The Kraft Heinz Company

Operator: Greetings. 2026 first quarter earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Anne-Marie Megela. Thank you. You may begin. Anne-Marie Megela: Thank you, and thank you all for joining us today. Welcome to the Q&A session for our first quarter 2026 business update. During today's call, we may make forward-looking statements regarding our expectations for the future. These statements are based on how we see things today, and actual results may differ materially due to risks and uncertainties. Please see the cautionary statements and risk factors contained in today's earnings release and our most recent SEC filings for more information regarding these risks and uncertainties. Additionally, we may refer to non-GAAP financial measures. Please refer to today's earnings release and the non-GAAP information available on our website for a discussion of our non-GAAP financial measures and reconciliations to the comparable GAAP financial measures. Joining me today to answer your questions is our chief executive officer, Steve Cahillane, and our chief financial officer, Andre Maciel. Operator, please open the call for the first question. Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Peter Galbo of Bank of America. Your line is now live. Peter Thomas Galbo: Hey, good morning, everybody. Thanks for the question. Steve, I was actually hoping to start with Hold, Win, and Win Big. Just comparing what you said at CAGNY a few months ago to what you are presenting today, at least in the slides, I think there have been a few shifts of some of the platforms and/or sub-platforms. Can you touch on the decision between the different categories and some of those changes, and then as a part b to that question, whether that signals anything in terms of how you are viewing potential asset sales of different platforms? Steve Cahillane: Yes. Thanks for the question, Peter. As I said at the outset, we reserve the right to continue to get smarter, and that is what we have done as we have made some of these changes. A couple of examples: we did downgrade our Frozen from Win Big to Hold. We think that is based on what the category is showing us, what our real opportunities are, and really confronting the facts as they stand and being realistic about them. Equally, we looked at hydration and moved that from Win to Win Big. We see strong category growth. We really like our brands in this space. We really like Capri Sun and its ability to follow the cohort when young and age with them with our new hydration platform that is coming out now. So we see a real opportunity to Win Big there based on our brands and our place in the category. Equally, we have moved cheese from Hold to Win. We like the margin there. We like our brands. We like our opportunities. Those are some of the changes that we have made. I think they are all positive and they point to the fact that we are continuing to look at our portfolio, challenge our portfolio, invest in our portfolio, and look for those areas where we can grow. Peter Thomas Galbo: Great. Thank you for that. And, Andre, maybe just as a follow-up: I know the guidance is largely unchanged after what was probably a better than expected Q1. You called out some timing factors. Maybe just expand a little bit on your prepared remarks around Q2 and how you view the evolving outlook. I know you bumped that up a little bit today. Thanks very much. Andre Maciel: Good morning, Peter. Thanks for the question. We expect the second quarter to have top line between minus 3% and minus 5%. This is a consequence of the Easter shift that we have explained a few times, combined with the fact we still anticipate and expect SNAP to be a 100 bps headwind in the year starting in the second quarter. Nothing that we have seen so far indicates otherwise. We do expect to continue to see market share improving like we observed in Q1, but given softness in the category, we expect that to be a headwind in the second quarter. These will all be partially offset by continuous improvement in away-from-home business worldwide and in emerging markets. When it comes to inflation, we initially guided the year to be approximately 4%. In fact, our number implied in the outlook was a little lower than that. We are now seeing, mainly because of the conflict, inflation around energy and resins spiking up. We are well hedged in energy for the year. Resins we are hedged through mid-Q3, so I do expect, if the situation remains the same—there is still a lot of volatility out there, which can get better or even worse—that we will start to suffer the impact from that inflation in the third quarter. Operator: Our next question comes from Steve Powers with Deutsche Bank. Your line is now live. Stephen Robert Powers: Great, thanks, and good morning, everybody. Steve, if we just look at the improvement you have started to show through and exiting the first quarter, as you dig into it, are you able to parse out where there is more meaningful, true underlying progress that you think can really be momentum you can build on versus maybe some transitory impacts—areas where Easter timing or weather or what have you flattered the quarter? Is there a way to parse out what is most promising versus maybe where we should temper our thinking a bit? Steve Cahillane: Yes, Steve. Definitely, we benefited from the Easter shift—there is no question about that—and the winter storms caused some pantry loading, no doubt about that. But underlying that, we have seen real improvement in our share trajectory and performance. We said in the prepared remarks, the total business last year held or gained share in only 21% of categories. In the first quarter, that moved to 35%, and in March, that moved all the way up to 58%. If you look at our Taste Elevation, where we were investing earlier last year, that moved from 24% holding or gaining share last year all the way to 81% in the six and exited March at 87%. That is really a function of the investments that we have made, the product improvements that we have made, and the distribution that we have been able to hold or gain based on the activities we put in place. The totality of the business and the good start to the quarter can also be attributed to the fact that for the last at least sixty days, this organization has been maniacally focused on growth and execution. Pausing the split freed up lots of resources, as we said it would, and we turned our attention and the attention of this entire organization to get off to a strong start, and that is exactly what we did. So we are being very realistic about what flattered the quarter, as you said, but we also see the underlying strength that is building. That is important because that is where we are going to continue to invest, and the vast majority of our $600 million is still dry powder that is being deployed as we speak from now through the rest of the year. So we are holding guidance, but we are very encouraged by the start to the year, and we plan on continuing our maniacal focus against our consumer, our customer, and execution. Andre Maciel: And to complement a little bit with the numbers: last year, we started the year losing 90 bps of market share, mix-adjusted. That was really the bottom of the last ten years. As we started to step up investment in the second half, we were able to exit last year losing 50 to 60 bps of market share. Now, year to date, we are at 30 bps, so there is definitely good improvement happening right now, led also by hydration, as Steve mentioned, and desserts—places where we have stepped up investments in marketing and renovated the product—and we have started to show some signs of improvement. Stephen Robert Powers: Great, thank you. And, Andre, while I have you, just on free cash flow—obviously a strong quarter, but with some working capital and marketing accrual timing benefits. You have maintained the free cash flow outlook for the year, but as you think about the balance of year, 2Q through 4Q, anything to call out in terms of timing of year-to-go free cash flow? Andre Maciel: Our cash flow comp remains very strong. Think of all the changes we have done to incentives a couple years ago. We now have the organization focused on really being disciplined in deploying CapEx and managing working capital better. We are seeing that translated again in the first quarter. Because of the step-up in investments happening in the second half, we should expect cash flow potentially to go down in the second half of the year, but that is anticipated. Now, we exited the quarter with very strong cash on hand, so you will see us now in the second quarter paying down debt. We have debt maturing now in Q2, and we are strongly considering anticipating paying back part of the debt that is maturing next year. We have $1.9 billion next year again, so we are considering anticipating a portion of that as well, and there are a couple other things we are doing in terms of managing our debt tower better, which will allow us to reduce interest expense. But I think it is a good position that we put ourselves in, to allow us to invest $600 million in the business and still generate strong cash flow. Operator: Our next question comes from Michael Lavery with Piper Sandler. Your line is now live. Michael Lavery: Thank you. Good morning. Just curious how to think about the pricing environment. You have obviously started the year with plans that include price adjustments, and it looks like there are early signs in this quarter that they are in place already—that that is working. But then there are shifts in the input cost environment. Does that do anything to change how you think about your plans, or how fluid and dynamic would your pricing expectations be? Steve Cahillane: Thanks, Michael. I would say the pricing environment can be best characterized as very rational. We have come through this inflationary cycle, which was obviously unprecedented. The consumer is under a lot of pressure, and so our focus is very much on value—creating value and affordability. We have looked at opportunities to adjust pricing where we think it has gone a little too far, and you are seeing some results in that. But we will always look at the input cost environment and say our first line of defense is productivity. We are really looking to ramp up and have a top-notch productivity year this year because it is really needed since the consumer can only absorb so much price. Ideally, a business like ours would take about half of input cost inflation in price and then the rest in productivity. If we could do better than that, this is the year to do it because the consumer is under a tremendous amount of pressure. We look at it as very much our goal to be affordable and be there for our consumers in an environment like this. Andre Maciel: To complement what Steve said, in the guidance for the year, we had contemplated initially that we would price only 20% of the inflation. So this was already anticipated. To Steve's point, we are relying on another strong year of productivity. We started Q1 strong again, above 4% of COGS, and we do expect to be able to maintain that pace. Michael Lavery: That is really helpful. Related to that, I wanted to follow up on—I think it is Slide 8—you flagged a simplified operating model as part of the turnaround for the U.S. It has the Ore-Ida logo there; it could be referring to the Simplot JV. How much opportunity is there to simplify the operating model? And part of the question is, through the lens of history, knowing that cost cutting can obviously go too far, how should we think about what opportunities there are and maybe the risks, and how you think about that approach? Steve Cahillane: We made a terrific hire in bringing Nicolas Munoz to run our North American business, and he has been hard at work looking at the operating model, as have we all. We see real opportunities to have stronger accountabilities and stronger empowerment at the people who are running the business. We also see big opportunities to supplement our commercial activities and our commercial people, and we have been doing a lot of that—hiring people in sales and marketing—with a focus on the consumer and the customer and very strong objectives that are aligned around our business objectives. The chief one is growing organic sales and improving market share performance. We are simplifying everything that we do in service of the consumer and the customer and our goal to drive profitable, volume-led, value market share. Operator: Our next question comes from Chris Carey with Wells Fargo. Your line is now live. Christopher Carey: Hi. Thank you, everybody, for the question. If you think about the back half acceleration in top line that you are embedding for the year, can you unpack that a little bit across the most meaningful drivers—as it pertains to the lapping of Indonesia, the step-up that you are expecting from investments, the improvement in market share that you are expecting, perhaps some of this acceleration in Western Europe post-pricing? Give us a sense of the major contributors to the back half improvement that you would expect in the top line. Steve Cahillane: Chris, I will start and Andre can help with more details on the numbers. We are not really calling for an acceleration. We got off to a very good start, and we are being prudent about the way we think about the rest of the year. Of course, we would always like to overdeliver on our top-line goals and overdeliver on our market share objectives, but we are being prudent in the way we think about the rest of the year and not embedding the first-quarter overdelivery into our guidance for the top line. Andre Maciel: In terms of the building blocks, you mentioned Indonesia—that is certainly a contributor. In the first quarter, for example, Indonesia alone was a 70 bps headwind to top-line growth, and we do expect that to go away in the second half as we lap all the adjustments we have made in the business. Market share in the U.S., as we step up the investments, should see an improvement versus where we are today. Similarly, we feel good about our European plans and everything that we are doing behind Heinz. There is a lot of step-up investment as well as part of the €600 million that is going against Heinz in Europe. We are going to see that also helping improve performance there. And away from home, even though there is still overall softness in the category, we are now seeing signs of market share improvement in the U.S., which is quite encouraging, especially in the sauces portfolio. All of those factors should allow us to see a step-up, so there will be a balanced contribution across those levers. Christopher Carey: Thank you. It has been touched on a bit, but as you think about the inflation exposure in Q4, this is going to imply bigger exit rates going into 2027. What does the toolkit look like for you to work through a sustained higher inflation environment? There is pricing, productivity running at relatively high levels, maybe harvesting some of the investments that you have made in SG&A to protect the bottom line going into 2027. Obviously this is a fluid environment, and inflation can certainly change, but can you give us more insight on how you would be planning from a cost-offset perspective if we look out 18 months? Steve Cahillane: We would not look at our investments—the $600 million and otherwise—as a way to protect profit. In fact, we are looking at opportunities to even invest more as we see good returns against those investments and good outcomes in terms of the top line. We will protect that and, in fact, even lean into it. As we said earlier, the first line of defense is always going to be productivity. It is unknown what the fourth quarter and 2027 will bring. It could be that the whole environment moves towards needing to take more price. We cannot predict what the outcome will be in the Middle East and how that will affect costs, but it would be something that affects the entire environment. We would be looking to go with that if needed, but again, first line of defense is productivity, investing in our brands, and driving a good top-line outcome. Operator: Our next question comes from Thomas Palmer with JPMorgan. Your line is now live. Thomas Palmer: Good morning. Thanks for the question. Maybe starting on the marketing side: you noted a 37% increase in the first quarter on a year-over-year basis, also the plans for 5.5% spend. Any framing on where that level of increase in the first quarter takes you relative to that annualized percent of sales? And when we think about the magnitude of the increase, are there any timing considerations, such as having that earlier Easter impacting how that marketing spend flowed through? Lastly, any detail on where that spend has really been focused and if you are seeing, when we look at the share improvements, disproportionate spend in the areas that have inflected the most? Andre Maciel: As we said in our prepared remarks, we do expect marketing for the year to be at least 5.5% of revenue. As Steve mentioned, we have been looking very closely at how our performance is shaping up, and if things end up better than we anticipated, we will be willing to lean more into investment, with marketing being one of the key drivers. The reason why we see 37% in the first quarter—you might remember last year we stepped up marketing investment in the second half—so now you have an easier comp on the marketing front. Year over year, we are going to see that benefit gradually reducing because of the step-up in the second half. But overall in the year, we do expect at least 20% increase. In terms of where this money is going, we have been prioritizing our Win Big categories. There is a proportionate amount, started last year, that went against sauces, cream cheese, mac and cheese, and hydration. But we do have the opportunity to step up marketing across the whole portfolio. We have been gradually stepping up investments across different parts of the business to different extents, but we believe that to be healthy for the whole portfolio. Thomas Palmer: Thank you for that. On the SNAP side, you have noted expected headwinds, especially ramping this quarter. I know it is still early in the quarter. Are you already seeing signs of this incremental impact as we think about the second quarter? And just to confirm, there was not really an impact in the first quarter—I know it was not a callout. Thanks. Andre Maciel: We definitely see an impact from SNAP already happening in February and March. If you look at SNAP transactions, they are already down, in line, if not even a little more than expected. On the other hand, we saw strength in the non-SNAP households, which helped to offset that in the first quarter. It is hard to predict at this point if that strength in the non-SNAP households will hold into the remainder of the year. We are anticipating that we will start to see that net household impact more pronounced into sell-out for the year to go, and that is why we have been calling for a 100 bps headwind. Obviously, we are not sitting on the problem. That is why part of the price investment we have deployed in the $600 million was put against opening price points. This part of the consumer base is definitely under a lot of pressure. Operator: Our next question comes from Megan Klap with Morgan Stanley. Your line is now live. Megan Klap: Hi, good morning. Thanks so much. Maybe to pick up on Tom's first question on the marketing investments—and, Steve, some of the comments you have made—clearly you are seeing some benefits from things that were done prior to you making this new plan. You mentioned $600 million is still dry powder. As you see the improvements you have made in the first quarter and then some of the areas you highlighted—meats in particular—there is still opportunity. Can you talk about whether anything you have seen so far has changed how you are thinking about concentrating some of those investments, particularly as the macro continues to shift and perhaps the cost inflation outlook gets more challenging as we go into the back half? Steve Cahillane: What we have seen is good returns on the investments that we have made, and that is where we are leaning in. If you look at some of the exciting things that we have going on right now, you can follow our investment against those. For example, Power Mac & Cheese, which just came out in April—too early to see any sell-out data, but the sell-in was outstanding: 35 thousand accounts right now as we speak. I think that is a function of the commitment that we made to increase our investments substantially, which led to better distribution, and we are going to be investing against it. We anticipate a good launch there. In our varieties business, we have a nice Shapes innovation that we are investing in. The Capri Sun Hydrate that we mentioned earlier is a big opportunity to continue the momentum that was built last year on Capri Sun with new distribution and new doors there, so we are investing against that. We have a Lunchables renovation coming next month; we will be investing against that. We have seen a good turnaround in Lunchables, which started at the end of last year. In the back half of the year, Philadelphia Lactose Free is coming, which we think is a big opportunity given the number of people who suffer from lactose intolerance in the U.S., and it is a great innovation we will be investing against. The brands where we think we have a real right to win, we will be investing in. You mentioned meats—where we have things that we need to turn around, we need to make some investments there. We do not like leaky buckets, and we are going to look to plug those at the same time as we lean against our biggest and best opportunities. Megan Klap: Great, thank you. And, Andre, maybe just a quick follow-up on the gross margin performance—still down in the quarter but significantly better than what you were expecting and what the Street was modeling. I understand there were probably some fixed-cost leverage benefits on the top line, but anything else in the quarter in terms of upside versus your expectations to call out? Thanks. Andre Maciel: There is about 40 to 50 bps of gains in the quarter that are nonrecurring. A portion of that is selling excess byproducts; we do not expect that to be repeated in the year to go. There is a small contribution from a maintenance we were expected to do in a certain factory that would have required us to cut back production to a co-packer temporarily. We decided to move that to later in the summer, so that is a phasing thing. Cheese commodities came a little better than what we anticipated. We did see the peak in inflation that we expected across most of the commodities, including coffee and meats, but we had those other upsides that helped in the quarter. That is why we are also maintaining our expectation for the year of a headwind of 25 to 75 bps. Anne-Marie Megela: Perfect. Thank you. Operator, we have time for one more question. Operator: Our last question comes from Scott Marks with Jefferies. Your line is now live. Scott Marks: Hey, good morning. Thanks so much for squeezing me in here. In the interest of time, I will just ask one. Can you give us a lay of the land in terms of the away-from-home environment? I know you called out some pressures in the U.S. business. You have some clear paths to growth there. Can you help us understand what is happening both in the U.S. and abroad, and how you think about the improvements within that part of the business? Thanks. Steve Cahillane: Yes, Scott. From a macro perspective, away from home is under a fair amount of pressure based on the macroeconomic environment both in this country and around the world. Having said that, we see tremendous opportunities for us in away from home based on the strength of our brands and the opportunities in front of us, and this is one of the areas we are investing in. We see away from home as a strategic outlet and a strategic opportunity for us. We like the momentum that we are building early this year. We see a lot of opportunities both in this country and especially around the world to continue to gain share in away from home. We have one of the greatest away-from-home brands in Heinz, and we can do a lot more in leaning into Heinz—and not just in ketchup. Heinz has been successful in mayonnaise and other spreads as well. There are big opportunities for us to continue to leverage our brands, especially Heinz, as we think about the away-from-home opportunity. Operator: We have reached the end of the question and answer session. This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.