Kraft Heinz and Kellogg have upgraded their profit outlook for the full year as the pandemic prompts consumers to return to processed fare they had previously shunned in favour of fresher alternatives.
Third-quarter results on Thursday showed that the benefit to the two US food companies was lasting long after the pre-lockdown stockpiling. Executives said strong growth had begun to slow in some markets but remained at elevated levels.
Carlos Abrams-Rivera, who runs the US business for Kraft Heinz, said the company had been “driving down the road at 90 miles per hour to keep up with all the demand”.
Sales on an organic basis jumped 6.3 per cent year on year at Kraft Heinz, whose products include the eponymous ketchup and macaroni cheese.
At Kellogg, the maker of cereals including Rice Krispies, Special K and All-Bran, they rose 4.5 per cent.
The results point to a step up in performance for the packaged food industry, whose difficulties have long been epitomised by Kraft Heinz, backed by Brazilian-US investment group 3G Capital and Warren Buffett’s Berkshire Hathaway.
The Chicago-based company has been forced in recent years to take a series of writedowns, reflecting diminished prospects for some of its best-known products, such as Oscar Mayer meats.
Big challenges remain for Kraft Heinz, which last month laid out plans to cut costs by an additional $2bn and struck a deal to sell parts of its cheese business to France’s Lactalis for $3.2bn, saying it would use the proceeds to help cut its $26bn of debt.
Net income in the quarter fell a third to $597m, on net sales of $6.4bn, in part because of charges related to the disposal.
Still, its prices rose 3.7 percentage points on average thanks to reduced promotional activity, while “sustained at-home consumption” helped lift volumes.
Both Kraft Heinz and Kellogg are seeking to permanently convert shoppers they have recently won over, investing in marketing and new products.
“Now is the time to communicate with consumers who discovered our foods during the pandemic,” said Steve Cahillane, chief executive of Kellogg, where quarterly net income rose from $247m to $348m on net sales of $3.4bn.
Michigan-based Kellogg said full-year organic net sales were on track to rise about 6 per cent, up from previous guidance of 5 per cent, and adjusted profits to rise about 2 per cent, whereas it previously expected a 1 per cent fall.
Kraft Heinz, which had forecast “mid-single-digit to high-single-digit” growth in adjusted profits, narrowed the guidance to “high-single-digit” expansion.
Shares in Kraft Heinz rose 2 per cent and those in Kellogg were little changed in early New York trading on Thursday.
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