The Kraft Heinz Company

Welcome to the Kraft Heinz Company Q2 2026 earnings 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your hosts, Anne-Marie Megela. Thank you. You may begin.

Thank you, and thank you all for joining us today. Welcome to the Q&A session for our second 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 risk 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.

Thank you. And as we conduct the question and answer session, if you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line in the question queue. And you may press star 2 to remove yourself from the queue. And for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Great. Thanks so much. It's encouraging to see some of the incremental investments starting to pay off. I know much can still change by the time we get to 2027. In the prepared remarks, you mentioned expected inflation next year in a 4% to 5% range, and that Kraft will try and offset as much as possible through incremental productivity. I know you'd mentioned previously that 26 would also be the margin trough year. So I'm trying to get a sense of whether we should read that inflation commentary for next year. Maybe it's implying that perhaps this year won't be the margin trough. And I guess some of the incremental investment now planned for the second half of this year will also have to wrap in the first half of next year, too. So I'm just trying to get a sense of how we should sort of read the commentary about next year in the prepared remarks. Thanks so much.

Yeah, Andrew, this is Steve. Thanks for the question. I think what we were trying to get across in those comments was that despite the macroeconomic uncertainty, despite all the challenges that we're facing, that the inflation outlook for next year is not anything that we're fearful of. In fact, we can absolutely manage it. But as always, our first line of defense is productivity. If we could cover all of the inflation with productivity, we would do that. but we're you know we are looking to maintain and strengthen our margins over time so that's the way we're looking at it it's a manageable year next year despite all of that we like the way we've set ourselves up it's you know more than halfway through the year with this incremental investment coming in we like the setup we like the momentum and we like the way we're setting ourselves up for 2027 including on the COGS line got it thanks so much

Thank you. Our next question comes from the line of Peter Galba with Bank of America. Please proceed with your question.

Peter Galba Hey, good morning, Steve. Andre, thanks for the question. I wanted to ask a little bit about just the consumption rates. I know there's a bit of noise with the inventory pull forward in Q2 that's also kind of disrupting Q3. I think if I back all that out, your consumption was something like down two in the second quarter. I think that the 3Q guidance implies it improves to something like down one in 3Q. So I just want to make sure I understand that cadence correctly. And then maybe just as a follow-up, what that says about how you feel about the exit rate on the year from consumption. So are we going from this down two to down one to something improved in Q4? I know there's Thanks very much.

Yeah, thanks for the question. You know, I'll start and Andre can certainly fill in, but you're reading it right. You know, we had obviously first quarter that was flattered by Easter, the second quarter that reversed. We had snowstorms that we tried to adjust for in the first quarter as well. But by and large, the consumption rate is improving. and the amount of our business that is maintaining or holding share is also improving. And we're seeing real green shoots in part of our taste elevation portfolio, certainly in Capri Sun, even in mac and cheese in terms of consumption rates. and so we hope to exit the year with the best consumption rates in the fourth quarter and enter 2027 with real momentum. Now it's too early to give guidance obviously and talk about 2027 but you're reading the consumption puts and takes exactly right and the momentum is growing. Nobody's doing a victory lap that we're declining less than you know we anticipated but it is moving in the right direction and that's what gives us the confidence to invest even more to double down on improving consumption and improve on our share performance.

Yeah, I think just to complement, Peter, I think directionally you're right. In Q2, it's about 2.5% decline on the consumption. As we are ramping up, it started to ramp up investments by the end of Q2, and now we're going to be a lot more intense in the second half. We do expect a gradual step up. I don't want to set up an expectation about the specific sellout that's going to be in Q3 and Q4, but we should expect an improvement in Q3 and then after another sequential improvement in Q4. July, just to put the perspective, we were about minus 1%, so there is already an improvement that's observed in July, and the market share is even more important. We were in the first half, we lost 30 BIPs. which is in a way is good because we go back to the historical levels remember that in 2025 at some point we're losing 90 bps of market share at the beginning of the year so it's a very significant improvement look at the most recent weeks we are now 20 bps even a little bit better so it's good to see that things are moving in the right direction great thanks so much thank you our next question comes from the line of Steve Powers with Deutsche Bank please proceed with your question

Yes, hey, great. Actually, I want to kind of follow up on that and just get a better sense of how you're thinking about the market share progression. Because as you say, Andre, down 30 bips in the first half, certainly improved versus where we were in 25. But if I compare kind of where you were coming out of the first quarter, it looks like there wasn't a whole lot of progress made in the second quarter. And certainly, percentage of win big, gaining or holding share went down. especially versus the March exit rates that you shared coming out of 1Q. So just maybe a little bit more perspective on how you're seeing progression. And then as we look to the back half, if there are specific pockets of the business where you expect to see the most traction that we should look for as specific proof points, that'd be helpful to be able to highlight. Thank you.

Yeah, and you are correct. The share trend Q2 and Q1 is similar. And if you remember the last earnings call, we already anticipated that. We said we did not expect. In part because, as we said, we built into the year 100 bps headwind from snap. And part of that would be a share pressure. So in a way, it's good that we were able to offset that share pressure coming out of snap because we are seeing the snap headwinds. And we were able to protect the share as we anticipated. Now, as the investments ramp up and have all the innovations that we put in market gain interaction, you saw in prepared remarks, I think there is very encouraging early signs coming out of Capri Sun Hydrate, out of the Power Mac and Cheese, out of the Ryder Shape. So there's good momentum there. And I think that's also contributing for the share improvement we are seeing. So you should expect Mac and Cheese to continue to improve. We should expect taste elevation in general to continue to improve from where we are right now. We should expect momentum on the desserts business. We should expect cold cuts to start to improve the trends given now that we're going to have the decline that started in July last year. So all those things would be signs of progress.

And if I just build on that, and Andre mentioned this, if you look at the last four weeks, we are seeing proof of that. So we're seeing that. and only a third of our incremental first $600 million has been spent. So we still have a lot in market to go, including the additional $100 million that we announced this morning.

Yeah. Okay. Very good. Thanks for that context. Appreciate it.

Thank you. Our next question comes from the line of Scott Marks with Jefferies. Please proceed with your question.

Hey, good morning all. Thanks very much for taking our questions. Wanted to just dive in a little bit on the meets and deals side of the business. That's one area where you specifically called out, you know, plenty of work to do, talked about the targeted actions. Just wondering if you can kind of help us understand, you know, how you're approaching those actions and, you know, what we can expect in terms of timing for the improvements beyond just the laughing dynamic that you mentioned. Thanks very much.

Yeah, so I'll start, and again, Andre can build on it. One of the biggest issues that we've had are with our Oscar Mayer brand, and specifically in Deli Fresh. We have new packaging, which is almost now complete, completely in the market, and we're seeing better performance based on that. And some of that has to do with now lapping the big declines that we saw. So we know we have work to do clearly on the Oscar Mayer front, but the new packaging is in place, and early signs are encouraging. and, you know, we want to plug that leaky bucket for sure. On bacon and hot dogs, you know, better performances, you know, better, much better than Deli Fresh. So it's really isolated around Deli Fresh. Lunchables, we've also had some innovations coming in the market, Lunchables, Snackables. We made some product improvements in Lunchables as well, which is showing early encouraging signs as well. And you mentioned meals, so, you know, mac and cheese, obviously, you know, we already mentioned is showing improved consumption, significant improved consumption, and Power Mac continues to be off to a good start. I think we mentioned on the last call, terrific distribution, 35,000 stores out there with Power Mac, and its consumption is in the first quartile of innovation. So feeling very good about that. And the early read is it is very, very incremental to us and to the category. So retailers have been quite pleased with that. So All in work to do, but progress being made.

Appreciate it.

Thank you. Our next question comes from the line of Michael Lively with Piper Sandler. Please proceed with your question. Thank you. Good morning.

Just was wondering if you could help us understand a little bit of what's working and You know, between some of the product investments, the price investments, the marketing, you know, what are you seeing being most effective that's running ahead of your expectations? How much can you transfer it across brands and categories? And how does it inform how you deploy the incremental 100 million?

I think, you know, it's working virtually everywhere we're putting it. And so condiments is probably the first area where we've seen really marked improvement. Heinz is back to growth as it should be, strong growth, strong consumption growth, which is terrific. So across the board in the U.S., we're seeing better performance. We haven't even mentioned, though, emerging markets and what's happening there. Emerging markets had a terrific quarter. Heinz is up 12% in the quarter in emerging markets driven by distribution and consumption. And so, you know, you look at the totality of our portfolio, we've said the investment is largely in the U.S. to turn around the U.S. business. We're seeing early green shoots on that. But the rest of the portfolio is performing well in emerging markets, as I already mentioned, and global away from home is back to growth as well. That's a very strategic channel for us, one that we were not performing well in last year, and we're performing well now. And so we're investing there in product, in customer, and in distribution, and it's paying off.

Just a couple of quick compliments. Heinz is really having a very strong year. Worldwide, we grew 3% year-to-date, and with the expectation to accelerate from where we are right now. Condiments in the U.S., which last year was flat, and that's one of the places where we started the step-up investments in the second half of last year. Condiments in total in the U.S. is also growing 3% year-to-date, which is very good, and again, with prospects to continue to improve.

Okay, great.

Thanks so much.

Thank you. Our next question comes from the line of Tom Palmer with JP Morgan. Please proceed with your question.

Good morning and thanks for the question. I wanted to follow up a little bit on Andrew's question on 2027 and maybe focus it a bit more on the investment side. You noted earlier in the call that only around a third of the spend had kind of stepped up in the first half of the year. So I think that would imply like a $200 million step up, $500 million then comes in the back half of the year. One, any help on kind of how much of that step up comes in 3Q versus 4Q? And then when we start thinking about next year, Is a reasonable starting point looking at kind of the 4Q run rate and then extrapolating what that would imply for kind of the step up next year? Or are there more meaningful considerations on top of that? Thanks.

Yeah, again, I'll start. I think you should think about the third quarter and the fourth quarter being broadly even in terms of how we spend that money. and then as you think about 2027 again too early to give guidance but you should think about not necessarily a fourth quarter run rate but think about 2026 being the base year in terms of getting the investment level right and you know we mentioned this in the prepared remarks but I would like to underscore that you know we're spending the additional 100 million dollars because we can from a position of strength and you know if you're a share owner would you rather we spend too much or too little It's not an exactly precise science, but we felt $600 million was the right number, a very good number and a strong number. The fact that we can add $100 million to it really helps us think about 2027 being the year that we've got it really right with a very strong marketing spend in order to drive our volume-led, sustainable share-type growth. We like the way we're setting ourselves up for 2027. When we get to the fourth quarter results, we'll obviously give guidance against that. But I like where we are, and I think we're in a differentiated position versus some of our peers in terms of the investments that we're making and the momentum that we're starting to build.

And just to be triple clear, we do not expect any wraparound of investments into next year. So this 26 is the base.

Thank you.

Thank you. Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

Great. Thanks. Good morning. From a category and brand perspective, I wonder is the best ROI on spending the brands you highlighted in the slides, Capri Sun, Heinz, Orida, Mac and Cheese in Philly, Those are getting the majority of incremental growth spending. If those are the highest ROI, why do you think that is? I can imagine some of it is the category responsiveness from a top-line perspective, and some of it's the incremental margins of the category. But also, I would imagine a lot of this comes down to your own readiness with ideas and innovation and the marketing messages. So any color on why those guys, those particular... Brands are getting the incremental spend would be interesting to hear.

Thanks for the question, and I think I already answered. So it is a combination of all of that, right? Those categories that were highlighted, they do have all very strong brand equity. They do typically have very high gross margins, pretty much all of them. We did start earlier last year. If you remember, the first place where we started to step up investments in headcount, innovation, marketing was test elevation. That's why you see those plans already coming to fruition in a stronger way. And we said in the earnings call, I believe in February, that some of these other categories we were catching up. And that's part of where the incremental headcount started. Investments and marketing and R&D work for us to be able to build bolder plans. And that's why we're starting to see some of those starting right now, but even more strongly towards the end of the year and into next year. So, all right.

Yeah, and I guess if I had to have a follow-up, it's really a follow-up not just on that one, but some of the other questions as well, because I think your incremental spend is $500 million or so versus $200 million so far, or a third of the $600 million. If you're going to be doing that sort of spending and that half a billion works, I wonder how much you would try to keep the flywheel going into next year and make that a billion or more if you just keep that run rate. How should we think about how you're thinking about that and those decisions on incremental spend in 27? Thank you.

You should think about 2026 being the year where we got our base right. and the incremental $100 million just gives us that much more confidence that we've got the right amount of investment behind our brands. And we'll continue to turn our attention to getting the maximum ROI from those investments. And we'll always be dynamic in the way we think about allocating that investment as we go forward. But we feel like this has given us a great opportunity being ahead of plan to put the incremental $100 million into just bolster our confidence that we've got the right amount of investment behind our brands to win in 2027.

I think having all these investments in the base now in 26 gives the optionality next year. If you need to dial up marketing and do a little less in price, or if you need to do more product and less marketing, I think we have the flexibility, but I think we're going to have a very solid base to invest in. I don't want you to go unnoticed. We show him to Perry Marks that at the same time he continued to work on ROIs. So we saw progress in both marketing and promotion ROIs year-to-date, which is also good.

Thank you.

Thank you. Our next question comes from the line of Chris Carey with Wells Fargo. Please proceed with your question.

Hi, everyone. I certainly don't want to belabor the investment point, but maybe just one final follow-up here. There's this dynamic where you've made the decision to increase investment because you're running ahead of plan, which is certainly a great thing. As we mature in this strategy, ultimately you're going to want to get back to organic sales growth, I would imagine. And so what if organic sales trails for longer than expected? Would you lean in more? or is this more about making sure that your market shares are back to healthy levels and then of course the categories will always do what they do. So just that context between your top line evolution versus getting your market shares back to a good place, which I think was a core premise of the initial investment. And then just as a kind of second question, that'd be more of a follow up. You've got better momentum in the business, Steve. You've been there for a bit now, getting your arms wrapped around the business. Does a bit better underlying momentum give you more ability to consider portfolio reshaping? Clearly, there's been headlines in recent quarters and years about potential avenues for portfolio reshaping. Does this Better Treadline give you a line of sight into maybe being a bit more proactive about making those decisions that are going to put you in a good place for the longer term. Thanks.

Yeah, so on the first one, I just reiterate that we have increasing confidence that we're doing the right thing to drive better share performance and better organic sales growth. I feel very confident about that, that we're doing the right things. And with the investment announced today, again, just bolsters our confidence. In terms of the second question, I think you're always wanting to operate from a position of momentum and strength, and we'll always continue to look at what's right for our share owners as we think about our portfolio. So we're very comfortable in looking at the portfolio, and if the right opportunities come to make moves that add share owner value, we'll absolutely be in a place to do that.

And I just want to add a comment that's not directly linked to your question, but I think is worth mentioning as well. You have noticed that at the same time that you are stepping up the investments, we also protected the cash flow. So we increased cash conversion expectation for the year. So free cash flow is the same dollar amount essentially that I have committed at the beginning of the year. We keep a close eye on the free cash flow. Our balance sheet remains very strong. You have seen that we have paid down $1.9 billion of debt in the quarter. After the quarter closed, we also paid another $1 billion in 2027. We did a very successful refinancing of an expensive debt maturity that we have. Also, that was very successful. So it is great for us to be in a position to step up investments. Gattles Returns positioned your company for growth while at the same time preserving a very strong balance sheet and cash flow.

Okay, thank you.

Thank you. Our next question comes from the line of Robert Machado with TD Cowen. Please proceed with your question.

Hi, thanks for the question. Andre, I just want to make sure I understand the guidance range, like what's in the low end and what's in the high end. It sounds from the tone here that you're pretty confident that things will keep accelerating from a sales perspective in third and fourth quarter. But if I just go to the midpoint of the guidance, the total organization would have weaker sales growth in the second half than the first half just at the midpoint. So just to be consistent with the tone, it sounds like you have more confidence in the high end than the low end. So just, do I interpret that correctly?

Yeah, so first on the tone, yes, I think you are hearing confidence and I think we are stepping up investments because we are seeing early signs of traction. We do feel about emerging markets and we believe our ability to continue to accelerate the growth from where we are, away from home, back to growth, we believe this might be sustainable. On the U.S. retail, you already talked about the places that we still have work to do and the places of strength. Industry is still a bit volatile, right? So the industry, if you normalize by coffee inflation and tariffs-related inflation, the industry is still soft. So that's always a point of pause for us. So that's why what we've been focusing a lot in the U.S. in particular now is the share improvement. And the industry, we believe, over time will go back to what it was. Now, In terms of the guidance, you are totally correct. At the midpoint, the second half implies worse performance in the first half. However, remember that we did have in Q1 a relevant benefit related to snowstorms. That in the first half represents about 0.7 percentage points, and we did have 0.8 in the second quarter that is shipment phasing to Q3. So if you normalize those two effects, we're actually improving the underlying performance in the second half compared to the first half approximately 70, 80 bps. But you are right.

Okay. Thanks for the math. Appreciate it.

Thank you. Our next question comes from the line of Leigh Jordan with Goldman Sachs. Please proceed with your question.

Hi. Good morning. Thank you for taking our question. So I understand that more of your investments are still expected to ramp from here, but curious where you've already made investments on the pricing side so far. How do you view your price gaps? What are you seeing in terms of any competitive response? And then ultimately, how are you thinking about maintaining the right gaps in the back half as we're also hearing retailers have recently stepped up price investments in their own private label and have plans to do even more in the back half, so risk that those gaps could widen. And that's really incremental versus when you initially laid out your plan. So how do you think about maintaining that with that change in the marketplace? Thank you.

Yeah, so Leigh, I'll start, and Andre can certainly fill in. We feel very good about the investments in price that we've made, and we've been very surgical. So it hasn't been just base price adjustments. maintaining distribution. It's been opening price points. It's been price package architecture. It's been making sure that our gaps to private label and competitors are appropriate. And so we've done all that. I think we've done it effectively. The incremental $100 million that we announced this morning is going to be almost entirely in marketing because we feel like we've done the right thing on price, even given some of the commentary that you just made about what the future may hold. So we feel like we've made It's very helpful. Thank you. Operator, we have time for one more question. All right. Thank you. Our last question comes from the line of Rob Dickerson with U.S. Bancorp BTIG. Please proceed with your question.

Great, thanks a lot. I think all my questions have been answered, so maybe a fun one. Could you just talk a little bit about the Disney partnership, just kind of the magnitude of that? Is that a partnership such that maybe even as soon as Q4, I would assume in 27, that we should be seeing some co-branding? And if so, where would we expect to see that? Thanks.

Yeah, so we're very excited about the Disney partnership. And you think about all the things that we can do with the Walt Disney Company, the iconic characters that they have and the things that we can do in co-branding and merchandising and licensing, things that we can do to activate in their parks and their cruise lines and their hotels. And so there is a multitude of really exciting things that we can do. with Disney. They're great partners. They're brilliant marketers. And they just, you know, they mean so much to consumers in such meaningful, emotional ways. So making that emotional connection with Disney in partnership is something we're really excited about. We're also really excited about the NFL partnership. So I think, you know, we're showing up in a very different way with consumers and with our retailers. And we're going to use both of those properties to really drive consumer emotional connections and something we're very excited about. So thanks for the question.

Thank you.

Thank you. And we have reached the end of the question and answer session. If I'll turn it back over to management for closing remarks.

Thank you. And thank you everyone for joining us.

Thank you. This concludes today's conference and you may disconnect your lines at this time.

We thank you for your participation. Have a great day.