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Kraft Heinz EVP talks earnings, pricing, and relationship with Pittsburgh Steelers

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Kraft Heinz EVP & North America President Carlos Abrams-Rivera joins Yahoo Finance Live to discuss company earnings, supply chain woes, commodities, plans to offer deals and discounts amid rising inflation, consumer spending, and ways to innovate sustainability.

Video Transcript

- Shares of Kraft Heinz rebounding slightly today, after sliding on the back of its second-quarter earnings. The food maker raised its full year sales outlook in the wake of higher prices but still saw gross profit margin narrow in the quarter. Joining us now to discuss we've got Kraft Heinz Executive Vice President and North America President Carlos Abrams-Riviera. Thank you so much for taking the time here on the day. What are some of the continued catalysts for the quarter that are working in the favor and some of those that you're still navigating through and trying to gauge where the consumer is actually still engaging fully with the brand at this point in time?

CARLOS ABRAMS-RIVERA: Well, first of all, thank you for having me. Listen, I think we are very proud of the fact that we have continued to deliver nine quarters of growth now in a row, in an environment that obviously has been quite challenging. I think the way the company has been able to navigate whether there has been some of the inflation, global conflict, challenges in supply chain in order for us to continue to deliver, I think shows the resiliency of our company and our strategy as we're going forward.

You know, as we go forward, what I would tell you is that, you know, things are not done. I mean, we're still going to be living in a very complex second half of the year going into 2023. There's several factors that are challenging there, whether that is decisions by the fed, whether that is how different the improvements on our commodities are going to continue to happen. We are seeing some of them improving and going down, some of them actually going up.

So I think that is going to be a situation that is still going to be volatile. But what I feel great about is the fact that we have proven that we can navigate those things and still deliver on the things that we expect. So I feel great about the quarter and feel things that we're going to continue to see and build on the success so far.

BRIAN SOZZI: Carlos, has it gotten that bad out there that you have to sell $1 Lunchables? I wish that was the price point my mom paid about 15 years ago.

CARLOS ABRAMS-RIVERA: Well, Brian, what I say is what we're seeing is that consumers-- different types of consumers are reacting to the economy in a different way. I know that maybe, whether it's technically, we may be in a recession. The reality is that consumers are feeling in their pockets. And that's happening difference by different types of consumers.

And again, I think we see certain consumers in which the actual cash flow and having to manage their monthly paycheck is important. So having those opening price points, whether it is adult Lunchables, whether it is accessible to Oscar Mayer bologna, those are things that we can offer in our company. At the same time, there are consumers who are looking for the absolute value.

So having those club-sized products, whether that is in a mac-and-cheese five pack, whether that is, you know, large bottle of ketchup of 38 ounces, that becomes a better option for them too. So we just have to be aware that, you know, consumers are going to be feeling and thinking and feeling in their families and their kitchen tables a different reaction to what's happening today. And we are adjusting our portfolio and our strategy to make sure we can serve both of those consumers.

JULIE HYMAN: Carlos, it's Julie here. Where are we in the cost cycle for you guys? We recently talked to someone more on the agricultural grain side of the business. You pointed out that grains have come off, right? So at least some of your input costs are coming down. I assume things like packaging and whatnot and fuel-- well, even fuel's come down too. So when are you going to start to see some margin improvement and maybe even be able to, you know, sort of dramatically slow some of these price increases across the board?

CARLOS ABRAMS-RIVERA: Yeah. I think let me answer it three ways, Julia. I think, one, if you think about our year in 2022, so far, we have already proposed about 99% of the pricing we're going to do for the year. So from that end, I think we have pretty much forecasted well what was going to happen. And we feel comfortable about our position.

I think the second thing is, as you said, there are being some places in which we are seeing commodity drops. But at the same time, there's many commodities that are still very much high level. And that while they may be off their peak, they're still significantly higher.

Whether you look at cheese, whether you look at butter, I mean, those are still places-- eggs-- where they are so much higher than they were pre-pandemic. So, you know, for us is, again, how do we think about managing through those in an environment that continues to change. And I feel like the way we're trying to think about it is using all of our tools of revenue management, where there is different sizes, different price points, different formulation, in order to make sure we provide consumers great quality brands in a way that it can be accessible to everyone.

BRIAN SOZZI: Carlos, you mentioned ketchup bottles. And since we last spoke, now, there's some giant ketchup bottles coming off now former Heinz Field, replaced by some company a lot of companies-- a lot people don't even hear about, Acrisure. Not even sure what that is. I think it's insurance company.

Now, what made you go that route? What was the decision behind that? Because Acrisure only bid close to $150 million. You guys ended the quarter close to $2 billion You had the money.

CARLOS ABRAMS-RIVERA: Well, first of all, I would just say that our relationship with the Steelers and the city of Pittsburgh is very important to us. And we will continue to have a relationship with them. In fact, we just announced that we are going to continue to have the Heinz red zone. So that's something that I know from not only from our own colleagues, but also reading all the feedback we got on social media how important that was to everyone.

So we are keeping that. And we're maintaining a strong relationship with the Steelers. What I'll tell you is, you know, for us, it's about making sure we derive the sense of ownership in all we do. And while you're right, I mean, the success that we've had in terms of solid strong growth for us, you know, we have to make a-- look at every single decision as it is, our company ownership and understanding what is the best return on the investment we're making.

So we wish them, you know, all the success. We have a huge amount of Steeler fans in our company. And we are going to continue to root for them as we go forward.

- Just quickly while we have here, Carlos, we were talking about inflation earlier. When you think about the packaging right now, have you had to consider shrinkflation, as we discuss it here and as many consumers know it, where the packaging actually either contains less or might just be a tick smaller?

CARLOS ABRAMS-RIVERA: Yeah. The way I think about it is we are actually looking at packaging in terms of how do we actually reduce the amount of plastic and packaging overall. So now because of responding to the inflation, but really because responding to us wanting to have more and improve our goals in terms of sustainability and how we reduce our packaging overall. So you think about places like Lunchables.

We, in fact, can be able and have plans now to reduce their packaging overall and the use of plastics because we know it's the right thing to do not only for the now and managing the inflation, but because it's the right thing to do for us with our consumers in going forward. I mean, I'll give you an example in Lunchables. You know, we started that product about 40 years ago and still has a space for plastic for putting a knife and putting a napkin.

We haven't had a knife and a napkin in 40 years. And yet we still have the plastic for it. So we are actually looking at what are the things that we can actually remove from our products in terms of usage of plastic and usage in packaging in order to provide more sustainability options.

And we're doing that across the entire portfolio, whether that is in mac and cheese, looking at how we bring more fiber-based cups that are compostable, whether we're looking at, you know, whether it's in our singles and thinking about how do we actually take more of the plastics from the overall packaging in order to provide consumers more of what they want. That is kind of the way we are approaching it.

- Carlos Abrams-Rivera joining us here this morning on "Yahoo Finance Live." We appreciate the time and the discussion. We'd love to check back in the future as well. He's the Kraft Heinz EVP of North America and president. Thanks.