opportunity where Kraft Heinz is investing and sees share-gain potential. He highlighted Heinz as a key brand in the channel, with opportunities beyond ketchup, including mayonnaise and other spreads.

About Kraft Heinz NASDAQ: KHC

The Kraft Heinz Company 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.

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