“Kraft Heinz Unveils New Business Strategy Focused on Brand Reinvestment and Consumer-Centric Growth Amid Pandemic Challenges”
In September, Kraft Heinz introduced its eagerly awaited new business strategy aimed at reinvesting in its brands and adopting a platform-based approach for its products and competitive landscape. This strategy, developed by CEO Miguel Patricio and his leadership team, was established by early 2020, prior to the disruption caused by the coronavirus pandemic on business operations and consumer behavior. Initially slated for rollout in early 2020, the launch was postponed to allow U.S. Zone President Carlos Abrams-Rivera to contribute his insights. As the pandemic transitioned most meetings to virtual formats, the company moved an in-person investor conference discussing the new strategy from spring to an online event in the fall. Despite these delays and the pandemic’s significant impact on consumer habits, Kraft Heinz’s leadership remains committed to their strategic approach.
“The strategy we are implementing is a more comprehensive and holistic business model in collaboration with our customers, focusing on enhancing our capabilities and investing in areas that will drive category and platform growth,” stated Cory Onell, Kraft Heinz’s president of U.S. sales. He emphasized the importance of insights in category leadership, omnichannel thought leadership, improved planning processes, and stronger collaboration within the supply chain as vital components that are essential for success, regardless of the pandemic.
Onell is one of three new executives appointed in August to complete the U.S. leadership team and ensure effective execution of the company’s strategy. The pandemic may ultimately test the effectiveness of this approach. Sanjiv Gajiwala, the company’s Chief Growth Officer, also hired in August, noted that changes in consumer behavior during the pandemic, coupled with the company’s new branding efforts, have positioned Kraft Heinz for stronger growth post-COVID-19.
“We believe that consumers are rediscovering new opportunities for meals at home,” Gajiwala remarked. “They are reconnecting with trusted brands they haven’t engaged with in a while, realizing their value in daily life. We anticipate that some of these behavioral shifts will persist in the future.”
From a sales perspective, this year has been remarkably successful for Kraft Heinz. The latest earnings report reveals that U.S. sales rose by 7.4% in the quarter ending in September compared to the same period last year, closely mirroring the 7.5% sales growth rate for the first nine months of 2020. All of the company’s platforms—Taste Elevation, Easy Meals Made Better, Real Food Snacking, Fast Fresh Meals, Easy Indulgent Desserts, and Flavorful Hydration—are experiencing various levels of sales growth.
“Consumers are increasingly gravitating towards major brands, and our retail partners are reassessing their assortments based on availability and sales velocity,” Patricio shared during an investor call regarding the earnings report. “Moreover, consumers are opting for brands that align with their values. These consumer trends are encouraging us to adopt a more optimistic outlook in the near term. The measures we’ve implemented to enhance our operating model are also crucial in adapting to an unpredictable environment characterized by rapid changes in consumer demand.”
While part of this year’s growth can be attributed to consumers stockpiling supplies as stay-at-home orders commenced in March, this does not account for the entire success. Onell mentioned that Kraft Heinz boasts a 97% penetration rate, meaning that nearly every household in the United States has at least one of its products in their pantry or refrigerator. The pandemic has altered consumer lifestyles significantly, and the company’s brands have been pivotal during this transition. Kraft Heinz products, from Velveeta to Oscar Mayer and its signature ketchup, have long been staples in American kitchens. With more people cooking at home, these brands have gained renewed significance.
Gajiwala noted that part of Kraft Heinz’s resurgence is due to its renewed focus on the consumer in its new strategy. Employees have set output records to keep up with demand during the pandemic, and through effective marketing and messaging, consumers have rediscovered the company’s offerings. The firm is keenly observing consumer behaviors and preferences, particularly how they engage with its products. For instance, Philadelphia Cream Cheese has seen a rise in its repeat purchase rate, now at 23%, as consumers explore new culinary uses for the product.
Kraft Heinz has also tailored its offerings to align with evolving consumer preferences during the pandemic. Gajiwala pointed out that Kraft Macaroni & Cheese, often viewed as a children’s meal, has been rediscovered by consumers of all ages. In response, Kraft Heinz is developing adult-friendly variations, such as the new Mac & Cheese Big Bowl, which provides larger servings appealing to older demographics.
The foundational elements of Kraft Heinz’s strategy—restructuring products around consumer-centric platforms, modernizing the supply chain, and focusing on significant innovations—are at the core of the company’s operations. While some adjustments seem to be yielding positive results, Kraft Heinz is already exploring further initiatives to drive future growth. The company plans to increase its marketing budget by 30% to better understand how consumers connect with its brands and what they value in terms of functionality and convenience.
One innovative campaign that Gajiwala highlighted involved Philadelphia Cream Cheese, which humorously parodies gaming consoles to promote a cheesecake-making kit titled “The Philly Series 5.” “We aim to be more agile and culturally connected than before, creating engaging content and interactions with consumers in diverse ways,” he explained.
Kraft Heinz also seeks to enhance its brand perceptions by addressing previous concerns about overly processed products. For several years, the company has been working to improve the ingredients and nutritional quality of its existing offerings, a commitment that remains central to its new strategy. The company has pledged that roughly 40% of its research and development efforts will focus on product renovation and enhancing label transparency, making iconic brands more natural.
Furthermore, Kraft Heinz is highlighting how its existing brands align with contemporary trends. For instance, Planters nuts are promoted as a plant-based, healthier snacking option with minimal ingredients, while Philadelphia Cream Cheese is now made with just five components. The acquisition of Primal Kitchen, known for its keto-friendly and health-conscious sauces and meals, aligns perfectly with current consumer interests.
As Kraft Heinz works to elevate brands that resonate with these trends, it also emphasizes its no-sugar and no-sodium products. Onell expressed confidence that the company will thrive as consumers transition from pandemic comfort foods to healthier options. “I’m not concerned about this shift,” he asserted. “Our portfolio is strong in both categories.”
Many food companies have streamlined their product offerings this year to optimize operations and increase production of high-demand items during the pandemic. At Kraft Heinz’s investor day presentation in September, Abrams-Rivera indicated that the company had already cut over 1,100 SKUs—about 20% of its total catalog—within just a few months of strategic assessment. During a recent Morgan Stanley Global Consumer Conference, he mentioned that while the company is currently pursuing nearly a third fewer innovation projects than in the past, significant new products are expected to launch in 2021 and beyond.
With its new strategy, Kraft Heinz is focusing on fewer but more impactful innovations. The company is laying the groundwork for sustainable product development that enhances marketing, supply chain efficiency, and sales execution. While specific details about upcoming projects were not disclosed, Abrams-Rivera expressed confidence that the foundational work being done now will lead to more successful innovations in the future, driven by genuine consumer insights and collaborative efforts with retailers.
Gajiwala is enthusiastic about the potential opportunities ahead. “There are dimensions in flavor and texture we can explore, and we have the chance to transform how we engage in the market and in-store,” he said. “We can enhance every touchpoint from the initial purchase to the consumer’s experience at home. I believe there are numerous opportunities to evolve and accelerate what is already happening.”
Even as vaccination efforts progress and an end to the pandemic appears imminent, Gajiwala predicts that many consumers will continue to spend significant time at home in the coming years. “We have a wealth of trusted, iconic brands that we believe consumers will continue to seek out,” he noted. “We are optimistic that we will retain many of the households that have recently discovered Kraft Heinz brands and categories. We expect this trend to persist, keeping these consumers engaged with us.”
