Kraft Heinz tampered its annual forecast for organic sales and profit on Wednesday as repeated price hikes hurt demand for the packaged food company’s branded products.
Shares for the company dell more than 3% in early trading as it also posted a bigger-than-expected drop in revenue for the third quarter.
CFRA Research analyst Arun Sundaram said, “Steep declines in a few brands are holding back overall results.
“Lunchables, in particular, has been the largest drag on sales, and Kraft Heinz may need to accelerate investment to turn this business around.”
Company executives said the negative publicity surrounding Lunchables appears to be lingering.
Earlier in April, a consumer watchdog group warned that the children’s meal kit brand contained too much lead and sodium.
Kraft Heinz expects a slower recovery for the brand due to an upstream supplier issue that led to a 15% quarterly decline in sell-out, or sales to consumers at retailers.
Cheaper Alternatives
Following price hikes over the last few years, Kraft Heinz has turned to promotions as value-seeking consumers cut back spending on packaged food items such as Capri Sun and Mac & Cheese.
Overall volumes at the company declined 3.4 percentage points, with prices rising by 1.2 percentage points in the quarter.
Customers have pivoted to cheaper, private-label alternatives, prompting packaged food makers like Kraft Heinz to reduce prices in the US on some items such as sauces and mayonnaise.
The company forecast annual organic net sales to be at the low end of its earlier range of flat to down 2% from last year, while adjusted profit per share is now expected to be at the low end of its prior range of $3.01 to $3.07.
It earned 75 cents per share on an adjusted basis in the third quarter, beating analysts’ estimates of 74 cents, according to data compiled by London Stock Exchange Group.
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