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The American food group Kraft Heinz performed above expectations in the final quarter of 2021. Nevertheless, the multinational says it will have to raise its prices for snacks and condiments further to compensate for the rising cost of raw materials and shipping.
Covidbonus
Packaged food producers were one of the biggest gainers from the pandemic last year as consumers stayed home stocking up on frozen meals, sauces and soups. However, a fragile supply chain led to a sharp increase in shipping and labour costs. Moreover, prices for staple foods such as wheat and oil reached their highest levels in a decade last year. It puts companies like Kraft Heinz under considerable pressure.
Chief Executive Miguel Patricio already announced price increases in October, and these are now reflected in the quarterly figures. Kraft Heinz increased its prices by 3.8 percentage points in the final quarter. As a result, margins were higher than in the same period before the coronavirus crisis.
Divestments
However, the food giant’s sales fell by 3.3 per cent to 6.71 billion dollars (5.9 billion euros) in the three months leading up to 25 December, but that was due to several acquisitions and divestments. They also performed better than the 6.61 billion dollars (5.8 billion euros) that analysts expected, writes Reuters. On an organic basis, revenues increased by 3.9 per cent.
“Our achievements are proof that our scale and agility have led to better results and greater relevance with customers and consumers. We are generating efficiencies to fuel incremental investments in our business, which, along with successful pricing, are mitigating inflationary pressures”, Patricio said.
Despite the high inflation, Kraft Heinz expects to deliver “strong financial performance” in 2022. The company expects organic sales growth of 1 to 3 per cent for the full year, driven by continued higher consumption than prior to the pandemic. Adjusted gross operating profit (adjusted EBITDA) is expected to be between 5.8 and 6 billion dollars (5.1 to 5.3 billion euros).
