Kraft Heinz on Tuesday lowered full-year sales and earnings guidance, citing weaker customer spending in the U.S. and the impact of President Donald Trump’s tariffs.
This is the latest big food company to express alerts of trade tensions and weak consumer demand. Last week, Pepsi lowered its forecast for full-year forecasts, while also citing tariffs. Earlier Tuesday, Coca-Cola noted a pullback in U.S. consumer spending due to economic uncertainty.
Kraft Heinz admits it's a tough place. It needs to keep prices low to prevent consumers from moving to cheap store brands for products like ketchup, mayonnaise, macaroni and cheese. However, tariffs (affecting imported ingredients such as coffee) will increase their costs.
"With the pricing of tariffs, we are working hard to minimize the necessary prices," Kraft Heinz's chief financial officer Andre Maciel said on a conference call with investors on Tuesday.
Maciel said the company is looking for many alternatives, including transferring suppliers and re-engineering products in the long run. Kraft Heinz also said some inventory was established earlier this year to help mitigate the impact of tariffs.
Pittsburgh and Chicago-based Kraft Heinz said its North American revenue fell 7% to $4.5 billion between January and March. The weakness of the United States overcomes some of Canada's stronger results.
Kraft Heinz said his operating income is expected to fall 10% this year. It had previously expected to drop as much as 5%. The company said flexibility is needed to provide promotions and strengthen marketing. It also wants to add value options, such as the new 11-ounce kraft paper and cheese designed to feed a family, about 50% higher than the original 7.25-ounce box.
The company said it may also need to respond to changes in federal regulations. Last week, U.S. health officials urged food manufacturers to phase out oil-based artificial colors in the U.S. food supply.
Kraft Heinz CEO Carlos Abrams-Rivera said that since 2016, Kraft Mac & Cheese has been without artificial flavors and colors. However, some of the company's products, such as Kool-Aid, do contain artificial colors.
Kraft Heinz said its net income fell 6% to $5.9 billion between January and March. According to Factset analysts, that's in line with Wall Street's $6 billion expectation. The company now expects its adjusted revenue to fall 3.5% this year. It was previously expected to drop by 1.5%.
Kraft Heinz shares remained flat in trading Tuesday afternoon.