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Kraft Heinz (KHC) to Expand Customer Base With Farmstead Deal

Zacks Equity Research

The Kraft Heinz Company KHC is focusing on expanding customer base, which is evident from its latest alliance with online grocer, Farmstead. Farmstead is the first company that offers fresh and premium-quality grocery products at compelling prices.

The deal will bring Kraft Heinz’s solid assortments like Heinz Ketchup, Kraft Mac & Cheese and Philadelphia Cream Cheese, among others, to Farmstead’s customers. While the partnership will strengthen Farmstead’s inventory, it will help Kraft Heinz reach more consumers through the convenience of online order and delivery.

We note that Kraft Heinz has long been committed toward innovations to improve the performance of core brands and products. Management earlier outlined plans to make significant investments in marketing, go-to-market capabilities and product development. These capabilities and platforms have been contributing to the company’s gains, and are expected to remain significant growth drivers.

The company has been focused on improving many areas, including Indonesia soy sauces, U.S. cold cuts, baby food in Canada and its non-measured channel shares in the U.K. Also, Kraft Heinz has various innovation initiatives planned in the foodservice space to fuel additional growth across all regions. Additionally, the company is making innovation efforts in the e-commerce channel, which has been gaining traction in the United States.

We believe that these efforts should provide some cushion to this Zacks Rank #5 (Strong Sell) stock that has lost almost 33% in the past three months compared with the industry’s decline of 5.6%. Well, Kraft Heinz has been battling cost-related hurdles that lingered in the fourth quarter of 2018. During the quarter, earnings declined on lower adjusted EBITDA, high interest costs, and greater depreciation and amortization expenses. Adjusted EBITDA was hurt by currency woes, lower-than-expected savings, and high manufacturing and logistic costs. Management expects adjusted EBITDA to decline in the first quarter of 2019, owing to cost inflation and commercial expenditure.

Nonetheless, the company is focused on undertaking solid pricing initiatives, and making cost saving and productivity efforts. Markedly, Kraft Heinz has implemented many cost saving initiatives, including the integration of Kraft Foods and Heinz. Other productivity improvement initiatives include programs such as zero-based budgeting, modernization and capability building within the manufacturing footprint, and building a performance-driven culture within the company.

These upsides along with Kraft Heinz’s solid innovation initiatives should help uplift investors’ sentiments.

Check These Solid Food Stocks

Medifast MED has long-term EPS growth rate of 20% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lamb Weston LW, with long-term EPS growth rate of 12%, flaunts a Zacks Rank #2 (Buy), currently.

General Mills GIS, with long-term EPS growth rate of 7.3%, also has a Zacks Rank #2.

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General Mills, Inc. (GIS) : Free Stock Analysis Report
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