Kraft Heinz, renowned for its popular products such as Oscar Mayer hot dogs and Philadelphia cream cheese, is bracing itself for a tough fourth quarter. According to analysts surveyed by FactSet, the packaged-food giant is expected to report $7 billion in sales, which represents a 5.4% decrease compared to the same period last year. The decline in sales is primarily anticipated in the U.S. market. Additionally, earnings are projected to shrink by 9.4%, amounting to 77 cents per share, down from 85 cents per share from a year earlier.
If these predictions hold true, it would mark the first year-over-year sales decline for Kraft Heinz since the second quarter of 2022. The company’s sales volume during the third quarter diminished by 5.4% from the previous year due to higher prices, which led consumers to reduce their purchases. By increasing prices by 7.1%, Kraft Heinz’s North American market experienced an offsetting effect, resulting in no growth in their largest market.
Over the past 12 months, Kraft Heinz’s stock has suffered an 11% decline, and on Tuesday prior to the earnings report, it dropped an additional 1%.
The staples food market is highly sensitive to price increases, particularly in products like bread, condiments, and frozen food. Since consumers typically prioritize value over brand loyalty with these items, they readily switch to competitors offering better deals. Moreover, grocery stores now offer a wider range of private label options, often at lower prices, intensifying competition for branded packaged food products.
Changes in Sales Volume for Food Companies
Conagra Brands, a prominent canned and packaged meals manufacturer, recently reported a 3% decline in sales volume during the last quarter. Surprisingly, this drop occurred even though prices remained mostly unchanged compared to a year ago. In a similar fashion, both Campbell Soup and General Mills experienced decreases in sales volume of 5% and 4% respectively during the latest quarter, despite a mere 3% increase in prices.
It’s worth noting that these companies have been steadily increasing their prices over the past year. However, consumers have been increasingly opting for their more affordable products. This shift has led to a reduction in the average price of items sold and subsequently impacted overall sales value.
Interestingly, companies that specialize in snacks and beverages have performed significantly better. Mondelez International, the maker of popular snacks like Oreos, Hersheys—the renowned chocolate giant, and more recently, beverage behemoth Coca-Cola have all experienced more positive results. These companies have managed to maintain relatively strong consumer demand for their comfort foods, even in the face of price hikes.
Coca-Cola, in particular, achieved remarkable sales growth in the fourth quarter by successfully passing on most of its rising costs to consumers while minimizing business loss. In North America alone, sales volume only exhibited a marginal 1% drop compared to the previous year, despite an 8% price increase.
The dynamic shifts in sales volume between these food companies reflect varying consumer preferences and behaviors. While some companies struggle with declining sales despite price increases, others have been able to navigate the market successfully, capitalizing on sustained consumer demand for their products.
