The head of Kraft Heinz’s U.S. business told CNBC on Wednesday that rising price pressures during the Covid pandemic have so far been “manageable” for the food and beverage giant.
“From our perspective, it looks manageable, the inflation that we’re seeing so far,” Carlos Abrams-Rivera said in an interview on “Power Lunch.” “For us it’s around mid-single digits in terms of our overall net inflation, and it’s really coming outside of our big three commodities of coffee, meat and cheese.”
Inflation has been one of the key concerns for the U.S. economy, as more activity resumes from pandemic-related disruptions.
Some companies, such as Coca-Cola, have raised the prices of their products to offset higher commodity costs. Data from the Labor Department shows that in May, consumer prices rose at their fastest pace since 2008.
Abrams-Rivera said Kraft Heinz has a “three-pronged approach” to manage inflationary pressures. The first, he said, is a goal of delivering about $400 million in efficiencies across the company by year-end, which are “helping us manage through this.”
Another focus is on renovating the company’s brands — which include Oscar Mayer, Velveeta and Maxwell House — to continue appealing to consumers and retain a strong pricing power, Abrams-Rivera said. He said Kraft Heinz will have renovated 45% of its U.S. portfolio by the end of 2021 and 90% next year.
Kraft Heinz had aimed to eliminate 1,100 products — or 20% of its business — by the end of 2020, in an effort to attract more customers. Trimming down the portfolio was intended to make the company’s supply chain more efficient and cut down on sales cannibalization, Abrams-Rivera previously told CNBC.
The third pillar to Kraft Heinz’s approach to inflation includes looking at how products are packaged, he said.
For example, “we’re looking at larger sizes in some of our packs to bring a better value for consumers,” he said, as well as trying to provide lower-cost options.
“So, things like … Lunchables — we actually launched a new $1 pack also,” he said. “Having options for consumers at different levels that allows us to have a good value is also part of how we’re managing through this whole inflation situation we’re seeing.”
More broadly, Abrams-Rivera said, the behavior shifts that occurred during the pandemic — people spending more time at home and eating together more — are likely to stick around and Kraft Heinz hopes to capitalize on it.
Consumers have also made huge investments in their home through renovations and started to cook more, he said. “That is a place where we can bring a different scale and a different benefit that allows us to continue growing in a way that nobody else can.”
Source: Business - cnbc.com
