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Kraft Heinz is done raising prices, but sees more inflation pain this year

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Kraft Heinz Co. beat fourth-quarter profit and revenue expectations because it raised prices by a lot — more than double the U.S. inflation rate — and by enough to offset a decline in demand.

The good news for customers of the food and beverage company
with brands including Oscar Mayer, Heinz Ketchup, Kraft cheeses and Kool-Aid, is that the company isn’t planning on raising prices anymore this year.

“From a pricing perspective, 99% of all new pricing has already been announced for 2023,” said Chief Executive Miguel Patricio, according to a transcript of the post-earnings conference call with analysts provided by AlphaSense. “As we look to the rest of the year, we have no current plan to announce new pricing in North America, Europe, Latin America and most of Asia.”

In the fourth quarter, the company said prices were 15.2 percentage points higher than they were a year ago, including a 14.2 percentage point increase in North America and an 18.5 percentage point jump internationally. For all of 2022, prices increased by 13.2 percentage points.

That compares with the U.S. annual consumer inflation rate of 6.5% at the end of 2022.

Kraft Heinz said its price increases helped offset a 4.8 percentage point decline in volume and mix in the fourth quarter, including a 5.0 percentage points drop in North America, and a 3.4 percentage point drop in volume in 2022.

As a result, fourth-quarter sales grew 10% from a year ago to $7.38 billion, above the average analyst estimate compiled by FactSet of $7.26 billion.

And the company swung to net income of $890 million, or 72 cents a share, in the fourth quarter, from a net loss of $257 million, or 21 cents a share, in the year-ago period. Excluding nonrecurring items, the company said adjusted earnings per share rose to 85 cents from 79 cents and beat the FactSet consensus of 78 cents.

The stock rose as much as 1% at its intraday high of $40.28, before paring gains to be up 0.2% in midday trading.

Now the bad news. The company said it anticipates inflation in the “high single-digit” percentage range for the year, which implies an increase from the U.S. inflation rate of 6.4% seen in January.

In addition, the company expects volume continue to decline in 2023, and organic net sales growth for the year is expected to decelerate to 4% to 6% from 9.8% in 2022.

As a result, the company expects 2023 adjusted EPS of $2.67 to $2.75, which was below the FactSet consensus of $2.77.

The stock has rallied 7.9% over the past three months, while the Consumer Staples Select Sector SPDR exchange-traded fund
has slipped 0.8% and the S&P 500 index
has edged up 3.4%.


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