The Kraft Heinz Company

Good day. My name is Kevin, and I'll be your operator today. At this time, I'd like to welcome everyone to the Kraft Heinz Company third quarter 2020 earnings call. I will now turn the call over to Chris Jakubik, head of global investor relations. Mr. Jakubik, you may begin.

Hello, everyone, and thank you for joining our earnings call. As you know, during our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, These are discussed in our press release and our filings with the SEC. We will also discuss some non-GAAP financial measures during the call today. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release. We will begin today's call with Miguel Patricio, our CEO, providing a brief business update. Carlos Sabrums Rivera will then review performance in our U.S. business. Paulo Basilio, our CFO, will discuss our financial performance and near-term outlook. Then we will all be available to take your questions. With that, I'll hand it to Miguel.

Well, thank you, Chris, and good morning, everyone. I would like to start our business update by sharing the sentiment I provided earlier today in our earnings release. say frequently that we were cautiously optimistic about the path forward. But our momentum has been building, causing us to turn more to a confidently optimistic. This is based on three facts. First, in the previous two quarters, our results benefited from the scale that Kraft Heinz could bring in the immediate response to the pandemic. Our exceptionally strong third quarter performance reflects the agility of our organization and our ability to sustain momentum. Second, the changes in consumer priorities continue to support greater at-home consumption and increase demand for our brands. And third, our strategic work is moving from planning and organizing into action. Based on these three factors, we are raising our 2020 outlook and continue to expect 2021 results to be ahead of the strategic plan we finalized earlier this year. To better make these points, let me share a few relevant charts. Slide six presents an updated view of our at home or retail versus away from home. or Food Service, Sales Performance. The charts show Kraft Heinz year-on-year sales growth by geography from Q1 through Q3. The abrupt unprecedented shifting between at home and away from home consumption that we saw in the first half of the year continued through the third quarter. At our investor day, We spoke at length about the many things we have been doing to become more creative, more agile, and more efficient. And despite both volatile demands and in some areas constrained capacity, our teams around the world are demonstrating their ability to adapt to demand through a mindset of growth. Our agility led to a very strong second half of September As retail demand accelerated yet again and we responded effectively and efficiently. As a result, our Q3 top and bottom line performance was stronger than what we projected at our investor day on September 15. We have talked about 2020 being the first year of a turnaround. We said, It would be a year in which we laid the foundation for future growth, stabilized our underlying profitability, and maintained our industry-leading margins, all while we rebuild our business momentum. It is clear that this is happening, as you can see on slide 7. From the first half through the third quarter, we have sustained underlying top and bottom line momentum, Even as we take on additional COVID-related costs and supply constraints, we have been keeping our cost of goods under control. Also, as we outlined in February, we are resetting our base through divestiture, business exit, and the normalization of incentive compensation. Our underlying growth is tracking with our strategies. Platform growth is consistent with the portfolio roles we have defined, with growth platforms up 7% year-to-date and energized platforms up 8%. And what we find very encouraging is that while taste elevation is growing middle single digits, excluding food service, taste elevation is growing roughly 20%. Emerging market growth is accelerating, up 9% in Q3 versus 7% year-to-date. The simplification that our platform approach and portfolio roles bring is a key enabler in guiding us and measuring our success as we move to off-ense. This visibility is critical as consumers' preferences evolve. and we need to adapt to serve different needs. Which brings me to another reason for our confidence in our path going forward. We are seeing consumer preferences evolve in ways that indicate that elevated demand for both at home consumption and big trusted brands will remain strong going forward. We are seeing Thank you very much. Thank you very much. Up and down the price-value ladder. Consumers are gravitating towards big brands, and our retail partners are reassessing assortment with availability and velocity, a key determinant for it. And consumers are increasingly choosing brands that can better align with their values. These consumer trends are tailwind. The actions we have already taken to put our operating model in motion and the things that we needed to fix the most heading to our turnaround are many of the same things needed to adapt to an unpredictable environment with faster, greater changes in the consumer development. For instance, since late last year, we focused on improving our people efforts by revamping and deploying new training and development programs. In many ways, we were also ahead of the game in our efforts to reduce stress and burnout and boost morale. And just last week, Kraft Heinz was named to the top quartile of Forbes Magazine list of world's best employers after not even making the list of 750 companies last year. This is very positive reinforcement for all our efforts. We have talked at length about the many things and the way to transform our company from adapting our innovation pipeline to eliminating waste and driving productivity as well as better planning with our partners and ramping up investments in our brand and our capacity and our rich e-commerce and emerging markets. The point is that we now have the framework and visibility to distort resources, reverse savings where we have the most advantage and the greatest opportunities to grow and most important We are moving from planning and organizing to action. I will close my opening comments by summarizing a few points. We had stronger than expected Q3 results due to the greater agility we are creating. The consumer trends we are seeing and the actions underway give us more confidence that our momentum will remain strong in the near term. and we expect to continue exceeding our original strategic plan into 2021. I will pass it on to Carlos now to provide more color on how we are seeing this taking shape in our biggest business.