Packaged-food giant is stepping up investments in new products to bring life to aging brands
By Jesse Newman
Cheesy ramen. Protein-infused Jell-O pudding. Round cut bacon for sandwiches.
After years of declining sales, Kraft Heinz is on a campaign to convince consumers -- and investors -- that new twists on some of its old products can power a turnaround for one of America's biggest food companies.
Chief Executive Steve Cahillane took the helm of the struggling food maker nearly a year ago. Since then, he has plowed an extra $700 million into Kraft Heinz's business and hired 400 new employees.
The measures are part of a plan to revitalize a conglomerate that epitomizes the problem facing U.S. food giants: Many consumers no longer want what they are selling.
"It's a big turnaround," Cahillane said, speaking from Kraft Heinz's boardroom on the 75th floor of its Chicago headquarters. "These brands have been underinvested in for over 10 years."
As part of this year's spending boost, $325 million went to marketing, $250 million to lowering prices, $75 million to personnel, and $50 million to improving existing products and developing new ones.
It isn't just consumers who need to believe in the makeover -- it's Wall Street. Ahead of a presentation to investors Thursday, Cahillane said he expects the company's sales to be flat next year, with sales and profits returning to full-year growth in 2028.
"More of our portfolio is actually doing well than it has in quite some time and less is doing poorly," he said.
Analysts and investors still aren't convinced. Kraft Heinz's stock is roughly flat so far this year through Wednesday, compared with an 11% gain in the S&P 500. TD Cowen analyst Rob Moskow said he worries that many of the company's brands are too out of favor with consumers to revive. And it will likely take billions of dollars more in spending for the company to reach its growth targets.
"There are too many holes in the boat, too many plates to spin," Moskow said. "I'm not sure how they can get it all done."
'Whack one mole'
Key to Kraft's Heinz's turnaround plan is a renewed focus on bringing new products to market, an area where Cahillane said the company had fallen behind. After it was formed in a 2015 merger between Kraft and Heinz, years of cost cutting left the $25 billion food empire vulnerable to competition from both cheaper store brands and buzzy, premium ones.
New products headed to store shelves in the U.S. next spring include offerings such as Jell-O pudding with 10 grams of protein, Crystal Light with extra fiber and protein, Oscar Mayer Sandwich Bacon and Kraft Mac & Cheese Cheesy Ramen, which Cahillane said recently sold out within a week of its launch in Canada.
About half of the products in the company's 2027 pipeline will be geared toward health and wellness, Cahillane said, including options with less sugar or more protein.
Many of Kraft Heinz's old products aren't going anywhere. Traditional Heinz Ketchup sweetened with high-fructose corn syrup will remain on shelves because cane sugar is more expensive and the company wants to keep its products affordable, Cahillane said.
"We're not trying to claim that 100% of our portfolio is grown in your back garden," Cahillane said. "We are claiming that we can do health and wellness. We can play in that space, and we can do it extremely well."
Moskow said he's a fan of Cheesy Ramen. "I think they're on to something," he said, adding that convenient, tasty products are what Kraft Heinz does best, not efforts like a more natural lunch meat.
Cahillane counts new products that have already made their debut under the company's Heinz and Kraft Mac & Cheese brands as early wins. PowerMac, a new product that boasts extra protein and fiber, has helped return the brand back to sales growth for the first time in several years, he said.
Same goes for new varieties of Heinz Simply, a ketchup line made with cane sugar instead of high-fructose corn syrup. Kraft Heinz launched Heinz Simply in spicy and pickle flavors this year, marking the first new offerings since Heinz Simply's launch over a decade ago.
Oscar Mayer meat and Kraft cheese continue to struggle, Cahillane said. Even sales of Philadelphia cream cheese have suffered as protein-hungry consumers shift to cottage cheese. Kraft Heinz is focused on developing cream cheese products that rely less on carbohydrates like bagels.
"When you're in over 50 categories, there's no way you're going to be growing in all of them all the time," Cahillane said. "We have to whack one mole at a time."
Thinking beyond a split
Kraft Heinz executives have long debated whether the company is too big. Last year, the company revealed plans to split in two, separating its global condiments and North America grocery businesses.
Cahillane later paused work on the split after examining the business and conversations with Berkshire Hathaway, the company's largest shareholder.
A split is no longer in focus, Cahillane said. Ultimately, he said he wants to make Kraft Heinz's portfolio more "growth-oriented," both through acquisitions and divestitures, like a recent deal to sell a majority stake in its North American coffee business.
"We're looking at it every day," the CEO said.