Kraft Heinz Is Dying a Death by a Thousand Cost Cuts
How one of the world’s largest food and beverage companies budgeted itself into a corner
How did things go so wrong for Kraft Heinz, one of the nation’s largest, most recognizable food companies that’s backed by one of the nation’s most beloved investors? In February, Kraft Heinz announced a 2.7% decline in net sales for 2019. This comes just one year after the company wrote down $15.4 billion because legacy brands like Oscar Mayer and Kraft failed to keep up with changing consumer tastes. Its long-term debt was downgraded to junk bond status after management refused to cut its dividend. Oh, and it also was investigated by the Securities and Exchange Commission for misrepresenting financial results.
During a scheduled conference call reviewing the past year, CEO Miguel Patricio told investors that “2019 was a very difficult year for Kraft Heinz.” The situation is a far cry from just four years ago when the company headlined its annual report “Kraft Heinz Reports Solid Financial Performance with Integration on Track.”
So what happened? To understand Kraft Heinz’s fall, you need to understand how the company came to be and how its strategy and approach to budgeting differs from the traditional model of a consumer packaged goods (CPG) company.
