For the second time in as many quarters, Kraft Heinz has reported falling sales and written down the value of their brands.
The food maker is struggling to improve its products to satisfy changing customer tastes. CEO Miguel Patricio reported that “We’ve been too focused on the present and literally on firefighting. We need to work on our competencies for the future,” (ref. WSJ). That happens to be exactly what food companies need to be doing – looking for the products that will attract their customers, updating the legacy products to engender more interest, and providing ways that will take the companies into the future, for growth and sustainability. All the large food companies face great pressure to both improve their products as well as add brands that appeal to today’s consumer tastes which are often geared toward fresher and healthier products. While they are concerned with these efforts of revitalization, the large food makers are also being impacted by competition from private-label products that large food chains contract with for sale in their stores, as well as higher costs for ingredients. Kraft Heinz has been hit harder than most, however. Some analysts say that that is the result of the company’s cost-cutting drive that left well-known brands too diminished, and without adequate advertising, to compete adequately in the marketplace. Other causes are said to relate to the fact that the company hasn’t acquired smaller brands more focused on healthfulness or natural ingredients nor has it updated its products to the same degree that competitors have. Also of interest is the fact that the company has lowered prices on some items, such as nuts and coffee, in an attempt to gain market share. In a contradictory move, other food makers, including Mondelez and Hershey, posted strong sales for the last quarter, after having raised their prices. Without a doubt, Kraft Heinz needs to look more definitively at what will actually allow their products to be attractive to the customer and move swiftly to institute those change management decisions.
Without all the moving parts working together, it’s rarely the case that companies will be either successful or sustainable.