Kraft Heinz’s CEO, Miguel Patricio in a recent earnings conference call said that they are planning to cut down the number of design and creative’s agencies that are currently working with the brand. However, the brand is planning to increase their media spends by 30%. Patricio said that the number of agencies will be reduced from 36 to 19. i
In a strange move, the company has announced that it will reduce the amount of new products or the amount of innovation in 2020 by 50%.
“We are not expecting a decrease in net sales of the innovation next year, but we are going to cut everything that is not accretive, that is cannibalistic, a lot of line extensions that we did in the past,” Patricio said. He explained that doing so helps the company focus on what really matters and puts its energy and budget “behind the innovation that moves the needle”.
“But also the other consequence is that we put more money on product development. We put more money behind agency or agency fees because we have less development and even marketing research. And putting all these savings on these lines together, we have put it back in media, which allow us literally to sweat the budget and increase media by 30% overall,” he added.
Patricio feels that’s the company can do much better by investing in core brands. He stressed on the fact that Kraft Heinz needs to balance their spending and marketing activities in a much better way.
For the fourth quarter of its 2019 financial year (Q4 2019) ended 28 December 2019, Kraft Heinz witnessed a 5.1% dip in net sales to US$6.5 billion compared to the same period last year.
After Patricio said its 2019 results were “disappointing” but nonetheless, it has taken critical actions over the past six months to reestablish visibility and control over the business. “And we remain convinced that Kraft Heinz has the potential to achieve best-in-class financial performance as we begin transforming our capabilities and making necessary investments in our brands based on deep consumer insights. Our turnaround will take time, but we expect to make significant progress in 2020, laying a strong foundation for future growth,” he added.
According to Patricio, 2020 is a year of stabilization rather than “a year of playing of offense”. “It’s a year that we want to continue stabilizing the bottom line of the company,” he added. He added during the call that 2020 will be the first full year of what it expects will be a three-stage turnaround, a turnaround characterized by laying the foundation for the future growth, fueling its flagship brands and accelerating growth platforms and then hitting its stride on both the top and bottom lines.
