Kraft Heinz lowered its full-year sales and earnings guidance Tuesday, citing weaker customer spending in the U.S. and the impact of President Donald Trump's tariffs.
It's the latest big food company to sound the alarm over trade tensions and weak consumer demand. Last week, PepsiCo lowered its full-year earnings forecast, also citing tariffs. And earlier Tuesday, Coca-Cola noted a pullback in U.S. consumer spending due to economic uncertainty.
Kraft Heinz acknowledged that it’s in a tough spot. It needs to keep prices low to prevent consumers from migrating to cheaper store brands of products like ketchup, mayonnaise and macaroni and cheese. But tariffs – which impact imported ingredients like coffee – will add to its expenses.
“In regards to pricing for the tariffs, we are trying to do everything we possibly can to minimize the amount of price necessary,” Kraft Heinz Chief Financial Officer Andre Maciel said Tuesday during a conference call with investors.
Maciel said the company is looking at many alternatives, including shifting suppliers and, over the longer term, reformulating products. Kraft Heinz also said it built up some inventory earlier this year to help cushion the impact from tariffs.
Kraft Heinz, which is based in Pittsburgh and Chicago, said its North American revenue fell 7% to $4.5 billion in the January-March period. Weakness in the U.S. overcame some stronger results in Canada.
Kraft Heinz said it expects its operating income to fall up to 10% this year. It had previously expected a decline of up to 5%. The company said it needs flexibility to offer promotions and step up marketing. It also wants to add value options, like a new 11-ounce Kraft Mac & Cheese that's designed to feed a family, about 50% more than the original 7.25-ounce box.
The company said it also may need to respond to changes in federal regulations. Last week, U.S. health officials urged food makers to phase out petroleum-based artificial colors in the nation's food supply.
Kraft Heinz CEO Carlos Abrams-Rivera said Kraft Mac & Cheese has been free of artificial flavors and colors since 2016. But some of the company's products, like Kool-Aid, do contain artificial colors.
Kraft Heinz said its net revenue fell 6% to $5.9 billion in the January-March period. That was shy of the $6.0 billion Wall Street was expecting, according to analysts polled by FactSet. The company now expects its adjusted revenue to fall 3.5% this year; it previously expected a 1.5% decline.
Kraft Heinz shares were flat in afternoon trading Tuesday.
Credit: AP
Credit: AP