Kraft Heinz CEO: ‘we’re a very different company than we were a year ago’
Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi speak with Kraft Heinz CEO Miguel Patricio about the company's history in the packaged foods segment, a potential price raise on some products, and more.
BRIAN SOZZI: The turnaround at Kraft Heinz continues right along. Kraft Heinz recently sold its Planters nut business to Hormel for $3.35 billion, and execs gave a pretty upbeat presentation at the CAGNY Food and Beverage Conference on Tuesday. Joining us now is Kraft Heinz CEO, Miguel Patricio. Miguel, good to speak with you again here.
You know, I was chatting with someone who caught you and your team's presentation at CAGNY yesterday, and he told me Kraft Heinz is the most interesting story in packaged food. Is that a fair assessment?
MIGUEL PATRICIO: Well, I hope so. We are transforming the company, and we are enjoying every single step of it. We had to change and to transform the company any way, but now because of the tailwinds that we are having because of the pandemic, this is happening much faster, and I can say that we are in a very different moment. We are a very different company than we were just one year ago. We are stronger, confident, and we know what we have to build.
BRIAN SOZZI: So, the last time you and I talked was investor day last year, and that's the day you spun off your natural cheese business. Last week, you sold the Planters nut business for, really, a big sum. Are you done evaluating your portfolio? Do you have other brands inside of there that could ultimately be divested because of that transformation plan?
MIGUEL PATRICIO: Look, we have to look at our portfolio in a very agile way. I think that food is one of these industries that changes faster. If you think the way that you were eating 10 years ago and the way that you are eating today is very different, and we didn't adapt the portfolio fast enough. So you can expect to be much more agile on portfolio management, and that will always mean acquiring and divesting a product. So I'm not working on any divestiture, but it can happen in the future the same way that we can acquire other businesses.
JULIE HYMAN: Hi. It's Julie here. I want to ask you about pricing power right now because we have heard some talk about this from some companies, including your own. How much do you expect to be able to raise prices in this environment, and how much does it reflect rising input costs for you versus just consumers' willingness to accept those price increases?
MIGUEL PATRICIO: Very good and important question. Well, we are being affected by inflation as everybody else, eventually a little bit less because we are less dependent on grains, but I think that what is important is that we announced that we would reduce, we would have gross savings of $2 billion in five years, and we delivered last year $400 million in, and we have plans in place to deliver more $400 million of gross savings. And that will be-- makes the increasing costs and inflation less worrying.
That being said, we are always going to look at revenue management opportunities, meaning price or not price, you know, to manage our portfolio.
MYLES UDLAND: You know, Miguel, it's Myles here. You had a really interesting slide in your presentation yesterday about the marketing approach you guys have taken, you know, citing the number of YouTube views and likes and engagement on social. For a brand like yours, how fast has that change been to looking at different social channels as a place to increase spending, and how are you thinking about pulling those levers a bit more, maybe versus the traditional paths that a Kraft Heinz would have followed in, you know, the last cycle? How are you thinking about those going forward?
MIGUEL PATRICIO: I think that we are just starting a big transformation on marketing and media. The bulk is still to come, but we did in 2020 some experiences that we are very excited. We started in May, in the middle of pandemic, our own social agency in-house, you know, bringing home social speaking, social listening, and content development, and we did that experiment in Canada.
And very fast we already scaled that up to China, to Australia, to UK, and now the next one is going to be US. And that really transforms a company because it contaminates the whole marketing area with the social, you know, mindset, and we are already profiting big. We are already in these countries where we started that with a very different thinking but also results.
Last week, we made a post on Twitter in UK, you know, inviting consumers to taste a product Weetabix with baked beans. This generated, well, Twitter became in that day, we were the number one topic of conversation in the country. We had in UK 4 billion impressions because of that, and that only happened because we were very close to the social networks. We had these in home, and we have a new way to operate. We are going to see a big transformation at Kraft Heinz in marketing moving forward and in the digital arena as a whole.
BRIAN SOZZI: Miguel. I have 30 seconds left. A lot of concern on Wall Street about demand in the second half of this year slowing down as more people get vaccinated. Do you see that in your business?
MIGUEL PATRICIO: Well, when we have vaccination, for sure the demand will decline. It will not be at the levels that are today. You know, for a single reason, people will go out more than they are going today. However, we expect consumption not to go at all to the levels of pre-pandemic for a couple of reasons. I'm going to mention you to the first one on brand.
We gained a lot of penetration during this time, and a lot of new consumers came to the base of our brands, and we are working hard to keep them when this pandemic is over. The second one, you know, just think about the way that we are going to work moving forward, all of us, all companies. We'll never-- we'll be much more mobile. We will be working from home forever. There's technology for that, and just think about, you know, example of a number.
If companies now start on average working only one day a week from home on average, well, that will be 20% above before the pandemic. This is going to happen. We are not going to work the same way that we worked before the pandemic, but just two reasons to believe that, yes, consumption will go down. It will not go to the levels it was pre-pandemic.
BRIAN SOZZI: Fair enough. Let's leave it there. Kraft Heinz CEO, Miguel Patricio. Good to see you. Stay safe, and we'll talk to you soon.
MIGUEL PATRICIO: Thank you very much, pleasure.