Profit margins at Kraft Heinz have grown for the second quarter in a row, as the company’s price discipline continues to pay off.
CEO Miguel Patricio expressed “pride” in the company’s “resilient” portfolio, which isn’t losing incremental market to private label despite charging above the competition.
While he acknowledges that the company is losing market share to brands that rely more on price discounts than Kraft Heinz, Patricio remains optimistic. He believes the company’s more “disciplined and surgical approach” to profit margin protection will benefit it in the long run.
“With this approach, and by continuing to unlock efficiencies across our value chain, we are generating margin gains,” he stated in an accompanying statement today (2 August). “With these margin gains, and in line with our strategy to drive further growth, we are investing more in marketing, R&D, and technology.”
The adjusted gross profit margin of the company increased by 180 basis points to 33.3%, up from 32.8% in Q1. Its net sales rose 2.6% year on year to $6.7 billion (£5.3 billion), while organic net sales rose 4%. Net income climbed by 277% to $1.6 billion (£1.3 billion), while adjusted EBITDA increased by 6% to $1.6 billion (£1.3 billion).
While volumes declined 7% year on year, the company compensated by hiking prices by more than a tenth (11%), compared to the same period previous year.
According to CFO Andre Maciel, its pricing approach is paying off, since even the products it did sell on offer (only 29%) had a 15% rise in ROI compared to 2019, and 5% in 2022.
The company is reinvesting its profits on its marketing team. Patricio stated earlier this year that he intended to increase marketing spending by “double digits,” which he confirmed today. He told investors that marketing spend climbed by 23% year on year in the second quarter, as the company continues to deliver “best-in-class” activations.