Kraft Heinz slashed its organic sales forecast for 2024 on Wednesday after missing quarterly revenue estimates.
The packaged food company signalled that it expects higher prices of its snacks and ready-to-eat meal kits to pressure demand for the rest of the year.
Other companies such as Mondelēz are facing similar pushback as Kraft Heinz from consumers.
This is a result of roughly double-digit price hikes over the last year dampening appetite in the key markets of North America and Europe, particularly for lower-income groups.
Shares for the company were up 2% before the bell as it reaffirmed its annual profit forecast on steady margins.
Adjusted gross profit margin rose 210 basis points to 35.5% in the second quarter.
This was due to savings made from Kraft Heinz’s investments in supply chain and automation efforts.
That helped it beat adjusted earnings-per-share estimates.
Kraft Heinz logged a profit of 78 cents per share, above analysts’ estimates of 74 cents per share.
‘Consumer Sentiment Remains Cautious’
Barclays analyst Andrew Lazar said, “KHC results played out similar to what we’d expect to hear from others, which is building productivity… and modest inflation being used to lean into greater promotional and trade spend, to try to drive a better volume outcome.”
The company said it will “selectively increase investments and promotions” and drive innovation in its North America retail business.
Bigger rivals PepsiCo and Coca-Cola have also ramped up investments in product innovations and are offering different price tiers to attract value-seeking consumers.
Chief executive of Kraft Heinz Carlos Abrams-Rivera said “Consumer sentiment remains cautious” and indicated “a more gradual top-line improvement” in the back half of the year.
Overall volumes fell 3.4 percentage points in the quarter, while prices rose 1.0 percentage point across its portfolio.
It posted net sales of $6.48 billion, missing analysts’ average estimate of $6.55 billion, according to data from the London Stock Exchange Group.
The Heinz ketchup maker now expects fiscal year 2024 organic net sales to be flat-to-down 2% from its prior forecast of flat-to-2% growth.
Read More: Mondelēz International Misses Estimates On Weaker Demand
