Kraft Heinz is exploring whether it should increase marketing to “create momentum” as it sees a rise in penetration for its products.
The FMCG giant’s CEO Miguel Patricio, told investors on a call last night (30 April) that despite marketing not having “substantial growth” he was keen to keep investment in its brands.
He explained: “It’s our intention to keep the investments on our brands. And even evaluating right now, if we shouldn’t even put more to create the momentum, and especially to keep the penetration that we are seeing, the increase in penetration of our brands with our consumers.”
He also reiterated Kraft Heinz’s pledge of growing media spend by 30% as laid out as part of the company’s strategy prior to the pandemic. This increase would be “paid from within”, he added.
The company is also assessing which channels are best to invest in given the new customers it has gained due to the pandemic coronavirus, largely due to customer stockpiling in the early stages of the outbreak. For example it has shifted spend on Heinz in the US to its ‘Heinz for diners’ initiative, which is offering grants to local restaurants, and on Oscar Meyer to its ‘Front Yard Cookout’ scheme, which will donate up to 1 million meals to Feeding America.
President of the company’s US Zone, Carlos Abrams-Rivera, added: “We will rebalance our marketing spend so that it can better reflect the healthful gains we’re making and the new consumers that we now have coming to our franchise.”
“We’re actually looking at what is the right media, the right channels for us to reach those new consumers that now have come into our franchises. Already some of that work is underway.”
One area where Kraft Heinz is pulling back is innovation, with the company delaying “a lot of” product launches due to the current pandemic.
“Talking with our customers we thought that was the best thing to do. At this moment, what we are doing is actually reducing the number of SKUs we are producing, so we can have better productivity in our lines. And we both thought it was not the best moment of introducing innovation, so they were postponed,” Patricio said.
However, this postponement only extends to the end of the year and not into 2021.
First quarter sales were £4.91bn, slightly ahead of analysts’ average estimate and in line with a forecast the company gave earlier this month. Approximately six to seven percentage points of sales growth were due to increased consumer demand related to the Covid-19 pandemic, as shoppers stocked up on food staples.
Despite the positive results, the second quarter is looking more tricky with a looming economic recession that could lead to consumers spending less as they work through their previously stockpiled food supplies.