Kraft Heinz Q3 Earnings Call Highlights

Key Points

• Kraft Heinz agreed to sell its North American coffee business to One Rock while retaining a 30% stake, allowing it to focus on higher-growth opportunities.
• Management expects inflation to rise to slightly above 5% in 2027 and anticipates pricing actions, while maintaining a similar overall investment level and relying on productivity to help manage costs.
• North American results beat the company’s original plan, and the share of revenue gaining market share improved to about 28%. Kraft Heinz expects spring 2027 retail resets and a stronger innovation pipeline to support distribution and growth.

Kraft Heinz NASDAQ: KHC executives said the company is moving to simplify its portfolio, sustain its investment program and prepare for higher input-cost inflation in 2027, while emphasizing plans to improve growth through innovation, retail shelf resets and productivity efforts.

Chief Executive Officer Steve Cahillane opened the company’s third-quarter 2026 earnings call by highlighting a definitive agreement to divest Kraft Heinz’s North American coffee business to One Rock. Kraft Heinz will retain a 30% non-controlling equity stake in the business.

Cahillane said the transaction would allow the company to focus its capital and management attention on areas with greater growth and value-creation potential. He added that the retained stake reflects Kraft Heinz’s confidence in the coffee brands’ future under One Rock’s ownership.

North American trends and retail outlook

Management said North American results came in ahead of its original plan, leading the company to narrow its top-line guidance. However, executives acknowledged continued pressure in certain U.S. retail categories and said the broader category environment softened during the quarter.

Chief Financial Officer Andre Maciel said category trends across Kraft Heinz’s portfolio were approximately 50 basis points softer on a mix-adjusted basis. He also said retailer inventory pressure was greater than the company had expected, although consumption trends were somewhat better than anticipated.

Maciel said the percentage of Kraft Heinz revenue gaining market share improved to about 28% during the quarter, from roughly 25% in the first half. He described the improvement as modest but said it represented another step in the right direction.

Cahillane said the company is seeing improved velocity for products receiving investment, including Kraft Mac & Cheese, PowerMac, Capri Sun and condiments. But he said those gains have not yet been matched by comparable distribution improvements because Kraft Heinz is working from a product pipeline developed before its current investment program.

Management expects the next material boost to distribution to come with spring retail resets in 2027. Cahillane said Kraft Heinz is holding constructive discussions with retailers and expects to have a plan to grow total distribution points next year.

The company also said it is participating in retailer discussions about revitalizing store aisles through more innovation and more dynamic merchandising. Cahillane said nothing dramatic is expected for 2027, but Kraft Heinz aims to be a growth contributor for retail partners after increasing its investment commitment from $600 million to $700 million.

Away-from-home growth and brand-specific opportunities

Executives pointed to share gains as the primary driver of recent strength in the away-from-home business. Cahillane said both global and North American away-from-home operations grew nicely, while U.S. away-from-home and Canada each posted low-single-digit growth during the quarter.

He attributed much of the performance to partnerships, including those with the NFL and Disney, as well as expanded distribution for ketchup and other condiments. Cahillane said the company sees additional opportunity if consumer demand recovers in 2027 while Kraft Heinz continues to gain share.

Management also addressed several areas of the portfolio facing challenges. Cahillane said Philadelphia Cream Cheese is gaining share but losing consumption as the cream cheese category comes under pressure. He said certain pricing actions proved deflationary for the category and did not work as intended, prompting the company to adjust its approach.

The company recently launched lactose-free cream cheese and is building distribution for that product, according to Cahillane. He said the broader category needs more innovation tied to consumer interest in protein, flavors and other product attributes, particularly as consumers shift toward cottage cheese and other protein-forward options.

On meats, Cahillane called Oscar Mayer a “phenomenal brand” and said its performance is improving, though more work remains. He said Kraft Heinz has opportunities to innovate and address consumer concerns related to processed foods, while continuing to evaluate ways to improve the overall portfolio.

Inflation, pricing and investment plans

Kraft Heinz expects inflation to increase in 2027. Maciel said the company’s prior expectation for 4% to 5% inflation next year has moved to slightly above 5%.

He cited pressure from packaging and certain commodities, including soybean oil, along with an anticipated reversal of dairy-related favorability that benefited the company in 2026. Inflation for 2026 is expected to be slightly above 4%, Maciel said, while fourth-quarter inflation is expected to be around 6%.

Cahillane said productivity will remain the company’s first response to cost pressures. However, he said Kraft Heinz will likely need to take pricing across its regions in 2027, while seeking to keep price increases as limited as possible given what he described as a fragile consumer environment.

Maciel said higher inflation can create temporary margin pressure because price actions typically lag rising costs. Still, he said the company does not expect additional investment requirements to drive a margin decline next year.

• Kraft Heinz expects to invest $700 million through its profit-and-loss statement in 2026.
• About 70% of planned trade and price investments had been spent by the end of the third quarter, according to Maciel.
• Marketing investment was running at a similar pace, with roughly 6.1% of year-to-date third-quarter sales accrued for marketing.
• The company had hired about 80% of the employees included in its investment plan and expects to complete nearly all planned hiring by year-end.

Maciel said the company plans to maintain a similar overall investment level in 2027, while redeploying resources among marketing, trade spending and personnel. He said expected efficiencies in selling, general and administrative expenses, shared services and automation should offset any remaining personnel ramp-up.

Focus on returns and innovation

Cahillane said management expects stronger returns on investments in 2027 as the company applies lessons from its current spending program. He cited strong results from investments behind Heinz ketchup and Heinz Zero, while noting that the company will redirect resources away from lower-returning activities.

The company is also increasing research and development spending by 20% and is working toward R&D investment approaching 1% of net sales, Cahillane said. He added that Kraft Heinz expects sales and marketing spending to exceed 6% of net sales.

Management said its 2027 innovation pipeline is stronger than the 2026 pipeline, although Cahillane said it is still not sufficient and should continue improving into 2028. As one example, he cited the Canadian launch of KD Ramen, which he said sold three months of inventory in one week and is planned for a North American introduction next year.

About Kraft Heinz (NASDAQ:KHC)

The Kraft Heinz Company NASDAQ: KHC is a global food and beverage company that develops, manufactures and markets branded products for consumers, retailers and foodservice customers. Its portfolio includes condiments and sauces, cheese and dairy products, meals, meats, snacks, beverages and desserts.

The company's brands include Kraft, Heinz, Oscar Mayer, Philadelphia, Velveeta, Jell-O, Maxwell House, Lunchables, Capri Sun, Planters and Classico, among others. Products are sold through grocery stores, mass merchants, club stores, convenience retailers, e-commerce channels and foodservice distributors.

Kraft Heinz was created in 2015 through the merger of Kraft Foods Group and H.J.

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