Myles Udland, Julie Hyman and Brian Sozzi of Yahoo Finance talk to Miguel Patricio, CEO of Kraft Heinz, about the company’s history in the packaged food segment, a possible price increase for some products and much more.
Video transcription
BRIAN SOZZI: The Kraft Heinz turnaround continues. Kraft Heinz recently sold its Planters nut business to Hormel for $ 3.35 billion, and executives gave a very optimistic presentation at the CAGNY Food and Beverage Conference on Tuesday. Joining us now is Kraft Heinz CEO Miguel Patricio. Miguel, it’s good to talk to you again here.
You know, I was talking to someone who saw you and your presentation at CAGNY yesterday, and he told me that Kraft Heinz is the most interesting story in packaged foods. Is it a fair assessment?
MIGUEL PATRICIO: Well, I hope so. We are transforming the company and enjoying every step. We had to change and transform the company in some way, but now with the favorable winds that we are having because of the pandemic, this is happening much faster, and I can say that we are at a very different time. We are a very different company than we were just a year ago. We are stronger, more confident and we know what we have to build.
BRIAN SOZZI: So, the last time you and I talked was on investor day last year, and it was on that day that you broke up your natural cheese business. Last week, you sold the Planters nut business for a large sum. Finished evaluating your portfolio? Do you have any other brands inside that could be sold because of this transformation plan?
MIGUEL PATRICIO: Look, we have to look at our portfolio in a very agile way. I think that food is one of those industries that changes faster. If you think that the way you ate 10 years ago and what you are eating today is very different, we did not adapt the portfolio quickly enough. Therefore, you can expect to be much more agile in portfolio management, and that will always mean purchasing and divesting a product. So, I am not working on any divestment, but it may happen in the future in the same way that we can acquire other businesses.
JULIE HYMAN: Hi. It’s Julie here. I want to ask you about pricing power now, because we heard about it from some companies, including yours. How much do you expect to be able to raise prices in this environment, and how much does this reflect the increase in input costs for you compared to just the willingness of consumers to accept these price increases?
MIGUEL PATRICIO: Very good and important question. Well, we are being affected by inflation like everyone else, possibly a little less because we are less dependent on grains, but I think the important thing is that we announced that we would reduce, we would have a gross savings of $ 2 billion in five years, and we deliver in the year spent $ 400 million in, and we have plans to deliver another $ 400 million in gross savings. And that will be – it makes rising costs and inflation less worrying.
That said, we will always look at revenue management opportunities, whether it means price or not, you know, to manage our portfolio.
MYLES UDLAND: You know, Miguel, it’s Myles here. You had a very interesting slide in your presentation yesterday about the marketing approach you took, you know, citing the number of views and likes on YouTube and involvement in social networks. For a brand like yours, how fast was this change in looking at different social channels as a place to increase spending and how are you thinking of pulling those levers a little bit more, perhaps compared to the traditional ways that a Kraft Heinz would have followed in, you know, the last cycle? How are you thinking about it going forward?
MIGUEL PATRICIO: I think we’re just beginning a major transformation in marketing and the media. The bulk is yet to come, but in 2020 we did some experiments that we are very excited about. We started in May, in the middle of a pandemic, our own internal social agency, you know, bringing home social talk, social listening and content development, and we did this experience in Canada.
And very fast we have already scaled this to China, Australia, UK, and now the next one will be the USA. And this changes the company a lot because it contaminates the whole marketing area with the social, right, mentality, and we are already profiting a lot. We are already in those countries where we started this with a very different thinking, but also with results.
Last week, we made a post on Twitter in the UK, you know, inviting consumers to try a Weetabix product with baked beans. That generated, well, Twitter turned that day, we were the number one topic of conversation in the country. We had 4 billion impressions in the UK because of that, and that was only because we were so close to social media. We had this at home and we have a new way of operating. We will see a major transformation at Kraft Heinz in advancing marketing and the digital arena as a whole.
BRIAN SOZZI: Miguel. I have 30 seconds left. Much concern on Wall Street about demand in the second half of this year slowing down as more people are vaccinated. Do you see this in your business?
MIGUEL PATRICIO: Well, when we have a vaccination, the demand is sure to decrease. It won’t be at today’s levels. You know, for one reason, people are going out more than today. However, we hope that consumption will not reach pre-pandemic levels for some reasons. I will mention you to the first one about the brand.
We have gained a lot of penetration during that time and many new consumers have come to the base of our brands, and we are working hard to maintain them when this pandemic is over. The second, you know, is just thinking about how we are going to work going forward, all of us, all companies. We will never be much more mobile. We will be working at home forever. There is technology for that, and just think, you know, an example of a number.
If companies now start working on average just one day a week from home, on average, that will be 20% above before the pandemic. It will happen. We are not going to work the same way we did before the pandemic, but just two reasons to believe that, yes, consumption will decrease. It will not reach pre-pandemic levels.
BRIAN SOZZI: It’s fair. 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.