Kraft Heinz has today forecast annual profit below estimates and missed quarterly sales estimates, as the packaged food maker struggles with sluggish demand for its products such as Lunchables and packaged meat following price hikes.
The fourth quarter of revenue misses in a row pushed the company's shares down about 5% in premarket trading.
Packaged food makers have increased product prices in the past few years to counter higher input and manufacturing costs and protect their margins.
As a result, middle-to-lower income groups, faced with still elevated inflation, have reduced spending on higher-margin products even in categories like condiments and spices.
"The recovery in sales is taking longer than expected. In 2025, the company will likely need to invest in price to improve the performance of underperforming brands including Capri Sun," said Arun Sundaram, analyst with CFRA research.
Kraft Heinz's overall volumes fell 4.1 percentage points in the quarter ended December 28, while prices were up 1 percentage points from the same period a year ago. Volumes were down 3.4 percentage points and prices were up 1.2 percentage points in the prior quarter.
Organic net sales in top market North America decreased 3.6% in the fourth quarter, after falling 3.2% in the prior quarter.
Meanwhile, the company has boosted its marketing efforts and invested in technology to reclaim shelf space for its brands such as Mac & Cheese and Philadelphia from cheaper private-label alternatives.
These investments, coupled with higher manufacturing and labour costs, pushed down its quarterly adjusted gross profit margin 40 basis points to 34.4%.
Kraft Heinz expects fiscal 2025 adjusted earnings per share to be in the range of $2.63 to $2.74, compared with analysts' average estimates of $3.04, as per data compiled by LSEG.
The company expects annual organic sales to be flat to down 2.5%, compared with 2.1% decline seen in fiscal 2024.
Kraft Heinz posted fourth-quarter revenue of $6.58 billion, compared with analysts' estimates of $6.66 billion.
