Kraft Plans $2 Billion in Cost Cuts in Return to Core Strategy

Kraft Plans $2 Billion in Cost Cuts in Return to Core Strategy

September 15, 2020

Kraft Heinz Co. is returning to its tried-and-true cost-cutting strategy as the packaged-food giant looks to beef up its long-term financial position.

The company will target $2 billion in savings over the next five years by focusing on procurement, manufacturing and logistics, according to apresentation released ahead of its investor day.

As part of what it’s calling a “strategic transformation plan,” Kraft is now targeting organic net sales growth of 1% to 2%. The ketchup-maker is also expecting long-term adjusted EPS growth of 4% to 6%.

“We are committed to returning Kraft Heinz to consistent growth on both the top and bottom lines,” Chief Financial Officer Paulo Basilio said in astatement.

A renewed focus on cost-cutting reads like a return to normal operating procedure for Kraft Heinz, which was created in a 2015 merger orchestrated by Warren Buffett and 3G Capital. Traditionally, 3G’s managers were known more for cost-cutting than nurturing brands, and after merging H.J. Heinz and Kraft Foods, the then-CEO slashed nearly $2 billion in expenses at the combined company.

When cost-cutting slowed, the spotlight turned to the company’s struggle to grow sales with a portfolio of food brands that was largely considered out-of-step with modern tastes. However, the pandemic reignited consumer interest in comfort staples like Oscar Mayer lunch meats and Kraft macaroni and cheese, giving it a boost during lockdowns.

Wall Street Journal reported on the planned cost cuts earlier.

Kraft shares rose as much as 4.9% in early morning trading before paring some of the gains.

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